The spiraling tax effect was abolished.

GST is indeed an indirect tax that serves to unify the various indirect tax regimes. This
effectively removes the spiraling tax impact or tax upon tax procedure. Let's have a look at the
impact of such a removal using the example beneath.

 Prior to the implementation of the GST

A consulting firm charges Rs.50000 for services and adds a 15% service tax, bringing the total to
Rs.7500 (50000*15%). The specialist spent Rs.20,000 on office equipment and charged VAT at
the rate of 5% without any deductions, totaling Rs.1000 (20000*5%). A total financial outflow
of Rs.8500 is expected.

 After the implementation of GST

The cash outflow of a financial consultant will be - GST payable on services at the rate of 18
percent, i.e. Rs.9000 (50000*18). The GST paid on office equipment is eligible for a deduction.
As a result, the total GST is Rs.8000 (9000-1000).

BENEFITS

1. Limits for higher thresholds

The minimal criterion for registration has raised as a result of the adoption of GST regulations.
Previously, all firms with a turnover of more than Rs.5 lakh (the maximum varied by state) were
obligated to submit VAT. The threshold amount was lifted to Rs.20 lakh under the new GST
system, offering assistance to various minor service merchants.

2. There are fewer compliances.

Both service charge and VAT had various compliances under the prior tax regime. Excise
returns, for example, were issued month by month, but service tax returns were filed quarterly,
with corporations and limited liability partnerships filing monthly and proprietorships and
partnerships filing quarterly. In the issue of VAT, however, the submission of forms varied
greatly. Nonetheless, with the introduction of GST, taxpayers are only required to file single
return.
 3. Scheme of Composition

The Composition Scheme enables enterprises with a yearly turnover range of approximately
Rs.20 lakh and Rs.75 lakh to reduce their taxes. This approach not only decreased the relevant
rate of tax, but it also significantly reduced the compliance load. This indicator is an important
criterion to consider while weighing the benefits and drawbacks of GST.

4. Reduced lawsuits and a hassle-free online process

GST registration and tax return filing are now available online. The procedure has been made
easier thanks to the user-friendly design and no-hassle approach. Start-ups are thought as one of
the most benefitted. It has also been effective in providing clarity on taxing authority between the
State and the Federal government, allowing for more efficient evaluation.

5. Logistics have been improved.

Previously, Indian logistical businesses maintained several warehouses throughout states to

evade CST and state entrance fees. Additionally, these warehouses were forced to operate at a
fraction of their full capacity. The GST, on the other hand, has greatly eliminated inter-state
mobility restrictions.

As a result, warehouse owners but also e-commerce integrators may now put up warehouses in
the most accessible places possible. This must have helped them to save unnecessary logistic
costs while also increasing profits.

DRAWBACKS

1. Operational costs have increased.

To keep their company functioning, GST required firms to replace their old accounting software
or ERP to GST-compliant technology. However, the expense of purchasing, installing, and
educating personnel on how to utilise GST-compliant technology can be high. In addition, GST
compliance has raised small businesses' operational costs because more companies now need to
engage tax specialists in order to become GST compliant.

2. SMEs face a larger tax burden.

Only enterprises with an annual sales of more than Rs.1.5 crore were required to pay excise duty
under the previous taxation system. Businesses having an annual revenue of more than Rs.40
lakh, on the other hand, should pay GST under the new tax structure.

3. Obligation to comply

Companies must now register for GST in all states where they operate under this taxing scheme.
The complete procedure of registering with the regulatory body, generating GST-compliant
receipts, preserving digital records, and filing taxes has put a huge strain on SMEs and several
others.

Furthermore, the infrastructure of all Indian states is insufficient to implement the GST-
mandated e-governance paradigm. As a result, numerous businesses are finding it difficult to
implement or shift to this new system.

A tax-paying citizen can have a better grasp of the benefits and drawbacks of GST based on this
information. As a result, it will assist them in determining how to maximise their GST-related
advantages and successfully work around its flaws.