The Impact of GST on Indian Businesses: Exploring the Advantages and Disadvantages

Revocations of GST Registration

Overview

The Goods and Services Tax (GST), introduced in 2017, revolutionised the Indian tax landscape by consolidating multiple Central and State taxes into a single tax system. This shift aimed to streamline the taxation process, making it simpler and more transparent. Through this blog, we will understand the advantages and challenges of GST, providing a balanced perspective on its impact on various sectors.

Advantages of GST in India

  • Elimination of Cascading Tax Effects: One of the primary benefits of GST is removing the cascading effect, or 'tax on tax,' prevalent in the pre-GST era. By implementing a comprehensive input tax credit system, GST ensures that tax is levied only on the value addition at each stage of the supply chain. This key advantage of GST tax in India has made the system fairer and more equitable.
  • Higher Threshold for Registration: GST has been a boon for small businesses, with the threshold for GST registration. raised to Rs. 20 lakhs nationwide, and Rs. 10 lakhs for North-Eastern and hill states. This increase from previous VAT and service tax thresholds means fewer small businesses are burdened by GST compliance.
  • Simplified Online Procedures: The introduction of GST has digitalised and simplified tax procedures. Filing returns, applying for refunds, and registering under GST have moved online, which is particularly beneficial for small and medium enterprises.
  • Reduced Compliance: Under GST, businesses face significantly fewer compliances than the previous indirect tax regime. Most businesses now file just 11 returns annually, with four primary returns that apply to all regular taxable persons. This simplification has reduced the administrative burden and compliance costs for businesses across India.
  • Boost to Logistics and E-commerce: GST has removed interstate barriers, creating a unified national market that has significantly benefited the logistics and e-commerce sectors. The seamless movement of goods across state lines without the need to pay state-level taxes has improved operational efficiency and reduced costs.

Challenges and Criticisms of GST

  • Perceived as a Regressive Tax: Critics argue that GST, by levying a uniform rate on goods and services, disproportionately affects lower-income households, which spend a higher proportion of their income on GST-taxed goods and services.
  • Complexity for Certain Sectors: While GST has simplified tax structures for many, it has also introduced complexities, particularly for small and medium businesses and the finance sector. The inability to claim an input tax credit under the composition scheme and the increased costs in the finance sector are points of contention.
  • The 'Disability Tax' Controversy: GST has faced criticism for taxing products essential for differently-abled individuals, such as wheelchairs and Braille typewriters, which were previously tax-exempt. This has led to debates about the sensitivity and inclusiveness of the GST framework.

Conclusion

While the implementation of GST brought with it numerous advantages like streamlined procedures and fewer compliances, it also presented challenges that have sparked ongoing debates about its efficacy and fairness. Staying informed and adaptive is crucial as businesses continue to navigate the GST landscape.

At MKDA, we specialise in helping businesses maximise the benefits of GST and mitigate its challenges. Our expert team is equipped to guide you through every step, from understanding the nuances of GST compliance to taking advantage of registration under GST, and navigating its complex landscape.

Frequently Asked Questions

What is GST and its types?

Goods and Services Tax (GST) is a comprehensive, multi-stage tax on goods and services, levied at each stage of the supply chain with credit for taxes paid on input. GST in India has three types: Central Goods and Services Tax (CGST), levied by the Central Government; State Goods and Services Tax (SGST), levied by state governments; and Integrated Goods and Services Tax (IGST), levied on inter-state supplies of goods and services.

Is GST registration free?

Yes, GST registration is free of charge. Businesses can register for GST via the official GST portal without any cost. It's important to ensure that all the required documents are in order before applying to streamline the process.

What is the time limit for GST registration?

Businesses are required to register for GST within 30 days from the date on which they become liable to registration. In the case of a transfer of business as a going concern, the transferee must register with effect from the date of transfer.

How do I claim my GST refund?

To claim a GST refund, taxpayers must file an application through the GST portal. This involves filling out the relevant details and submitting the necessary documents to support the refund claim. The process includes specifying the reason for the refund, such as excess payment due to a mistake or the export of services. Timely submission and accurate documentation are crucial for a successful refund claim.