GST Advantages and Disadvantages

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.

The GST Advantages

GST is a transparent tax and also reduces the number of indirect taxes.
GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower.
Benefit people as prices will come down which in turn will help companies as consumption will increase.
There is no doubt that in the production and distribution of goods, services are increasingly used or consumed and vice versa.
Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs.
In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.
GST will be levied only at the final destination of consumption based on the VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.
GST will also help to build a transparent and corruption-free tax administration.
Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.
GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.

GST Disadvantages

Some Economist says that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
Some Experts says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST. Hence, there is no major reduction in the number of tax layers.
Some retail products currently have only a four percent tax on them. After GST, garments, and clothes could become more expensive.
The aviation industry would be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.
Adoption and migration to the new GST system would involve teething troubles and learning for the entire ecosystem.

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.

Find GST Rate

1 to find the GST rate along with HSN or SAC Code for thousands of goods and services under GST.

How to Calculate GST

Learn the procedure for calculating GST in India and the various factors that determine GST calculation.

Know how to calculate GST.

Back to Learn

Frequently Asked Questions

Common questions about GST Advantages and Disadvantages.

The main advantage of GST is that it reduces the number of indirect taxes and creates a unified tax system across India. It eliminates the cascading effect of multiple taxes, making the tax system more transparent and reducing the cost of doing business.

GST is expected to bring down the prices of some items like movie tickets, dining out, two-wheelers, and consumer durables. However, it may also increase the prices of certain services like mobile bills, insurance premiums, banking services, and aerated drinks.

According to some economists, GST may negatively impact the real estate market by adding up to 8% to the cost of new homes, potentially reducing demand by around 12%.

While GST aims to simplify the tax system, some experts argue that CGST (Central GST) and SGST (State GST) are just new names for existing taxes like Central Excise/Service Tax and VAT, so the number of tax layers may not significantly reduce.

The aviation industry is expected to be impacted by GST, as service taxes on airfares, currently ranging from 6% to 9%, may surpass 15% under GST, effectively doubling the tax rate.

GST will benefit businesses by reducing the cascading effect of multiple taxes, making tax compliance easier, and creating a unified national market. It will also help build a transparent and corruption-free tax administration system.

For the common person, items like movie tickets, dining out, two-wheelers, and consumer durables may become cheaper under GST. However, expenses like mobile bills, insurance premiums, banking services, and aerated drinks may increase.

GSTN (Goods and Services Tax Network) is a fully integrated tax platform that will deal with all aspects of GST, including registration, returns, payments, and refunds, ensuring efficient GST implementation and administration.

Under GST, goods and services will be taxed together, eliminating the need to divide transaction values into the value of goods and services for taxation. This will simplify the taxation process and reduce associated complications and compliance costs.

The adoption and migration to the new GST system may involve teething troubles and a learning curve for businesses, tax officials, and consumers alike, as they adapt to the new tax regime and its procedures.