simplications and complications of indian GST
Simplications of in indian GST:
- Simplication of More competing business environment:
It will shift the burden of taxes from the manufactures in India where the tax system is unfairly change towards the consumers. Manufacturers will pay lesser taxes and there will be an environment of greater competitiveness and more flexibility in business.
- Simplication of Systematic tax rates across states:
Would you not decrease your rates to attract more people towards your products if you could? Similarly to be competitive states sometimes cut the VAT rates. This is to attract more investors in line with the human nature, causing a loss of revenue to both the states and the center. Systematic rates will check this problematic fiasco.
- Simplication of Better inter-state trade:
In progress there are no tax credits provided for inter-state trade and hence uniform rates across all the states would boost the trade in the country between different states.
- Simplication of No worry:
All confusion regarding what is a manufacturing or service activity will be removed. All economic activities will be “economic activities” only and will be taxed.
- Simplication of No cascading effect:
There will be no taxes on taxes. Only once will there be a tax- a single indirect tax. There will be no gung-ho.
- Simplication of Ease on many fronts:
This will be easier to understand, easier to administer and easier to dispense with. Aam Aadmi Party had made it a manifesto point of simplification of VAT for the traders, such is the magnitude of the problem. Hence ease of administration and understanding will be of great help.
- Simplication of increase tax base:
More people will pay taxes. The tax rates are reduced but the emerging number of participants will make up for the loss, the government has suggested.
2.Complications of in indian GST:
1. Complication of Huge Tax Burden for Manufacturing SMEs :
Small businesses in the manufacturing sector will bear most of the burden of GST implementation. Under the existing excise laws, only manufacturing business with a turnover more than Rs. 1.50 crores have to pay excise duty. However, under GST the turnover limit has been reduced to Rs. 20 lakh thus increasing the tax burden for many manufacturing SMEs.
2. Complication of supplement in Operating Costs:
Most small businesses do not employ professionals and prefer to pay taxes and file returns on their own to save costs. For GST though, as it is a completely new tax system, they will require professional assistance. While this will benefit the professionals, the small businesses will have to bear the additional costs of hiring experts.
3. Complication of Adjustment in Business Software:
Mostly businesses use accounting software or ERPs for filing tax returns which have excise, VAT, and service tax already incorporated in them. The change to GST will require them to change their ERPs, too, leading to increased costs of purchasing new software and training employees.
4. Complication of GST Will be enforce During the Middle of the Year:
The contingent GST implementation date is 1st July 2017. So, for the fiscal year, 2017-18 business will follow the old tax structure for the first 3 months, and GST for the rest of the time. It is impossible to cross over from one tax structure to the other in just a day, and hence businesses will end up running both tax systems in parallel, resulting in more confusion and compliance issues.
5. Complication of Development in Taxes will Increase Prices:
Currently, some sectors like the textile industry are exempted from taxes or pay low tax. GST has only 4 proposed tax rates of 5%,12%,18%, 28%. Thus, for many sectors the tax burden will increase which in turn will increase the price of the final goods.
6. Complication of Petroleum Products Are Not Part of GST Yet:
Petroleum products are being kept outside the scope of GST as of now. States will levy their own taxes on this sector. Tax credit for inputs will therefore not be available to related industries like the plastic industry which are heavily dependent on petroleum products. Petrol and diesel are required to run factory machinery and unavailability of input tax credit on petroleum products will most probably push up the final price of all manufactured goods.
Recently the Finance Minister Arun Jaitley said that GST will apply on petroleum only after all the states, through the GST Council, are agreed on it. So, an inclusion of petrol in GST is expected but there is no deadline on the horizon yet
7. Complication of Registration in Multiple States:
GST requires businesses to register in all the states they are operating in. This will increase the burden of compliances.
8. Complication of Complication Faced by E-commerce:
Nowadays, many SMEs operate through their own online shopping websites or through third party websites to sell to different parts of India. Under GST, they will be required to register for all the states. Not only that, they will not be eligible for composition scheme and will be required to pay taxes like any large organisation. E-commerce facilitators are now required to
9. Complication of Configuration Scheme is Not Available for Many Businesses:
Configuration scheme is available for only businesses selling goods. It is not available to service providers or for online sellers. This sets SMEs at par with large organisations in an unfair move.
10. Complication of No Anti-Inflationary Measures:
Every country that follows GST experienced a hike in inflation when they first introduced it. They countered the inflation by keeping tabs on prices and initiating anti-profiteering measures at the retail level to protect consumers from price swindling.
While there have been similar discussions in the GST council, India still does not have concrete anti-inflationary measures to curb the inflation that is an inevitable outcome of GST.
11. Complication of The Jharkhand-esque problem:
The states like Jharkhand which are more goods-driven and lesser services-driven will thus be sharing their sales revenue with the Center but don’t have enough services to compensate like Karnataka. This is going to hurt some states.
- Complication of States suffer a share of revenue:
Some of the states may even lose a loss on the account of tax sharing and the center itself may decide on the one-time compensation. The government may increase the state taxes by 1-2% to compensate them. However this is the stumbling block in the way of this bill as settlement will be a pain in the ass.
Implication and simplication in GST It is important to take a leaf from global economies that implemented GST and overcame the teething troubles to experience the advantages of having a unified simplication tax system, easy input credits, and reduced compliances.
Once GST is implemented, most of the current challenges of this move will be a story of the past. India will become a single market where goods can move freely and there will lesser complications to deal with for businesses. If you want know more about GST please follow this link it will more helpful to you gstreporting.com.