GST:

GST stands for Goods and Services Tax which is imposed on the sale of products or services in
India. A variety of indirect taxes previously levied by central and state governments have been
complied and accumulated under GST. Those taxes include VAT, Service Tax, Local Body Tax,
Central Excise duty, Central Sales Tax Purchase Tax, Luxury Tax, Entry Tax, Octroi, etc. It
offers benefits to all stakeholders like businesses, central and state governments, and people.
Having said that, the GST imposition also brings in a few disadvantages. Let us look at its
features, as well as the various advantages and disadvantages of GST in detail.

After the implementation of Goods and Services Tax (GST), the Government received several
feedback on the advantages and disadvantages of GST. The GST acts as a Value added Tax
(VAT) and designed as a comprehensive indirect tax levy on manufacture, sale, and consumption
of goods as well as services at the national level. It shall replace all indirect taxes levied on
goods and services by the Indian Central and State governments. Though GST serves as to be
historical tax reform in India, it also includes some demerits. In this article, let us look into GST
Taxation and deal with its advantages and disadvantages.

Features of GST

• As mentioned in the GST introduction, it applies to the 'supply' of goods or services as

opposed to the traditional system of taxes on the manufacturing of goods or the selling
of goods or the provision of services.
• GST is built on the notion of taxation of destination-based use as opposed to the earlier
norm of taxation on roots.
• CGST, SGST / UTGST & IGST is paid at rates negotiated between the centre and the
states.
• All goods and services excluding alcohol for human consumption are subject to GST.
• The tax refund is received by the applicant or any other individual who has suffered the
tax incidence within two years of the applicable date.
•A registered person's scheme for self-assessment of the taxes payable was introduced.
• The Goods and Services Tax Appeal Tribunal has been appointed by the Central
Government to hear appeals against orders issued by the Appellate Authority. States
shall comply with the provisions of the SGST Act relating to the Tribunal.
• Detailed transitional provisions for a seamless transfer of existing taxpayers to the GST
system was carried out.
• Advance Ruling Authority is constituted by the states to allow the taxpayer to acquire
from the department a legal clarification on tax matters. Under the CGST Act, such
jurisdiction will be followed by the centre.
 • An anti-profit provision was adopted to ensure that companies pass on to customers the
benefit of a lower tax rate on products or services or both.
Checklist types of GST

As per the GST tax system, there are 4 specific types of GST:
• CGST - Central Goods and Services Tax;
• SGST - State Goods and Services Tax;
• UGST - Union Territory Goods and Services Tax
• IGST- Integrated Goods and Services Tax
Furthermore, the government has set different tax rates for each, which will be applied to the
payment of tax on products and/or services provided.
Integrated Goods and Services Tax or IGST

IGST or The Integrated Goods and Services Tax is a GST tax that is imposed on commodities
and/or services between two states. It is also imposed on exports and imports. The IGST is
governed by the laws of IGST. Under IGST, the entity responsible for collecting taxation is the
Central Government. After the tax collection, it is split among the respective states. For instance,
when a trader from TamilNadu has sold goods to a buyer in Andhra Pradesh worth Rs.6,000,
then IGST will be applied as the payment made between two states. The GST rate charged on the
goods is 18 percent, hence the trader will charge Rs.7,080 for the goods. The IGST collected is
Rs.1,080, which will be collected by the Central Government.

The GST Advantages

1. Termination of Multiple Types of Taxes
• Different forms of taxes on goods and services have been limited since the introduction
of GST.
• Central Excise, Sales Tax, Service Tax, Luxury Tax, Special Additional Duty of
Customs, and other taxes are among them. As a result, there are no numerous tax
assessments on goods and services.

2. Removal of Cascading Effect

• The removal of the cascading impact, i.e. the elimination of tax on tax, is the most
significant advantage. Prior to the establishment of the GST, there was no provision for
set-off against output VAT on service tax paid on input services.
• The GST framework intends to lower the tax burden on end-users by allowing input tax
credits to be used across a wide range of goods and services.

3. Ease of Doing Business at National and International Level

 • With the establishment of GST, the difficulty of filing indirect taxes has decreased.
Previously, practically every company had serious concerns with excise customs, VAT
registration, dealing with tax authorities, and so on.
• Due to a surge in exports, GST has earned a competitive advantage in the international
market for goods and services produced in the country.

