As any decision has its consequences and is
faced by different opinions, same happened with GST decision. Some praised the
decision and noted its long-term benefits and others expressed fear and
downvoted this decision showing all the disruptive threats. The notion behind
creating GST for all the 29 states and 7 Union Territories was that all the
business people won’t have to file a lot of taxes and everyone could have an
easy process. Besides, considering the customer’s or common people’s side, the GST
was supposed to lessen the ‘n’ number of taxes and reduce the burden.
But, these were all ideal notions, what
actually has happened and what not? How people are perceiving reality.
Everything is different in practical life. Let us see how GST impacted India in
actuality.
The
Short-Term Impact of GST
According to the customer’s point of view,
they have to pay more tax than ever for many goods and services as it comes
added up in the original cost. Many
things of daily life are having the same or a bit higher tax rate.
Additionally, implementation of GST has a compliance cost together with it.
This cost was high and limit-causing for the small-sized businesses, therefore
they objected to it. Hence, the basic costs of the goods got increased to cover
up the losses.
Long-Term
Impact of GST
The
Rise in Competitiveness
In India, for manufactured goods and
services, the retail rate shows that the total tax value is approximately
25-30% of the product’s cost. After the
GST application, the prices went down because the tax burden is stripped down
to the end user. If the scope of the production increases then the competition
increases.
Freedom
of Inter-State Transportation
Due to GST, the freedom of inter-state
transportation has increased, which has led to bigger growth for all the
businesses. GST has encouraged businesses to concentrate on Pan-India
operations.
Simplified
Tax Structure
Doing a calculation of multiple taxes was a
headache, but under GST, there is only one tax to calculate, which saves money
and time.
Single
Tax to Pay
The taxpayers don’t have to count for
several taxes now, they can pay taxes uniformly. This singular tax has proven
as an advantage for the same purpose.
Rise
in Exports
The production cost of the domestic market
has lessened down after the introduction of GST. Hence, it has led to the
growth of a positive influence on the international market.
Higher
Tax Revenues
Reducing the burden of taxpayers encourages
a number of people to pay their taxes. This, in turn, leads to a greater amount
of revenues for the government. Hence, the government can give a lot of
benefits later like loan waivers for farmers, grow infrastructure, strengthen
the army, etc.
Benefits of
GST
·
Elimination of multiple taxes
·
Elimination of cascading taxes
·
A rise in the number of
services and products
·
A rise in supply and demand for
services and products.
·
Reduction in costs of
manufacturing and processing.
·
Less burden on the end user
·
Black money has got control
over it and a lot of lost amount got extracted.
·
Upsurge in the tax revenue.
Challenges
of GST
·
The pricing impact on services
and goods due to all-in-one tax.
·
Initial costing slabs for some
goods were high, then they are brought down later.
·
Lack of IT infrastructure in
some Indian states.
·
Drafting of a completely
different law.
·
Inter-state transfer of
products with some exemptions on state and central GST.
·
Making constitutional amendments
to allow easy flow of GST in central and state governments.
·
Making amendments to implement
the levy of GST on imported items.
Influence
of GST on Various Sectors
Transportation
Industry
The rates for air travels and cabs got
reduced to 5% and this change was welcomed by the customers.
FMCG
Industry
For consumer goods and services industry,
the GST rate was set as 18-20%. Some were highly affected, so opposed the
decision and some were not. Recently they have been reduced to 12% slab.
Hospitality
& Entertainment Sector
Entertainment and Hospitality Sector has
been set to 28% category and hence customers will have to pay more for such
services like movies, hotels, etc.
After GST got applied, for the taxable
supplies, the e-commerce operators get 1% of its net value. This is called as
Tax Collected at Source (TCS).
Financial
Products and Services
Application of GST has impacted financial
services and products like banking, funds, and insurances, and NBFCs.
Impact
on Economy and Inflation
GST was an inflationary step as the 18% tax
rate on the services had inflation figure raising.
Start-Up
Sector
GST has tried to create a positive impact
on start-ups, but the start-ups have already being burdened by new business
management, the filings for GST number and the processes were seen as tiresome.
Transfer
of Stocks
The tax levied on operations like branch
transfers and input tax has the chance to be claimed afterwards.
The
‘Imports’ Sector
Before GST, there were many import duties
on the goods, but after GST, all the indirect taxes were replaced by IGST.
The
‘Exports’ Sector
After GST got applied, the supply chain
doesn’t have a tax on its every single stage. Furthermore, the availability of
input credits is acceptable.
