Question

Describe the advantages and disadvantages of GST.

Hint:

List the benefits of GST first: no cascading, one market, simple returns and less evasion. Then give its drawbacks: compliance cost, technology need and many rate slabs.

Answer 1

Step 1: Meaning of GST:
GST stands for Goods and Services Tax.
It is a single, destination-based indirect tax on the supply of goods and services in India.
It came into force on 1 July 2017 and replaced many central and state taxes, such as excise duty, service tax and VAT.

Step 2: Advantages of GST:
1. One tax across the country: GST removes the cascading effect (tax on tax). Input Tax Credit lets a business set off the tax it paid on inputs. This lowers the final cost of goods.
2. Fewer taxes and simpler compliance: many indirect taxes merged into one. Registration, returns and payment are done online on the GST portal.
3. Common national market: check posts on state borders have gone. Goods move faster, so transport cost and delivery time fall.
4. Better transparency and less evasion: invoice matching and the e-way bill make it hard to hide sales. This raises government revenue.
5. Relief for small traders: small businesses below the turnover limit need not register. The composition scheme allows them to pay tax at a low flat rate.
6. Boost to exports and growth: exports are zero-rated, so Indian goods become cheaper in world markets.

Step 3: Disadvantages of GST:
1. Higher compliance burden for small firms: they must file returns on time and keep digital records. Many lack the skills or software.
2. Need for technology: GST works on the GSTN portal and internet. Glitches and slow servers have caused trouble to taxpayers.
3. Multiple rate slabs: there are several rates (0%, 5%, 12%, 18%, 28% and special rates). This creates confusion and classification disputes.
4. Some sectors still outside GST: petroleum products, alcohol for human consumption and electricity are not fully covered.
5. Possible price rise and revenue loss for states: some goods and services became costlier. States gave up their power to fix taxes and depend on the GST Council.

Final Answer:
GST gives one national tax with credit for input tax, simpler rules and less evasion. Its drawbacks are higher compliance for small firms, dependence on technology and many rate slabs.