A RESARCH PAPER ON GST AND ITS IMPACT ON SERVICE SECTOR. NAME- Jain Disha Mukesh COLLEGE – kandivali education society of arts and commerce ABSTRACT GST is one of the most crucial tax reforms in India. It is a comprehensive tax system that will subsume all indirect taxes of states and central governments and unified economy into a seamless national market. It is expected to iron out wrinkles of existing indirect tax system and play a vital role in growth of India. This paper presents an overview of GST concept, explains its impact on service sector.
KEYWORDS: GST (Goods and Services Tax), Indian Tax Scenario INTRODUCTION The Goods and Services Tax Bill or GST Bill is a national Value added Tax to be implemented in India from 1 April 2017. "Goods and Services Tax" would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the central and state governments. Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. This method allows GST-registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Taxable goods and services are not distinguished from one another and are taxed at a single rate in a supply chain till the goods or services reach the consumer. Administrative responsibility would generally rest with a single authority to levy tax on goods and services. Exports would be zerorated and imports would be levied the same taxes as domestic goods and services adhering to the destination principle. A dual GST system is planned to be implemented in India as proposed by the Empowered Committee under which the GST will be divided into two parts:
State Goods and Services Tax (SGST) Central Goods and Services Tax (CGST)
Both SGST and CGST will be levied on the taxable value of a transaction. All goods and services, leaving aside a few, will be brought into the GST and there will be no difference between goods and services. The GST system will combine Central excise duty, additional excise duty, services tax, State VAT entertainment tax etc. under one banner. The GST rate is expected to be around 14-16 per cent. After the combined GST rate is fixed, the States and the Centre will decide on the SGST and CGST rates. At present, 10 per cent is levied on services and the indirect taxes on most goods are around 20 per cent. OBJECTIVE 1. To study about GST and its impact on service sector with respect to hotels and restaurants, pharmacy industry, and airlines. HYPOTHESIS 1. Impact of GST on pharmacy will be negative. RESARCH METHODOLOGY The study focuses on extensive study of secondary data collected from various books, journals, government reports, publications from various websites which focused on various aspects of goods and service tax. SIGNIFICANCE OF STUDY This research paper can actually benefit all of them who want to know about GST its impact and its benefits. LIMITATIONS 1. Data was collected through secondary sources hence may not be fully accurate. 2. As the study was to be completed in a short time, the time factor acted as a significant limit on the scope and extensiveness of the study.
FUTURE STUDY SCOPE A research report on comparison of GDP before and after applying GST. IMPACT ON HOTELS AND RESTAURANTS The GST, once implemented, is expected to rationalize indirect tax structure and usher in seamless tax credit. However, the impact for the hotel sector is more likely to be neutral depending on the final GST rate. Since hotels/restaurants are mainly subject to service tax, VAT (state subject), luxury tax (state subject), the impact of GST would depend on the tax levied by various states.
HOTELS
PRESENT TAX Service tax – 8.7 % Luxury tax – 8-12% TOTAL- 16% -20%
AFTER GST 1. If GST will be
IMPACT POSITIVE
around 1015% 2. If GST will be around 15-
NEUTRAL NEGATIVE
20% 3. If GST will be more than RESTURANTS
Service tax – 5.6 % VAT –12-14.5% TOTAL- 17% -20%
20% 4. If GST will be around 1015% 5. If GST will be around 1520% 6. If GST will be more than 20%
IMPACT ON PHARMACY
POSITIVE NEUTRAL NEGATIVE
CURRENT TAX STRUCTURE IN PHARMACY Currently, the pharmaceutical sector in India faces a multistage taxation system. Different taxes —such as import customs duty, central excise duty on manufacture, CST/VAT on sale, and service tax on provision of services—adds burden to operating margins of pharma industry. Further, the loss of tax credit on services (currently credit claims are available for raw materials) such as logistics impart insufficiencies to the complete pharma supply chain. Further, multistage taxation increases compliance cost for the pharmaceuticals as the company is liable to file multiple returns on monthly basis to different authorities. AFTER GST GST implementation will lead to re-distribution of taxes across different business functions, thereby, leading to low taxation cost for drug makers. The most direct impact is likely to come from elimination of CST. This will lead to reduction in transaction cost. CHALLENGE Currently, the pharma sector enjoys tax holidays in a few regions provisioned by the government on the backdrop of regional development. The access and logistic cost to these regions is high, but is overridden by the tax benefits. However, with GST, these tax benefits will also be eliminated. It will be up to the government on how it plans to lure manufacturers to stay in these regions and ensure their development. Concluding, we assume that the foremost benefits to pharma from GST will come from unified taxation (leading to low processing cost) and optimized logistic process. However, given the pricing controls by government on drug prices, the key question to be answered is — who will avail this benefit, the patient, the government or the pharma? HYPOTHESIS TESTING – there are many challenges in pharmacy industries but then to it is assume that after GST it will have a POSITIVE impact on pharmacy industry hence, our hypothesis is been proved wrong.
IMPACT ON AIRLINES
Flying to become expensive, as service tax will be replaced by GST. Service tax on fares currently ranges between 6% and 9% (depending on the class of travel). With GST, the rate will surpass 15%, if not 18%, effectively doubling the tax rate. The other impact may be on aviation turbine fuel. Currently, airlines can claim what is called a cenvat credit on the central excise duty for fuel. They will lose that in the GST regime as petroleum products, including ATF, are outside the purview of GST. This will have a NEGATIVE Impact on airline industry and thus the prices of air ticket will go up. ADVANTAGES OF GST BILL Introduction of a GST is very much essential in the emerging environment of the Indian economy.
There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs. In the GST system, when all the taxes are integrated, it would make
possible the taxation burden to be split equitably between manufacturing and services. GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national
market. It will also help to build a transparent and corruption-free tax administration. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.
CONCLUSION
Tax policies play an important role on the economy through their impact on both efficiency and equity. A good tax system should keep in view issues of income distribution and, at the same time, also endeavor to generate tax revenues to support government expenditure on public services and infrastructure development. Cascading tax revenues have differential impacts on firms in the economy with relatively high burden on those not getting full offsets. This results in loss of income and welfare of the affected economy. The ongoing tax reforms on moving to a goods and services tax (GST) would impact the national economy, International trade, firms and the consumers There has been a good deal of criticism as well as appraisal of the proposed Goods and Services Tax regime. It is considered to be a major improvement over the pre-existing central excise duty at the national level and the sales tax system at the state level, the new tax will be a further significant breakthrough and the next logical step towards a comprehensive indirect tax reform in the country. GST is not simply VAT plus service tax, but a major improvement over the previous system of VAT and disjointed services tax – a justified step forward. India is a federal republic, and the GST will thus be implemented concurrently by the central and state governments as the Central GST and the State GST respectively and it appears that there will be different rates of taxes. However a single rate of GST would help maintain simplicity and transparency by treating all the services equal. And though there are some negative as well as positive impact on various service sectors but with the proper planning and implementation it can be a great boost to our country. REFERENCES http://www.careratings.com/upload/NewsFiles/SplAnalysis/Impact%20of%20proposed%20GST %20on%20select%20industries.pdf https://www.academia.edu/6661188/GOODS_AND_SERVICE_TAX_ITS_IMPACT_ON_INDI AN_ECONOMY http://icmai.in/icmai/Taxation/upload/GST-In-India-vol1.pdf http://www.ey.com/IN/en/Services/EY-goods-and-services-tax-gst
