The introduction of the Goods and Services Tax (GST) brought a change in the Indian economy which was not adapted to easily. It has taken several efforts on the government’s part to make GST applicable uniformly throughout the nation. However, the unified tax system brought with it various GST advantages and disadvantages. The following article enlists each in an elaborated manner.
The following topics have been covered in this article:
- Advantages of GST
- Disadvantages of GST
- GST Search Number
1. Advantages of GST
The introduction of the Goods and Services Tax (GST) brought with it various advantages. Since its implementation, taxpayers in India have witnessed countless GST advantages and disadvantages. Some of the GST benefits are as follows:
- Elimination of cascading effect: The introduction of GST removed the previous cascading effect of tax. In the VAT era, there was a lot of tax applied on tax. This made goods and services much more expensive for customers. GST was designed to be an indirect tax which unified all other taxes and eliminated the cascading effect on tax.
- Higher turnover threshold for registration: The GST regime increased the turnover threshold of mandatory GST registration from Rs. 5 lakhs under VAT to Rs. 20 lakhs under GST. It further exempts several small businesses and small service providers from GST. The turnover threshold for GST registration in the northeastern states is Rs. 10 lakhs.
- Composition schemes: Small businesses are provided with composition schemes under GST. Every small business with an annual turnover or Rs. 20 lakhs to Rs. 75 lakhs is eligible to opt for the composition scheme. Through this scheme, small businesses will be able to pay taxes at lower rates which will further reduce the burden of tax compliance on them.
- Simple online procedure: The entire process of registering under GST and filing returns has been made online through the GST Network (GSTN). This has made tax compliance extremely easy and simple. As opposed to the VAT system where most of the procedures were completed physically, the GST system allows its taxpayers to do so through its online portal. Also, various software applications have been made available to complete these procedures for taxpayers.
- Lesser compliances: GST has unified all indirect taxes and their return filing procedures. This has reduced the number of taxes to be filed and also the compliances. GST has around eleven returns which are to be filed under it. Four returns out of these are basic returns which are applicable to all taxpayers under GST. The details in the main form GSTR-1 are to be entered manually whereas those in forms GSTR-2 and GSTR-3 are auto-populated from the main form.
- Well-defined treatment of e-commerce operators: Before GST, the VAT system allowed differential treatment of e-commerce operators. However, GST has eliminated such confusing compliances. Clearly mapped provisions have been made applicable to the e-commerce sector throughout the country. Thus, there is no complication related to movement of goods between states anymore.
- Improved logistics efficiency: GST has made the Indian logistics industry much more efficient that it was before. It has reduced the restrictions on movement of goods between states. The number of warehouses has reduced because warehouse operators and e-commerce aggregators are now willing to set up their warehouses in strategic locations. There has been a reduction in the number of inter-state and intra-state checkpoints which has saved a lot of time and money.
- A regulated unorganized sector: The pre-GST era had its unorganized sector largely unregulated. However, GST regulated this unorganized sector by providing it with provisions such as online compliances, online payments, and availing input tax credit (ITC) once the supplier has accepted the payment. This has made the unorganized sector more accountable and systematically regulated.
Other GST benefits include increased transparency, lower cost of doing business, increased production, reduced time in transportation, etc.
These are some of the main GST benefits which India has witnessed since the introduction of GST nationwide.
2. Disadvantages of GST
The introduction of the Goods and Services Tax (GST) brought with it various disadvantages too. Since its implementation, taxpayers in India have witnessed countless GST advantages and disadvantages. Some of the main GST disadvantages are as follows:
- Software purchase has increased costs: Businesses purchase ERP software applications or update their existing accounting system for complying with GST and file accurate returns on time. These options have increased the costs incurred by the company in purchasing software and training employees on how to use the new billing software most efficiently.
- Complying with GST: Small and medium enterprises (SMEs) will have to issue invoices, keep digital records, and file returns as per GST compliances. This will mean that to issue an invoice compliant to GST, the SMEs will have to attain details such as GSTIN, HSN codes, place of supply, etc. which are mandatory to fill the invoices.
- Increased operational costs: Tax professionals will have to be hired by businesses so as to stay compliant with GST. This will increase their operational costs. Apart from employing experts, businesses will also have to train their employees to become GST compliant. This will further increase their overhead expenses.
- Online procedures: Since GST has been introduced as an online taxation system, many businesses may find it difficult to adapt to. Most businesses are used to manual filing procedures. Online procedures may result in confusion and compliance issues. Therefore, it may become difficult for them to adopt the online system and adjust to it.
- Higher tax for SMEs: SMEs may face difficulty as GST makes it mandatory for every business with an annual turnover of more than Rs. 20 lakhs to pay GST. Anyhow, these SMEs can also opt for the composition scheme but then they won’t be able to avail any ITC.
These are some of the GST advantages and disadvantages.
3. GST Search Number
GST search number or verification of GSTIN is a method to ensure that the GST paid by you is accurate and will go in the right hands. Many businesses are not registered under GST but show their GSTIN at the top of the bill and take GST from their customers. GST search number is an easy and quick method to find out if a GSTIN is legitimate or not.
GST search number can be verified easily online. All you need is a smartphone with an internet connection and the details you want to verify. GSTIN can be verified through the GST Portal very easily:
Login to the GST Portal and click “Search Taxpayers”. Select “Search by GSTIN/UIN” and enter the GSTIN in your invoice/bill in the search column. Enter the captcha code and click “Search”.
You will then find out if the GSTIN in genuine or fake so that you can report a fake one immediately.