The Goods and Service Tax (GST) is all set to change the Indirect Tax scene in the country. Incorporating the vivid and complex tax brackets under one umbrella may seem like a brilliant strategy from the point of view of revenue inflow but in a diverse country like India formulating and enforcing a new law has never been a cake walk. Let us look at some drawbacks that traders might face owing to the proposed implementation of GST come July.
The roll out of GST in the middle of the accounting year is bound to cause a compliance chaos. There is still no clarity as to what repercussions the transition from one tax structure to the other will hold.
Change in Accounting Software:
Businesses now-a-days, large or small, use tax enabled software mainly for accounting and filing returns. Incorporating an entirely different tax structure into the system will bring out many technical exigencies and the same will call for a revamp of the entire Accounting system.
Higher tax burden for SMEs manufacturers:
Small manufacturing firms are going to feel the sting of GST as the overall exemption limit under the tax is 20 Lakhs, while the earlier exemption limit under excise was 1.50 crore.
No input credit under composition scheme:
Though the composition scheme provides for lower tax rates to small scale businesses who have annual turnover of more than 20 lakhs but less than 50 lakhs they would not be allowed to avail any input credit on the tax paid.
Service providers and online suppliers not eligible for composition scheme:
Service providers and online suppliers would not be considered for registration under the composition scheme. It is only meant for the suppliers of goods. Consequently, small scale service providers will share the tax burden at par with their large-scale competitors.
Also Read: Advantages of GST – The bright side
Traders are required to register separately under GST in all states they are operating in. This means an increase in compliance complications.
Pathos of E-sellers:
Business especially small ones that have web based operations will have to register in every state. Increasing their compliance procedures exponentially. Moreover, they would not be eligible for the composition scheme. Also, they would have to collect TCS (Tax Collected at Source) under GST which will further- payment, credit and compliance complications.
Apart from the above the major issue that the application of GST would bring into being is the inflation of products. There is tax on virtually all goods. Essential items like health services and medication will get more expensive due to the higher GST cap. Economists are also predicting a hike in food items like vegetables and cereals.