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Critical Analysis of Benefits of GST

Critical Analysis of Benefits of GST

Government is advertising benefits of GST since few months. Here in this blog we have analyzed some of the benefits of GST which are advertised by government.


Let’s Discuss benefits of GST, one by one:-

Simpler Tax Regime:

In place of many forms of indirect taxes only one GST will apply, Hence it may provide simpler tax regime. But due to many features of GST like No cenvat credit of CGST in SGST and vice versa, Open market value concept for valuation, new concept  of TDS against GST, State wise registration (Presently a service provider provider providing taxable services in all the state need only one registration in Service tax, but now this service provider who never deals in sale of goods but only provides taxable services needs to get registration in every state where he provide services.),  filing of various Returns etc.  It appears complicated.

Reduction in prices of goods and Services:

Due to removal of cascading effect of taxes and being allowed cenvat credit between Excise, Vat and Service tax, prices are expected to go down But this is possible only where prices are determined by cost plus method Hence actually prices will go high or remain same as businesses may book profit for the sum which is saved due to less tax. For example, if a product is priced as Rs. 13225/- (cost-9000/- Taxes-3225/- profit-1000/-) before GST. Then if taxes are reduced to Rs.2800/- then Price of product may remain same as profit of business may shift up by the difference like price is Rs. 13225/-(Cost 9000/-, taxes 2800/- Profit 1425/-). Government has made anti-profit booking rules for this, but without execution these rules are not going to serve any purpose.

Transparency in taxation system:

Due to simplification of process, there may be some transparency in taxation system, but in GST law there are so much open way (like open market value concept has replaced fair market value concept in valuation rules) given to tax authorities that they can create hurdle for any honest businessman . GST law passed in India has changed its shape and it may temper the purpose for which it is implemented. Actually this transparency is for Government, Government can easily catch the Tax Evaders. But no extra transparency for tax payer regarding utilization of money collected as tax.

Common National market:

Due to merging of State taxes in GST there may be common national market but unavailability of Cenvat credit of SGST of one state against SGST of other or CGST in the hurdle in developing Common National market. Further In GST, SGST is the part of revenue of the state where goods is consumed. For Example, If a car is manufactured in Haryana and that car is sold to a customer in Uttar Pradesh. Then SGST collected on that sale will be revenue of state of  Uttar Pradesh and this sum will root through GST Network. Hence no tax benefit for manufacturer state. Hence some state oppose GST. Hence Government proposed compensation cess for loss of revenue to states.

Uniform Prices throughout Country:

Due to same tax rates of GST in whole country there may be same prices throughout Country, But prices does not merely depends on taxes, it depends on various other factors like cost incurred to manufacture the product, availability of labors, Minimum wages of labor which is different in states, Competition level in area, Customer needs of that area etc. So prices may not be same throughout Country.

Increase in Employment Opportunity:

Due to easiness of business in India after implementation of GST, employment opportunity may increase, but GST law as appears is focused to increase revenue of Government not the industrial development. Index of Industrial Production (IIP) has a growth rate of slightly over one percent. To increase employment, Industrial development is necessary. If Government timely review its success and bring some positive changes to remove the hurdles of industrial development, then only it may be helpful in creating some employment opportunities.

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