Impact of GST on Small and Medium Enterprises
This article explains impact of GST on Small and Medium Enterprises. GST has promised to revolutionize revolutionize the Indian Indian tax system. system. At present, the total tax collection in India is around 14.5 Lakh Crore, of which 34% is indirect tax. Indirect taxes include include service tax, stump duty, duty, customs duty, VAT, etc. It refers to the collection of tax indirectly by the Government of India. In most of the developing countries, the share of indirect tax is higher than the direct tax. However, in the developed countries the share of indirect tax is much lower. Therefore, the new GST implementation will allow the government to have a better grip on the taxpayers. This should be capable of evolving the entire tax system. How will GST help small to medium enterprises?
GST is meant to bring every indirect form of tax under one roof. For small and medium sized businesses, owners or manufacturers manufacturers have to take care of different taxes and have to run to various departments to fulfil all the tax-related documentations. Some file different taxes biannually, annually, half-yearly, etc. The more the departments, the more is the harassment. Currently, Currently, the total tax levied by the central and the state governments add up to 32%, but with the implementation of GST, the business owners have to pay a much lower tax of around 18-22 percent. Moreover, they do not have to pay different taxes to various departments. It makes the job very much easier for every business owner. Direct impact of GST on small and medium enterprises
GST will help and ease the process of starting a business in India. Earlier, every business in India India was required required to obtain VAT VAT registration, registration, which differs differs in every state, and the rules and regulations are different. Thus it was a very confusing procedure. However, under GST, the businesses have to t o only register for GST which will have a centralized process, similar to service tax. Currently, for any business, it is mandatory to make a VAT payment if the annual turnover is more than 5 lakh in few states and 10 lakhs in few other states. This difference in various states creates confusion. Under GST a business does does not have to register register or collect collect GST if the annual annual turnover is 10 lakh. This is applicable to every state. This will allow many small businesses which have a turnover between 5 lakh – lakh – 10 10 lakh to avoid applying for the GST return.
GST allows small and medium business to do business with ease in India, due to the less complexity. The distinction between the services and goods wil l be gone, and this will make compliance easier.
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Amidst economic crisis across the globe, India has posed a beacon of hope with ambitious growth targets, supported supported by a bunch of strategic undertakings such as the Make in India and Digital India campaigns. The Goods and Services Tax (GST) is another such undertaking that is expected to provide the much needed stimulant for economic growth in India by transforming the existing base of indirect taxation towards the free flow of goods and services. GST is also expected to eliminate the cascading effect of taxes. India is projected to play an important role in the world economy in the years to come. The expectation of GST being introduced is high not only within the country, but also within neighboring countries and developed economies of the world. Benefits of GST to the Indian Economy
Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
Less tax compliance and a simplified tax policy compared to current tax structure.
Removal of cascading effect of taxes i.e. removes tax on tax. Reduction of manufacturing costs due to lower burden of taxes on the manufacturing manufacturin g sector. Hence prices of consumer goods will be likely to come down.
Lower the burden on the common man i.e. public will have to shed less money to buy the same products that were costly earlier.
Increased demand and consumption of goods.
Increased demand will lead to increase supply. Hence, this will ultimately lead to rise in the production of goods.
Control of black money circulation as the system normally followed by traders and shopkeepers will be put to a mandatory check.
Boost to the Indian economy in the long run. These are possible only if the actual benefit of GST is passed on to the final consumer. There are other factors, such as the seller’s profit margin, that
determines the final price of goods. GST alone does not determine the final price of goods. How will GST impact the Indian Economy?
Reduces tax burden on producers and fosters growth through more production. The current taxation structure, structure, pumped with myriad tax clauses, prevents manufacturerss from producing to their optimum capacity and retards growth. manufacturer GST will take care of this problem by providing tax credit to the manufacturer manufacturers. s.
Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved items being transported. This penalty transforms into major costs due to higher needs of buffer stock and warehousing costs. A single taxation system will eliminate this roadblock.
