Home Business & Finance The disadvantage of Goods and Service Tax (GST)

The disadvantage of Goods and Service Tax (GST)



What is GST ?

GST Stands for Goods and services tax . Goods and Services Tax would include manufacture, consumption, and sale of goods as well as services at the national level. According to critics there are some major disadvantages of the Goods and services tax.

Must Read : What is GST And Its Working ?


There are a few disadvantages Goods and Service Tax (GST), they are listed below:

Negative impact on real estate

Some critics of Goods and Service Tax (GST) say that it would negatively impact the rising real estate market of India.

It would reduce the demand for houses by twelve percent as the prices of new homes would rise by 8 per cent.

Economists argue that GST would bring no new reforms for this country.

Services May Be Become More Costly

In India, service tax is about fifteen percent, but after Goods and Service Tax (GST), it would be about eighteen to twenty percent.

All services would be costlier. It is also a disadvantage for Indians6.

Some Products Become Expensive

Some retail products have only four percent tax on them after GST garments and clothes would become more expensive.

IT Companies cost go high

Some of the biggest IT companies in India have adopted a strategy for spreading their operations and stationing their majority workforce where the cost of functioning, services and production is low.

This low operation cost would end after the implementation of GST.

Petroleum Products Prices Become High

Petroleum products are the majority import value in the Indian economy. Petroleum products like crude, ATF, high-speed diesel and natural gas are kept out of GST.

Compliance costs would rise because of dual indirect tax mechanism according to economists.

Negative Effect on Banking Sector

The Banking & Financial Sector would get hit because of this reform. The effective tax in this sector is fourteen percent.

After GST effective tax rate on fee-based transactions would increase to eighteen to twenty percent.

There would be a moderate increase in financial services such as loan processing fees, debit/credit card charges, and insurance premiums.

  • Life, health and motor insurances would costs more from April 2017 as the taxes will rise by 300 basis points.

Read Also : Benefits of GST .

Disadvantage For Aviation Industry

The aviation industry would be affected. In the recent year, the airline sector is currently witnessing increasing domestic traffic with GST implementation this growth would slow down.

Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.

The implantation of GST may boost the growth of the overall Indian economy. Many analysts expect ten percent growth of the economy with the implementation of the GST.

But now we have to wait for the Q1 earnings of FY 2017-18 to access the effectiveness of GST after companies start disclosing their income