Rental
Properties
The implementation of GST has exempted the
rental limit of Rs. 20 lakhs on commercial properties, further, setting no
limit for house rent.
Gold
Business
After the application of GST, the rate was
reduced to 5%, which was initially 18%. It later benefits the customers.
Special
Economic Zones (SEZ)
After the establishment of GST, the Special
Economic Zones (SEZs) got benefits from the zero-tax rate.
Real
Estate Industry
After the introduction of GST, the real
estate sector was mostly benefitted as it got more transparent in the
operations.
Reasonable
Housing Services
Although, purchasing a house is non-taxable
but, the GST applies to all houses under construction. The homes under EWS,
CLSS, LIG, and MIG1/11 is 8%, excluding the cost of land. Those houses which do
not come under these norms, are paying 12% GST.
Logistics
The rate pre-GST was above 26% and post the
implementation of GST there was a reduction to 18-20%, which came out as a
pleasant news for the logistics sector.
Automobile
Industry
GST inculcated an indirect tax regime,
which created various taxes and duties on the trade of vehicles, accessories,
and spares.
Manufacturing
Industry
GST wants businesses to match the
necessities of this tax. After the
adoption of the requirements, the compliance costs were lessened to a major
extent.
Chemical
Industry
The chemical industry got benefitted
positively in the long term, after the implementation of GST.
Stainless
Steel Industry
GST has proven favourable to the steel
industry and hence given a positive impact. Earlier the rate was 18%, which was
later reduced to 5% for some steel products.
Tobacco
Industry
The tax rates post GST are lesser than the
tax-rates pre-GST era.
Textile
Industry
Earlier, the textile industry was quite
against the GST due to its high rates, but still, it impacted positively. The
range now differs from 5% to 12% according to the products.
Power
Sector
As the domestic coal is in the 5% rate
slab, the impact of GST is positive for lighting and electrical industry.
Coal
Sector
After GST, the rates for transporting coal
through trains went down by 5%, and hence the logistics cost also reduced.
Domestic
& Electrical Appliances
Here, there was no major impact as the
pre-GST and post-GST rates were quite similar.
Job-Works
Sector
The goods after the job-work have special
provisions as they carry no GST. The owner and the job-workers, both get the
benefits of this provision.
Hospitality
Industry
The earlier rates were up to about 27%,
which were reduced after the implementation of GST.
Indian
Railways Segment
The lowest tax-slab rate of 5% has been
assigned to this sector keeping the passengers’ benefit in consideration.
Aviation
Sector
There has been a mixed impact after the
implementation of GST, especially when the rates of fuel is considered.
Handicraft
Sector
This sector has been poorly affected so it
wasn’t welcomed by the artisans all over.
Pharmaceutical
Industry
The rates of the medicines have been
increased by 2.3% for those which are in the 12% bracket and those with 5%,
will see no change in the MRP.
Cement
Industry
There has been not of a much change as the
tax rates got mixed up in the cement-production cost.
Alcohol
Industry
The price of alcohol has increased, but, no
GST was applied. The state governments continued to charge VAT and excise duty
on beer and liquor. They were not under GST for two prime reasons –
•
For having a major chunk of
revenue other than GST
•
To keep the prices high, so
that people will consume it less.
Sweet
Manufacturers
There has been a confusion in what these
sweet manufacturers need to pay. Certain sweets were settled in 5% slab and the
beverages into 12% slab
These
were the industry-specific impacts of Goods and Services Tax in India.
Wrapping Up
There have been various speculations about
GST and every decision has its opposers and supporters. GST has been a game
changer, transforming the Indian economy at its peak by letting people pay only
the net appropriate price for all services and goods under one tax. The single
tax structure has lessened the burden of many people, thereby increasing the
competition in the market. After GST first rolled out, there have been small or
big revisions to it, the recent one being at the end of the financial year
2018-2019. This revision has seen many reduced rates than the initial ones,
which has benefitted the country. There might be a possibility of having
another revision when the government thinks that it is the right time.
GST, though a simple tax, yet it felt
complicated to many people as it was new. Many people want GST
billing software for GST eFiling. If you face issues and want a GST
return filling software for shortening the tedious and time-consuming
process, then you can use our GST eFile
Software. It is convenient and straightforward to do online GST filing for
small and big businesses. We provide affordable
GST return filing packages so that your GST eFiling journey becomes smooth
and hassle-free.
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