There will be more transparency in the system as the customers will know exactly how much taxes they are being charged and on what base.
GST will add to the government revenues by extending the tax base.
GST will provide credit for the taxes paid by producers in the goods or services chain. This is expected to encourage producers to buy raw material from different registered registered dealers and is hoped to bring in more vendors and suppliers under the purview of taxation.
GST will remove the custom duties applicable on exports. The nation’s competitiveness competitivene ss in foreign markets will increase on account of lower costs of transaction.
A Brighter Economy The introduction of the Goods and Services Tax will be a very noteworthy step in the field of indirect tax reforms in India. By merging a large number of Central and State taxes into a single tax, GST is expected to significant significantly ly ease double taxation and make taxation overall easy for the industries. For the end customer, the most beneficial will be in terms of reduction in the overall overall tax burden on goods and services. Introduction Introduction of GST will also make Indian products competitive in the domestic and international markets. Last but not least, the GST, because of its transparent character, will be easier to administer. Once implemented, the proposed taxation system holds great promise in terms of sustaining growth for the Indian economy.
imapact of GST:
Here an attempt is made to illustrate the general impact and also specific sectorwise analysis. Firstly discussing the general impact of GST on Indian economy which can be listed as follows: 1. Competitiveness in exports: Under GST, exports will become competitive due to elimination of cascading effect of taxes. A study done by National Council of Applied Economic Research suggested that GST could boost India’s GDP by 1%1%-2%. GST is like key “Brahmastra” for India’s GDP in times of challenging global environm environment. ent. atii on of of a com common nati nati ona onall mar mar ket: The motto of GST is “one nation 2. C r eat one tax one market”. GST will turn the nation into a common national market, due to which there will be seamless flow of credit across the nation and also it will lead to seamless movement of goods across states and reduce the transaction cost of businesses. A study found that truck drivers in India spend almost 60% of their time off roads negotiating check posts and toll plazas because of 11 categories categories of tax are levied on the road transport transport sector. The GST will help bring down logistical costs. structu ucturr ed ind i ndii r ect tax tax syste system m: The GST will reshape the indirect tax 3. R estr structure by subsuming almost all the indirect taxes e.g. Excise, Service Tax, VAT etc. This will do away with the complex indirect tax structure of the country, thus improving the ease of doing business in the country and hence giving positive vibes for multi-national companies to work in India. ncre ease i n re r eve venue nue for G ove verr nm nme ent: Under GST, dealers will get credit for 4. I ncr all the taxes paid earlier in goods/services chain, thus incentivizing firm to source inputs from other registered dealers. This could bring in additional revenues to the Government as the unorganized sector, which is not part of the value chain, would be drawn into the tax net. 5. Reduction in corruption: To claim input tax credit, dealers have an incentive to ask for documentation from the dealer behind him in the value added chain. Thus, new tax regime is seen as less intrusive, more self polishing and hence more effective effective way of reducing reducing corruption. 6. Push to “Make in India” programme: A Finance Ministry report said that the GST regime will boost the “Make in India” programme as dealers will get input tax credits for capital goods also. i nflatti on: The service tax rate will shoot up from the current level of 7. R i se i n infla 15% to 18% in GST regime. This has led to fears that inflation could rise in
short term, which can probably last a year. Inflation in second year after GST implementation will benefit favourably as the numbers would be compared to already-high figures of first year of implementation. vall of cascadi cascadi ng effect: As GST is based on single taxation regime, it 8. R emova will reduce the cascading effect of multiple taxes. uctii on in i n cost cost for for i nd ndust ustrr y: As the industry will have to pay a single tax, 9. R educt it will make their goods and services relatively cheaper, ultimately resulting in increased demand and consumptio consumption. n. ducti tion on i n ad admi ni nistration stration cost cost for G ovt vt.:.: Earlier indirect taxes 10.R educ department were administered by the union and state governments. But, after the implementation of GST, there is no need of having so many departments and this will ultimately result in reduction of administration cost for Govt. ncre ease in in voluntar voluntaryy com compli pliance ance and r eve venue nue coll colle ecti ctio ons: GST regime 11.I ncr will be much simpler than as of now, so it will encourage voluntary compliance and thus resulting increased revenue collections for government. cono nom mi c G r owth th:: As it is neutral to business processes, business models, 12.E co organization structure, geographic location, product substitutes, it promotes economic efficiency and sustainable long term economic growth. Now, moving to analyze analyze the impact impact of GST on sectoral sectoral basis: Sr. No.
