Question

Write any five limitations of pre-gst indirect taxes

Answer 1

The five limitations for business entities due to pre-gst are:-

Added costs for buying the new software

Increase in operational cost

Requires proper training for GST

Difficult to adjust to the new system in the middle of the financial year

Requires adaption to  online taxation for GST

Explanation:

• Business entities find it difficult to adjust to the new taxation system in the middle of the new financial year. The Business need to buy the new software for GST or update their systems for handling the new tax structures.
• It is necessary for business organisations for training their employees by incurring additional costs for the purpose of training. They need to understand the system for being compliant with the digital record keeping.
• It is important for the companies  to recruit tax professionals to be GST complaint which will lead to increase in cost for small business. They also need to adapt to online filling of the taxes

To know more about GST

What is GST and what are the characteristics of GST

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Answer 2

Answer:

Explanation:

Pre-GST indirect tax:

With a method to provide credit for tax paid on inputs, it is a multi-point system of taxation on the sale of goods. VAT collects the tax in stages during transactions involving the sale of goods. The output tax offsets the input tax, which is the tax paid on purchases (i.e. tax payable on sales).

Limitations of Pre-GST indirect taxes:

• Every time commodities are moved from one State to another, Central Sales Tax (CST) is due. CST is due if the sale is direct.
• Since the input service credit (set off) of input taxes is not entirely available, there is tax incidence even in cases of stock transfers or branch transfers.
• An orphan is Central Sales Tax. Because of this, there is no authority to handle problems and develop answers.
• In CST, this causes a number of issues.
• Due to CST and Entry Tax, cascading effects of taxes cannot be prevented.
• In the European Union (EU), there are no restrictions on the free movement of commodities between any two nations.
• But in India, moving products from one State to another is subject to taxes.
• Due of checkpoints and the obvious and unseen barriers of central sales tax, entry tax, and state VAT, India does not have a nationwide market.

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