It is rightly said that everything has a flip side.
GST, that is about to roll out in less than a month’s time is expected to bring enough comfort and relief to the taxpayers but have you ever wondered that it could have another side too, where everything would not be a smooth sailing procedure? Well, just like there are benefits of GST; likewise, GST has some defects and disadvantages too.
Below are some disadvantages of GST that should be well set in your mind before you move towards the reform.
- Petroleum Products Undefined Under GST
Petroleum products have not been defined under the GST which means the states will continue levying their taxes and no input tax credit will be available in this industry and the related ones.
- Implementation of GST in the Mid-Year
GST will roll out on July 1 which means for the new financial year starting from April 1, old tax structure will be carried out and as soon as GST is implemented, new structure would be enforced. This would create confusion as the change would not take place in a day and two systems (old and new) would be running parallel for a while.
- Inevitable Inflation
In many sectors, GST would result in inflation and there have been no measures to curb the same. While there were steps taken to initiate anti-profiteering at retail level, there have been no concrete steps as such.
- Operating Cost Hike
For smaller enterprises that do not hire professionals to manage accounts and taxes, the new system would compel them to require professional assistance as the structure would be completely new.
- Tax Burden for SMEs
The new tax regime is indeed a challenge for GST as no duty was payable by taxpayers having turnover less than 1.50 crores but with the threshold being significantly lowered to Rs 20 lakhs, the tax base has become wider by inclusion of more taxpayers in the loop.
- Business Software Updation
Businesses, up till now have been using accounting software with VAT, Service tax incorporated in it but as the reform would take place, these software would need to be updated and that means extra cost of purchasing software and training the employees.
- Multiple Registration
For a business, GST requires to be registered in as many states in which the business is operating and that means multiple registration leading to compliance burden.
Once the GST gets implemented, these challenges would follow it for a long time but as the benefits of GST are sure to bind India into one tax, the end result is hoped to be positive.