Sector
Positive
1
E-commerce GST will help free movement and supply of goods in every part of the country. It will also eliminate the cascading effect of taxes on customers which will bring efficiency in product costs.
The tax collection at source (TCS) guidelines in GST regime will increase administra administration, tion, documentation workload and other costs for ecommerce firms.
2
Telecom
Call charges, data rates will go up since normal tax rate will be 18%.
For handset makers, GST will bring in ease of doing business as they may no
Negative
longer need to setup state Tower firms will be able specific entities and to set off their input duty transfer stocks to them. liabilities as petroDealers are also likely to products are likely likely to be pass on to consumers consumers cost cost included in GST purview benefits they will get from later on. consolidating their warehouses and efficiently managing inventory. 3
Automobiles On road price of vehicles could drop by 8%, as per a report. Lower prices can be construed as indirect stimulus to boost volumes.
Demand for commercial vehicles may get a hit in the medium term. With fleet productivity increasing, operators may not feel the need to expand in mid-term.
4
Technology
GST will eliminate multiple levies. It will also allow deeper penetration of digital services.
With GST, companies might require each centre to generate a separate invoice to every contracting party.
5
Media
Taxes can go down by 2%- No negative could could be 4% resulting in lower figured out as of now. average ticket prices and increase the footfalls in multiplexes.
6
Insurance
No positive could be figured out as of now.
Insurance policies (life, health and motor) will cost more from July 2017
as taxes will go up by 300 basis points. 7
Airlines
No positive could be figured out as of now.
Flying to become expensive. Service tax on fares currently ranges between 6%-9%. With GST, the tax rate will get almost doubled.
8
Cement
Effective rate of tax for No negative could could be cement companies was figured out as of now. 25% earlier as compared to 18% in GST. So, it will lead to savings in transportation transportatio n cost. One common market will bring down the number of depots in the country.
Conclusion:
GST is indeed the need of hour for Indian economy. The people are sick of complying with multiple laws, and many times they are penalized for not complying the laws they are not even aware of. GST will ensure broader tax base, and hence covering most of the dealers into its ambit. This will create a unified market and credit flow chain will work properly without any hindrances. It will also add up to the revenue generation for the Government as many unorganized sector will get organized once GST is implemented. GST will also motivate foreign direct investors to invest and setup industry here in India. This will create job opportunities, and for a developing economy like India it’s always a favorable situation. It will make the supplies being priced competitively so benefitting the ultimate consumers.
After analyzing all the pros and cons, we as an Indian citizen should welcome the upcoming change with open arms, after all we want to see India being entered down in the list of super powerful economies, and GST is one of the biggest measure of making that happen. Introduction of Goods and Services Tax (GST) in India I ndia India November 14 2016 2016
The President of India approved the Constitution Amendment Bill for Goods and Services Tax (GST) on 8 September 2016, following the bill's passage in the Indian parliament and its ratification by more than 50% of state legislatures. This law will replace all indirect taxes levied on goods and services by the central government and state government and implement GST by April 2017. The implementation of GST will have a far-reaching impact on almost all the aspects of the business operations in India. With more than 140 countries now adopting some form of GST, India has long been a stand-out exception. GST is a value-added tax levied at all points in the supply chain, with credit allowed for any tax paid on input acquired for use in making the supply. It would apply to both goods and services in a comprehensive manner, with exemptions restricted to a minimum. In keeping with the federal structure of India, it is proposed that the GST will be levied concurrently by the central government (CGST) and the state government (SGST). It is expected that the base and other essential design features would be common between CGST and SGSTs for individual states. The inter-state supplies within India would attract an integrated GST (IGST), which is the aggregate of CGST and the SGST of the destination state. The following are the salient features of the proposed GST system: system:
The power to make laws in respect of supplies in the course of inter-state trade or commerce will remain with the central government. The states will have the right to levy GST on intrastate transactions, including on services. The administration of GST will be the responsibility of the GST Council, which will be the apex policy-making body for GST. Members of GST
Council will comprise central and state ministers in charge of the finance portfolio.
