Why is everyone unhappy with GST?!! What are the problems?

The Goods and Service Tax (GST) was supposed to be a simple uniform tax structure across the country that would bring a significant percentage of the informal sector into the formal economy. The businesses expected lower indirect taxes under the scheme as well as easy compliance procedure for filing returns. But what was implemented stands in stark contrast to what was expected!!

 

Firstly, the tax rates were not lowered, rather it was increased making it unpleasant for businesses. It did not come out as a single tax structure, rather it is a multi-tier tax model. The tax slabs are majorly divided into 5%, 12%, 18% and 28%. Several business falling under higher tax brackets who were earlier paying lower tax had to increase the cost of their products or services which leads to negative impact on their competitive edge, thereby reducing profits. There are also technical difficulties like figuring out the tax slab of an item after it is processed or for the commodities and services that are not listed in the GST list. There is also no mechanism to resubmit filings in case of inadvertent errors during the first submission.

 

What is more cumbersome are the compliance procedures. Now business have to file multiple returns on a monthly basis which increases procedural burden. Even big businesses find it a daunting task to navigate these filing procedures as there aren’t sufficient trained personnel to submit GST forms.  Small and medium business find it even harder as it drags time and attention which otherwise could be spent on productive activities.

 

While these being the primary hurdles with the GST, there are many more practical difficulties that are impacting businesses. Despite this, the finance minister appears to be adamant as he claims that the slowdown in the economy has nothing to do with either demonetisation or GST.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s