The Goods and Services Tax (GST) replaces various indirect taxes levied by the Centre and States such as excise, VAT, and service tax.
On goods and services sold in the country. Every year on July 1st, GST Day: Let us take a look back at how GST has performed over the last year. Every reform has benefits and drawbacks. In this post, we shall discuss the benefits and drawbacks of the GST bill.
The GST unifies all indirect taxes under one roof. More crucially, it will end the tax cascading effect. Cascade tax impact is also known as ‘Tax on Tax’.
Business turnover of Rs 5 lakh or more was previously subject to VAT. Note that state restrictions vary. Profits under Rs 10 lakh were also exempted. Many small retailers and service providers are now exempt from GST.
Small firms (with a turnover of Rs 20-75 lakh) can profit from GST by lowering taxes under the Composition plan. This reduced many small firms’ tax and compliance burdens.
The entire GST process is done online, from registration to filing returns. This has benefited new businesses, as they do not have to run around chasing VAT, excise, and service tax registrations.
Before, Indian logistics companies had to maintain multiple warehouses across states to avoid CST and state entry fees. These warehouses had to operate at a loss. The GST has eased interstate trade restrictions. Because of GST, warehouse operators and e-commerce aggregators are interested in locating in Nagpur (India’s zero-mile city).
Businesses must either update their existing accounting or ERP software or purchase GST-compliant software to stay in business. However, both solutions increase the cost of software and employee training to use the new billing software efficiently.
Small and medium-sized businesses (SMEs) may still be unfamiliar with GST. Invoices must be GST-compliant and returns must be filed on time. It must include mandatory information such as GSTIN, supply location, HSN codes and so on.
In order to comply with GST, firms will need to hire tax professionals. Having to recruit professionals will inevitably raise pricing for small businesses. In addition, businesses will have to teach employees on GST compliance.
After the first three months (April, May, and June), businesses switched to GST for the balance of the year. Businesses may struggle to adjust to the new tax system, producing uncertainty and noncompliance.
Businesses are now moving away from paper invoices and filing to online returns and payments. Some smaller enterprises may struggle to adapt.
Change is never easy. The administration is easing the GST transition. We should learn from global economies that have already introduced GST and overcome the first challenges to enjoy the benefits of a unified tax system and easy input credits.
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