India is the third largest economy after Germany and Japan. GST (goods & service tax) was implemented in India as the biggest indirect tax reform. Being a destination based single tax on consumption of goods and services with no cascading (tax on tax) effects empowers one nation one tax. Many indirect taxes brought as a single under GST umbrella.
France is the first country introduced GST in 1954 followed by 160 countries in later period up to date. Apart from India only Canada and Brazil have a concept of dual GST (cgst & sgst) . In some countries like Malaysia, Japan, Singapore GST sustained after initial protests. But India’s GST is different from global variables and rather more complicated and confusing. It has 3 layers ( igst , cgst , sgst ) and 7 slabs of taxation [ 0 , 3(on gold) , 5 , 12, 18 , 28 , 28 with cess…all in % ] giving a complex shape in comparison to existed indirect tax set-up [ VAT ] .The 29 States and 7 Union Territories agreed to give up their right to impose a sales tax on goods and centre gave up its right to impose excise and service taxes. The centre is bound to compensate any state for any shortfall from GST.
After demonetisation, GST got implementation during slow economic growth in hurriedly and without full preparedness. Although it has plus points like centralised registration  tax credit transfer irrespective of location of business  improved logistic services  consuming state getting more benefit etc. But it’s demerits (as a half-baked product) are stronger.
- Time is precious for traders. The devotion of enormous time in filing GST returns is unproductive and difficult resulting in mounting pressure on business minds. In a year 37 returns are to be filed by a businessman.
- Despite “ one tax” policy, GST is collected in various rates of tax. Goods classification are unclear to common. Different tax on different variants of a single product such as
**garments below 1000 mark will attract 5% GST
**garments above 1000 mark will attract 12% GST
**footwear below 500 mark will attract 5% GST
**footwear above 500 mark will attract 18% GST
It is simply ridiculous. Additionally, classification disputes will continue milking businesses by bureaucratic decisions.
- HSN codes mentioning in invoices creates confusion. It is to be removed initially.
- The system of matching invoices is not logical. It is only in India.
- Putting services in 18% category of GST ( 3% increment ) creates upward pressure on prices in the service sector. The service sector contributes 50% to India’s GDP.
- Small businesses are loosing. The purchase price for small businesses becomes more than large businesses.
- The definition of branded and unbranded is not clear. For example, GST rates on food are 0% on branded & 5% on unbranded stuff. Some businesses seem to deregister their brands and to sell goods under the corporate brand name without paying tax.
- GST rates in India are highest in the world.
- Tax filing is putting pressure on GST portal which subsequently crashes. Large taxpayers may be asked to file their GST return earlier to avoid last time rush.
- Exports have come down.
- The exclusion of petroleum products and electricity from GST is problematic. Indirect taxes paid on diesel account 30% of the logistics cost, for which no credit is available. Also, different tax in different states on these items gives a different cost of production.
- Under GST regime rating to business is to be given based on their discipline. It will affect the goodwill or good profile of the concerned even for small delays in filing returns or paying late.
- The quantum of a fine is not defined under GST law and it is at the discretion of the tax officer. [ In a recent case a trader was asked to pay Rs 20000 in fines after he omitted Rs 15 GST in a bill ]
On the basis of demerits of GST, further best reforms are necessary for the success of the bright GST system. In initial stage taxpayers needs administrative guidance.It may be short-term pain but long-term gain. Still, it is to be made better and simple in the shortest period.