The threshold for levy of GST is a turnover of Rs. 1 million. For a taxpayer who conducts business in a northeastern state of India the threshold is Rs. 500,000. The central government will levy IGST on inter-state supply of g oods and services. Import of goods will be subject to basic customs duty and IGST. GST is defined as any tax on supply of goods and services (other than on alcohol for human consumption). Central taxes such as central excise duty, additional excise duty, service tax, additional custom duty and special additional duty, as well as state-level taxes such as VAT or sales tax, central sales tax, entertainment tax, entry tax, purchase tax, luxury tax and octroi will be subsumed in GST. A provision will be made for removing imposition imposition of entry tax/ octroi across India. Entertainment tax, imposed by states on movies, theatre, etc., will be Entertainment subsumed in GST, but taxes on entertainment at panchayat, municipality or district level will continue. Stamp duties, typically imposed on legal agreements by states, will continue to be levied. The key benefits associated with GST are: Offers a wider tax base, necessary for lowering tax rates and eliminating classification classificati on disputes
Eliminates the multiplicity of taxes and their cascading effects
Rationalizes the tax structure and simplifies compliance compliance procedures
Automates compliance procedures to reduce errors and increase efficiency
GST would be levied on the basis of the destination principle. principle. Exports would be zero-rated, and imports would attract tax in the same manner as domestic goods
and services. In addition to the IGST in respect of supply of goods, an additional tax of up to 1% has been proposed to be levied by the central government. government. The revenue from this tax is to be assigned to the origin states. This tax is proposed to be levied for the first two years years or a longer period, as recommended recommended by the GST GST Council. With GST, it is anticipated that the tax base will be comprehensive, as virtually all goods and services will be taxable, with minimum exemptions. GST would bring in a modern tax system to ensure efficient and effective tax administration. It will bring in greater transparency and and strengthen monitoring, monitoring, thus making tax evasion evasion difficult. While the process of implementation of GST unfolds in the next few months, it is important for industry to understand the impact and opportunitie opportunitiess offered by this reform. GST will affect all industries, irrespective irrespective of the sector. It will impact the entire value chain of operations, namely procurement, manufacturing, distribution, warehousing, sales and pricing. impact of GST on Indian economy The introduction of Goods and Service Tax (GST) in India is now on the horizon. The Constitution Amendment Bill to replace existing multiple indirect taxes by uniform GST across India is likely to be taken up for voting in Rajya Sabha during this week. Lok Sabha has already passed this Bill. The current indirect tax structure is major impediment in India’s economic growth and competitiveness. Tax barriers in the form of CST, entry tax and restricted input tax credit have fragmented the Indian market. Cascading effects of taxes on cost make indigenous manufacture less attractive. Complex multiple taxes increase cost of compliance. In this scenario, the introduction of GST is considered crucial for economic growth. GST will have quite a favourable impact on Indian economy. Some sectors will have more favourable impact compared to others under the proposed GST. Removal of tax barriers on introduction of uniform GST across the country with seamless credit, will make India a common market leading to economy of scale in production and efficiency efficiency in supply supply chain. It will expand expand trade and commerce. commerce. GST will have favourable impact on organised logistic industry and modernise modernised d warehousing. GST will remove cascading effect of taxes imbedded in cost of production of goods and services and will provide seamless credit throughout value chain. This will significantly reduce cost of indigenous goods and will promote ‘Make in India’. The sectors which have long value chain from basic goods to final
