Good and Service Tax (GST) Essay for UPSC Mains Preparation

GST is the abbreviation of Goods and Services Tax. GST is a kind of tax that was implemented in India on 1 July 2017. This tax is considered as a major reform of the Indian tax system after independence. Since its implementation, GST has been a controversial tax in the context of the Indian tax system.

When the government makes some major changes in an existing system then few people may like it and other few may not like it. The same thing happened with GST.

The government collects tax form the citizen of the country in two forms; Direct Tax and Indirect Tax. Direct taxes are based on the income of citizens and indirect tax is levied on the bases of the purchasing of product or service.

Income tax is a direct tax whereas GST is an indirect tax that brought many taxes under the same roof. To understand the features and concept of GST, we have to take a quick look at the previous tax system.

In the earlier tax system, the taxes used to be charged on every stage of goods. From the manufacturing of a product to its sales a tax has to be paid. These taxes used to be in the form of VAT, excise, CST but GST has replaced all different types of taxes.

Earlier the rate of taxes can be varied in different states and there were two types of taxes; central taxes and state taxes. Now with GST, the rate of taxes are the same in all the states of country and taxes have been imposed jointly by the state and central government.

In short, we can say that GST has simplified the complex tax system of India. But many business owners don’t have the same opinion on GST. So let’s understand the benefits and difficulties of GST.

Benefits of GST

The earlier tax system in India was not favorable for small business units. There were different types of taxes were present at that time and on a product, different taxes used to be imposed. The motive behind the implementation of GST was “One Nation One Tax”. GST has its own benefits and disadvantages. First, we will have a look at the advantages of GST.

Indian economy is developing at a lightning speed and it has to compete with other more developed economies. Countries like Sweden, Denmark, Germany, Switzerland, and Japan have already implemented the GST. This tax helped the economy of the aforementioned companies to grow. GST work like a common window for the tax collection. Here are the other benefits of GST that will help the Indian economy for the long run.

Ease of Business

One Country One Tax made it easier for the business to set up their project in any state of the country. Earlier the taxes on any projects used to vary from one state to another. But now tax slabs are the same for one item in all the states of the country.

Easy Tax Filling

Now different types of taxes like sales tax, Vat, services tax etc have covered under GST so the process of tax filing has become much easier. Filing of the document has also become less time and space consuming work. The entire process of GST from registration to filing returns is available online.

It’s easy to complete all the procedure mandate for GST online. Earlier there used to be a different process for Vat and Services Tax and now it’s one so of course, GST is proved as a better tax for the startups and established companies.

Elimination of different taxes

Before GST, different types of taxes used to apply to one product. Taxes like excise, octroi, sales tax, CENVAT, Service tax, turnover tax etc have different rates but GST has included all of them in it.

Regulated Under-organised sector

Before the implementation of GST, many big industries like construction and textile were unorganised. But after the implementation of GST when companies associated with these industries have to complete all the compliance’s online then they have to stick to regulations.

A defined tax for E-Commerce

Before the implementation of GST, the business for E-commerce sites was difficult. For Up they will have to apply VAT and for other states like Rajasthan, they will have to remove it. So it was confusing for them. But GST made it easy as its one tax for all the states.

Disadvantages of GST

GST has reformed the taxation system of India. It has many advantages so it must have some disadvantages as well. So let try to find out the difficulties and disadvantages of GST.

A New Tax

GST is a new tax and still, the common man could not understand it. The common Indian man is habitual of paying different types of taxes and they even know the percentage of tax on different products.

But now when all types of taxes have been combined in GST so it has become tough for a common man to understand the rate of tax on a particular product. This disadvantage can be called as a short term disadvantage.

Online Tax System

The process of registration and filing GST is online based so much small businesses may not cope with this new system as the earlier taxes used to be pen paper based. Since its an online system so it’s easy to file it through online software but buying software for GST is not mandatory.

The online procedure of GST requires the digital signature of authorised personnel to complete the process. In small enterprises usually, people don’t know much about them so they will have to work harder to understand this indirect tax.

Difficult for SMEs

As GST is a newer tax system so some difficulties are obvious but for SMEs (Small and medium-sized enterprise) it is a bit more complicated. The SMEs have to quickly adopt this system because it’s mandatory to mention the GSTIN, place of supply, HSN codes, and others on the invoice.

Earlier the companies with more than Rs. 1.5 crore turn-over used to pay excise duty. But now after the implementation of GST, any business whose turnover exceeds Rs 20 lakh will have to pay Good Services Tax. Here the point of relaxation is that for SMEs with turnover up to 75 lakh the tax rate is only 1 percent.

Conclusion

GST is a progressive tax. Since it is a new tax so the government keeps revising the tax slabs of GST. On Sin products like tobacco, cigarettes, the tax percentage was as high as 50-60% but now it has been reduced to 28%. Earlier people were worried and not comfortable with GST but now the accounts professionals are more comfortable with this tax.

We cannot deny that GST is not perfect tax without any disadvantage but this tax is being observed by the government officials and they are trying to make it better. It reflects the changes that the government has made so far.

On grounds, GST made it easier for companies to have the record of tax payment of schedule of tax payment. Since it’s online so it can be filed while sitting in office premises.

Implementation of GST is a big step for making Indian economy better, stronger and more transparent in the near future. The way people are debating on its advantages and disadvantages and giving their suggestions to make it even better, this is really appreciable.