Goods & Services Tax GST in India 2024: Pros & Cons

The Goods and Services Tax (GST) is a tax on the sale of goods and services in India, introduced in July 2017. When it comes to Goods & Services Tax, there are pros and cons to think about. On one hand, GST could help businesses and the economy as a whole by making everything more streamlined and efficient. But on the other hand, it could lead to higher prices for consumers and hurt small businesses.

So what’s the verdict? GST is definitely a mixed bag – it has potential upsides, but also some potential downsides. As with any change, we’ll just have to wait and see how things play out in the long run!

What is GST?

The Goods and Services Tax (GST) is an important development in the field of indirect tax reform in India. GST greatly reduces the negative impacts of cascading or double taxation, allowing for a unified national market.

The greatest benefit for consumers is the reduction in the overall tax burden on items. It implies that the real burden of indirect taxes on goods and services would be apparent. There are benefits and drawbacks to the Goods and Services Tax, however.

To begin with, the GST is a destination-based tax, which means that the tax is levied on the value of goods and services at the place where they are consumed. This is opposed to the current system where tax is levied on the production or supply of goods and services. The GST is also a multipoint tax, which means that it is levied at every stage of the supply chain, from the manufacturer to the consumer.

The GST leads to an increase in economic growth by 2-3%. This is because it reduces the cost of doing business, which makes Indian goods and services more competitive in the global market. It also helps in simplifying the tax structure and improving compliance.

Pros of GST

• GST helps to reduce the negative effects of double taxation. This helps to create a common national market.
• Consumers would benefit from a reduction in the tax burden on goods. This leads to a decrease in prices for goods, as businesses would pass on at least some savings to consumers.
• It implies that the actual burden of indirect taxes on goods and services is transparent. This would help consumers make informed choices while spending.
• GST also helps in bringing about uniformity in tax rates across States.
• The GST regime is more transparent and efficient as compared to the previous system.

Cons of GST

• It leads to an increase in the cost of goods and services. This is because the GST is a multi-stage tax that is levied at every stage of production and distribution.
• The GST applies to all goods and services, except a limited number of items that have been specifically exempted. This could lead to an increase in the cost of living for people.
• The GST is a regressive tax, which means that it is levied at a fixed rate on all goods and services, regardless of the level of income of the consumer. This could lead to an increase in the cost of essential goods and services for low-income consumers.
• The Goods and Services Tax (GST) is a very complex tax system, which is difficult to administer. This could lead to problems in the implementation of the GST.
• There is a risk of revenue loss on account of the Goods and Services Tax (GST). This is because the GST is a Value-Added Tax (VAT), which means that the tax is levied on the value addition at each stage of production and distribution. This could lead to a loss of revenue for the government.

So there are some pros and cons of Goods and Services Tax (GST) is mentioned in this blog.  It is hoped that the GST leads to a more efficient and transparent tax system in India.

How does GST impact the average Indian citizen?

The Goods and Services Tax (GST) is a destination-based tax, which means that the tax is levied on the value of goods and services at the place where they are consumed. This is opposed to the current system where tax is levied on the production or supply of goods and services. GST is levied at every stage of the production-consumption chain, with the final consumer paying the tax.

Under GST, all indirect taxes are subsumed into a single tax. This includes central excise duty, service tax, and value-added tax (VAT) levied by the Central and State governments. The GST Council, which is a joint body of the Center and the States, be responsible for framing the rules and regulations for GST.

GST has a number of benefits for the Indian economy. Firstly, it leads to the elimination of cascading or double taxation, which is caused by the levy of multiple taxes at different stages of production. This reduces the overall tax burden on goods and services, which is currently estimated to be around 25%-30%.

GST also led to the development of a common national market. Currently, there are multiple tax rates and regulations across the States, which leads to inefficiencies and higher costs for businesses. GST harmonises these rates and regulations, leading to reduced costs for businesses and improved competitiveness.

How does GST impact businesses in India?

GST levied on the supply of goods and services made in the course of business. The businesses would be required to charge GST on the taxable supplies made by them, file tax returns, and claim the input tax credit for the GST paid on the inputs used in making those taxable supplies.

The impact of GST on businesses depends on a number of factors such as the nature of business, the GST rate, and the availability of input tax credit. In general, GST is likely to impact businesses positively as it would lead to simplified taxation, increased transparency, and reduced costs.

How does GST impact consumers in India?

The impact of GST on consumers depends on the rate of GST. If the rate of GST is low, then the overall tax burden on consumers would reduce. However, if the rate of GST is high, then the overall tax burden on consumers would increase.

In general, GST is likely to have a positive impact on consumers, as it would lead to reduced costs and increased transparency.

What changes do businesses need to make to comply with GST?

There are a number of changes that businesses need to make to ensure compliance with GST. These include:

• Reviewing supply chains and business processes to identify potential areas of tax leakage
• Registering for GST and obtaining a Goods and Services Tax Identification Number (GSTIN)
• Updating accounting software to calculate GST liabilities
• Appointing a GST officer to handle tax compliance
• Reviewing pricing strategies to ensure Goods and Services Tax is factored into prices
• Familiarising themselves with the Goods and Services Tax rates and exemptions
• Completing quarterly returns and annual returns

Businesses that do not comply with GST may face penalties, so it is important to understand the requirements and make the necessary changes.

What are the benefits of GST for businesses?

Businesses that are compliant with GST benefit from a more efficient and streamlined tax system. It is important to note that the benefits of GST vary depending on the size and complexity of the business.

For smaller businesses, there may be some initial adjustment costs associated with GST compliance, but the benefits outweigh the costs in the long run.

There are a number of benefits of GST for businesses, including:

• A simplified tax structure with one tax rate and no Hidden Taxes
• No cascading or double taxation reduce the overall tax burden
• Uniformity in tax rates and compliance procedures across the country
• Ease of doing business as all taxes be subsumed under GST
• Increased transparency and efficiency in the tax system

Conclusion

There are pros and cons to the new tax system, and it remains to be seen how it impacts the average Indian citizen and businesses in India.

However, it is important for businesses to make the necessary changes to comply with GST so that they can take advantage of all the benefits that GST has to offer. It is also important for consumers to be aware of the changes that GST brings so that they can take advantage of the lower taxes and make informed decisions about their spending.

Overall, GST is a good step in the right direction for indirect tax reform in India, and it is hoped that it bring positive change to the Indian economy.