Before knowing the GST Pros and Cons, first, let us know the classification of taxes.
Classification of taxes
Direct Taxes: It is a burden of charge that is put directly on the person who earns money and pays tax, and the amount is directly paid into the pockets of the Government.
Indirect Taxes: It is a charge which is indirectly collected from the final consumer. Indirectly, it is paid into the pockets of the Government.
The above two classification helps you to understand where you fall under and how to pay the tax accordingly.
In other words, Indirect tax –
The person paying the tax to the Government collects the same from the ultimate consumer. Thus the burden of tax is shifted to the consumer.
GST Pros and Cons
Pros of GST
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of the industry, the Government, and the consumer.
The pros of GST are as follows;
- Creation of unified national market
GST aims to make India a common market with common tax rates.
- Boost to ‘Make in India’ initiative
GST gives a boost to the ‘Make in India’ initiative of the Government of India by making goods and services produced in India competitive
- Ease of doing business
A simpler tax regime with fewer exemptions, along with the reduction in the variety of taxes under GST, has led simplification of taxes.
- A source of revenue
Indirect taxes are a major source of tax revenues for the Government. The percentage of indirect revenue is 50%.
- Wider tax base
Unlike direct taxes, indirect taxes have a wide tax base. The majority of the products or services are subject to indirect taxes with low thresholds.
- Promotes social welfare
High taxes are imposed on consuming harmful products, also known as ‘sin goods,’ such as alcoholic products, tobacco products, etc. This not only checks its consumption but also enables the state to collect substantial revenue.
- Ease of ill effects of cascading
Here cascading means double taxation. By including most of the central and state taxes into a single tax and allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it helps in easing the ill effects of double taxation, improving competitiveness, and improving liquidity of the business.
- Benefits to small traders and entrepreneurs
GST has increased the limit for GST registration for small businesses. Further, a single registration is needed in one State. With the creation of a seamless national market across the country, small enterprises have an opportunity to expand their national impression with minimal investment.
- Reduction in keeping the cost
The keeping cost of the books for a variety of taxes cannot be seen under GST. The keeping cost is lesser as multiple record-keeping for a variety of taxes is not needed. Therefore, there is a lesser investment of resources and human resources in maintaining records.
Cons of GST
The following are the disadvantages of GST
- No knowledge of direct pinch
Since the value of indirect taxes is charged inbuilt, the taxpayer pays the same without actually knowing that he is paying tax to the Government. Thus, the taxpayer does not recognize a direct pinch while paying indirect taxes.
- Inflationary
The tax imposed on commodities and services causes an all-around price spiral. In other words, indirect taxation directly affects the prices of commodities and services and leads to an inflationary trend.
- Regressive in nature
Generally, indirect taxes are regressive. The rich and the poor have to pay the same rate of indirect taxes on certain mass consumption commodities. This may further increase the income differences between the rich and the poor.
- Shifting of burden
There is a precise movement of the tax. For example, the tax paid by the supplier of the goods is reclaimed from the buyer by involving the tax in the product’s cost.
GST Invoice
A person who is a registered person under the get law and supplying goods or services or both are taxable shall issue an invoice on the registered name.
GST Invoice Format
There is no specific GST Invoice Format prescribed under GST, but rules make it mandatory for an invoice to have the following fields( only applicable fields have to be filled)
- Name of the person selling goods or providing services, address of the supplier, and GST Identification Number (GSTIN) the supplier( the person who sells the goods)
- Serial Number not surpassing 16 characters, in one or multiple series, containing alphabets/numerals/special characters hyphen or dash and slash, and any combination.
- Date of issue
- HSN code of goods
- Quantity of goods
- The total value of the goods or services sold
- The taxable value of the goods or services after deducting discount(if applicable)
- Tax rate to be levied
- GST charged
- Supplier’s or authorized representative signature or digital signature as required.
Conclusion
A person who wants to start a business or who has already started a business must first understand GST pros and cons to stay updated as it gives a transparent picture of the tax and GST invoice format. By understanding the key details in an invoice, you can access the GST invoice format independently.
To stay updated with the various GST changes, one can go through the official website of GST, i.e., GST common portal, through the link.
Follow Techrado for more!