4. Regulation of Unorganized Industries

• Certain unorganized and unregulated sectors of the country, such as textiles and
construction, have been regulated and are now held accountable.
• GST strives to make payments and compliances easier to manage online, and input credit
can only be available if the supplier accepts the payment, ensuring that these industries
are regulated and accountable.

5. Complete Online Process

• Under the GST regime, interactions with tax authorities would be limited, with the full
flow of communications taking place online through a single gateway.
• Without engaging with tax authorities, e-transactions and the web system maintain a
careful eye on fraud and avoidance.

6. Efficient Economy
• GST, which is unaffected by business models, procedures, geographic location, or
organizational structure, will finally enhance long-term economic growth and efficiency.
The Goods and Services Tax (GST) has improved India’s tax-to-GDP ratio.
• This all-inclusive tax ensures stability and equality in the workplace. GST establishes a
single national market and eliminates economic misconceptions. As a result, there will be
more voluntary compliance and the cost of compliance will be lower.

Disadvantages of GST

1. Larger tax burden on SMEs

• Under the previous tax structure, only businesses with yearly sales of more than Rs.1.5
crore were obligated to pay excise duty. Under the new tax structure, businesses having
annual sales of more than Rs.40 lakh are obligated to pay GST.

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2. Compliance Burden
• Due to the filing of 3 tax returns every month, GST compliance is quite high. Also, the
companies must now register for the GST in all states where they conduct business.
• The entire process of registering with the regulatory body, producing GST-compliant
invoices, keeping digital records, and filing returns have put a tremendous amount of
stress on SMEs and others.
3. Increased Costs
• GST required businesses to change their present accounting software to GST-compliant
software or ERP in order to keep their operations running. The cost of obtaining,
installing, and training employees on how to use GST-compliant software, on the other
hand, might be substantial.
• Furthermore, since more businesses are required to hire tax professionals in order to
become GST-compliant, small businesses’ costs of doing business have increased.

For the Common Man – Items Expected to Get Cheaper

The following things/items might become cheaper under GST for the common man:

• Prices of movie tickets may become cheaper in most states

• Dining in restaurants
• Two-wheelers
• Entry-level sedan (except small cars)
• SUVs and luxury or premium cars
• Televisions
• Washing machines
• Stoves

For the Common Man – Items Expected to Get Costlier

The following things/items might become costlier under GST for the common man:

• Mobile bills
• Renewal premium for life insurance policies
• Banking and investment management services
• Basic luxuries for a common man like WIFI and DTH services, online booking of tickets
may become costlier.
• Residential rent
• Health care
• School fees
• Courier services
• Commuting by metro or rail may become expensive.
• Aerated drinks
• Cigarettes and tobacco products.

Know the Basics of GST

In an effort to make it easier to understand the proposed GST regime in India, we have compiled
7 articles that can make it easier for a layman to understand the GST regime and its effects. Read
the following to know more.
Taxable Person under GST
A taxable person under GST are persons who must have GST registration and are required to
comply with all GST regulations.

Click here to know more about taxable persons under GST.

Difference Between IGST, CGST, and SGST

Under GST, both the Central and State Governments simultaneously levy taxes. The levy of
IGST or CGST and SGGST would depend on the type of transaction, i.e., inter-state or intra-
state. Know more about IGST, SGST, and CGST.

What are the steps involved in GST registration

The following steps are carried out in GST registration through Vakilsearch
• Step 1: We help you get a Secure GST Identification Number.
• Step 2: We make it easy for you to get your GST from the comfort of your own home.
• Step 3: We will file your returns and complete all other compliances as and when
required.
Documents required for GST registration

Here's a list of the documents needed for GST registration:

• Certificate of incorporation
• Photo of the authorized person or signatory
• Stakeholder's photo (They can be a promoter or a partner)
• Company address proofs such as receipt of electricity bill or property tax, or a record of
legitimate ownership
• Copy of the statement approved by the board of governors and
• Letter of authorization
• Proofs such as details of the bank account like a bank statement copy and the first page of
the passbook and a cancelled cheque.