consumption stage with operation spread in multiple states such as FMCG, pharma, consumer consumer durables, automobiles automobiles and engineering engineering goods will will be the major beneficiaries of GST. GST will facilitate ease of doing business in India. Integration of existing multiple taxes into single GST will significantly reduce cost of tax compliance and transaction cost. Stable, transparent and predictable tax regime will encourage local and foreign investment in India creating significant job opportunities. Electronic processing of tax returns, refunds and tax payments through ‘GSTNET’ without human intervention, will reduce corruption and tax evasion. Built-in check on business transactions through seamless credit and return processing will reduce scope for black money generation leading to productive use of capital. Significant reduction in product and area-based exemptions under GST will widen the tax base with a consequent reduction in revenue neutral rate. This will enable the government to keep GST rates lower which may have favourable impact on prices of goods goods in the medium term. The tax rate for services services however may may go up by 2 to 3% from the present level of 15%. The adverse adverse impact of rate rate increase on services will be partially neutralised by availability of seamless input tax credit. GST will eliminate the scope of double taxation in certain sectors due to tax dispute on whether a particular transaction is for supply of goods or provision of service such as licensing of intellectual properties like patents and copyrights, software, e-commerce and leasing. While the GST will simplify tax structure, it will increase the burden of procedural and documentary compliance. Number of returns will increase significantly so also the extent of information. For instance, a real estate developer or contractor will have to file 61 returns in a year compared to 24 returns at present. Similarly a taxable person providing services from several states will have to take registration and file return in all such states. Currently a single centralised registration is required in such cases. GST will also have impact on cash flow and working capital. Cash flow and working capital of business organisations which maintain high inventory of goods in different states will be adversely affected as they will have to pay GST at full rate on stock transfer from one state to another. Currently CST/VAT is payable on sale and not stock transfers. It is also pertinent to note that all indirect taxes will not be subsumed in GST. Electricity duty, stamp duty, excise duty and VAT on alcoholic beverages, petroleum products products like crude, natural natural gas, ETF, ETF, petrol and diesel diesel will not be subsumed in GST on its introduction. These taxes will form part of the cost of these goods when used as inputs in downstream products. products. Hence those sectors where these goods form significant input cost such as plastics and polymers,
fertilisers, metals, telecom, air transport, real estate will not get full benefit of GST. Major beneficiary of GST would be sectors like FMCG, Pharma, Consumer Durables and Automobiles and warehousing and logistic industry. High inflationary impact would be on telecom, banking and financial services, air and road transport, construction construction and developm development ent of real estate, While GST is eagerly awaited by the industry, the legal process to implement GST in India is quite long and complex. After the Constitution Amendment Bill is passed by the Parliament Parliament with two-thirds two-thirds majority, majority, it will have to be passed passed by at least 15 states. There after GST council has to be constituted which will recommend model GST law and GST rates. On such recommendation, recommendation, GST Act and Rules have to be enacted by the Parliament and each state assembly assembly.. Then implementation date has to be notified. It is therefore quite important that the Constitution Amendment Amendment Bill is passed in the current Monsson Session if GST is to be implemented during the tenure of present Parliament which ends during 2019. Thinking about GST Pros and Cons? The Goods and Services Tax is a unified, destination-based tax that was implemented in India from July 1, 2017 to effectively replace all the existing indirect taxes, including service tax and vat. The GST has directly affected the businesses involved in the selling/buying of good and services, as well as consumers, in the country. Whereas the prices of some goods/services have gone down, some other facilities have become costlier in the post-GST regime. There are some predefined tax rates for various commodities under GST and some basic items like food, milk, etc., have been kept tax-free, while petroleum products have not yet been included under the cover of GST. The impacts of GST are being noticed as we move forward into this new tax era. Let’s discuss the major GST Pros (advantages) and Cons (disadvantages) we have experienced so far. Positive Impacts (Pros/Advantages) of GST Implementation
GST is expected to build a more transparent and corruption-free tax system in India.
