The Government of India, in their effort to simplify the taxation process and bring transparency into the system, will soon introduce Goods and Services Tax (GST) in India. Like any other system, GST has its own pros and cons. Let’s have a look at both the sides of the coin:
|Improvement in business:
Indian manufacturers may experience a relative ease in the amount of stress experienced by them due to taxes. The taxes may be lower and it may invariably increase the scope of a healthier business environment.
|A dominating Center:
One of the cons of GST is that it would make the Center truly powerful. The Center will specify the rate of revenue that has to be shared with the States. The States might have to bear a loss due to tax sharing. The Center has the right to hike rates for states when they need.
|Standardization of Tax across the country:
By standardizing the GST rates across the country, the government will be able to provide a steady platform for businesses both Indian and International. Such practices can catapult India into a promising nation for foreign investments.
|Some States will suffer losses:
States that are more dependent on their goods rather than services will now have to share their revenue with the government. This can burn a big hole in their pockets as they don’t have any service to compensate.
|Strength in simplicity:
The best thing about GST is its simplicity. No more worrying about multiple taxes. One Nation – One Tax. By merging various indirect taxes, GST can help people get a better understanding of the taxation system.
|Not consumer friendly:
GST is going to fetch the amount from the consumers that used not to be taken from the manufacturers through tax credit system. Undoubtedly, this will make the consumers unhappy.
|Increase in the number of tax payers:
GST can ensure that the number of tax payers increases. This can nullify the adverse effects of the cut in tax rates.
If the GST is to be successfully implemented, it is essential that the GST code that would be brought into force at the Centre and the states is similarly worded. It should also ensure that the principles and the procedures underlying the tax, as also the systems to be followed by the tax payers in order to enable compliance, are standardized and well understood. Information technology may be a key driver and may be critical in ensuring that GST is rolled out successfully. An enormous amount of time and effort is required to be put in to ensure that the vast bureaucracy in the government tax departments is adequately informed and trained on the fundamentally different tax that is proposed to be introduced.
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