What are the Major Disadvantages of GST Registration?

GST Registration

If you are about to apply for a GST number, you should now about all the aspects of GST. While there are numerous advantages of GST there are certain disadvantages as well. These disadvantages might change according to your business structure, location and type of product or service you sell. So let’s discuss these in detail:

Process becomes complicated for businesses

The GST registration process is a long and tedious one for businesses. The process involves filling out various forms, paying various fees, and submitting them to the department of revenue. It can be very time-consuming and difficult for businesses that are small or have limited resources. This is especially true for those businesses that do not have any staff members who are able to deal with such a complicated process.

Also Read  IronWallet: Revolutionizing Crypto Storage with Non-Custodial and Cold Wallet Features

Increase in transaction costs for traders

In addition to this, there may be an increase in transaction costs for traders as they will need to factor in an additional 5 per cent on top of existing rates for credit sale activities and stock management services under GST.

Higher taxes on imported goods

The biggest disadvantage of GST for traders is the higher taxes on imported goods. The new tax will be levied at five per cent on all imported goods that are not exempt from the levy. For example, a consumer who buys clothes worth Rs 1 lakh from ecommerce website Amazon may have to pay an additional Rs 300 on top of his/her existing taxes to pay GST. This will make imported goods more expensive than domestic ones.

Also Read  3 Things Every Expat Should Know Before Moving Abroad

Disruption in consumption patterns

Another disadvantage of GST registration is that consumption pattern of the goods and services disrupted. People may not buy as much as before because they are not sure about the tax rates.

Higher rates in banking and insurance services

Banking and insurance services are the two sectors that will be most affected by GST. The effective rate of GST is not the same for all sectors, but the difference between the current sales tax rate and the new one will be significant in some cases. The effective rates for banking and insurance services will go up significantly as a result of GST.

In addition, there is also a possibility that banks could keep some of their profit as interest on pre-GST deposits instead of passing it on to customers. This would cause another increase in bank charges.

Also Read  ICICI Bank Balance Check Number

Problems for B2B sector

The business-to-business sector may not participate fully in GST because of the complex nature of tax rules for this sector. For example, some B2B businesses are required to report their sales at the end of the financial year. However, they usually have to pay GST in advance or at the start of the financial year. This means that they cannot use their existing invoices as proof of payment until after they pay GST.

Another problem is that some B2B businesses do not get an e invoice under gst from their suppliers, which makes it difficult to comply with the rules for collecting and remitting GST.

error: Content is protected !!