It is easy to start a business in the post-GST regime and tax regulations are easier than before.
Composition mechanism is there to reduce the tax burden from small businesses and startups.
Input credit (ITC) mechanism ensures an uninterrupted flow of cash for businesses and reduced price of goods/services for the end consumers.
The merging of all the indirect taxes makes it easier to process the tax payment for the government as well as for the taxpayers.
Tax harmonization
More simplified movement of goods and/or services between states and within the country.
GST is calculated on the total amount, irrespective of the type of sales and services.
GST has eliminated the cascading effect of taxes by introducing a unified tax system.
Since it is a destination based tax, the tax will only be paid by the consumer upon delivery of goods/services.
The implementation of Goods & Services tax puts India in the line of international tax standards, making it easier for Indian businesses to sell in the global market.
Inflation is expected to stay under control after the implementation of GST.
GST is expected to reduce the price of production, operational and others costs that will benefit the end consumers.
The cost of collecting the tax is reduced thus resulting in a higher revenue for the government.
GST has the mechanism of integrated tax that makes sure that the tax burden is split impartially between manufacturing goods and services.
The complexity of tax compliance is reduced as all the returns are being filed and taxes are being paid through a single platform.
Since all the records and data are now available on a single platform, it has become easier for the tax authorities to identify and deal with tax evasions.
One major benefit of GST is that the government is now receiving more taxpayer registrations than ever before.
Negative impacts (Cons/Disadvantages) of GST in India As for the disadvan disadvantages, tages, GST GST has a few. The The implementation implementation of GST in India India has created troubles for some sectors by increasing the cost of manufacturing and/or supply or by reducing the value of the product. For example, the value of some second-hand items and refurbished items diminished due to the increased cost of processing or supply.
Let’s take a brief look at the disadvantages of GST, as reported so far.
GST compliance and tax filing has increased the implementation cost for businesses, as they are required to invest in computers, accounting (GST) software and/or trained GST experts (CAs and accounting experts).
The process of GST of GST compliance is also proving daunting as most businesses are not yet fully aware of the rules, provisions and processes of the new tax system, including the process of return filing, GST registration, returns filing schedule, invoicing and billing, etc.
The overall cost of doing business is going to increase, at least in the first few months of GST.
The implementation of GST in the middle of the financial year is creating a lot of confusion among business, as to whether to follow the old tax rules or new ones or both.
Many businesses, especially small businesses and startups, do not usually have the money or tech resources to get compliant with the digital GST system. A cloud-based (online) GST software like theGen the Gen GST could GST could be a perfect solution to this problem.
The tax relaxation limit for small manufacturing businesses, which was 1.50 crores earlier, is now Rs. 20 lakh under the GST system. This has effectively increased the tax burden for such businesses.
No clarification about tax holidays has further increased operation costs for textile, pharma and other manufacturing industries.
The chaos among businesses has ended up creating a disruption in the industry.
Consumers are not very hopeful about GST benefits and implementation and therefore, they are reluctant to adapt to the new system.
The tax rate has been increased for many products, thus increasing their costs. Although there is a provision of of input credit credit in GST, some some businesses businesses are not willing to pass on its benefits to their consumers.
The cost of refurbishing has increased due to increased tax, thus increasing the price of refurbished products.
Businesses are required to have separate registrations for multiple business entities in different states. It will increase the burden of tax compliance.
GST has reduced the tax revenue of some states as they are now required to share revenues with the central government.
The tax will be paid by the end consumer, which makes it a non-consumer-friendly tax system.
Conclusively, the GST has both its pros and cons , and it is expected to bring a positive change in the tax system of India. For now, we should hope for the best. Follow our GST Helpline for help and guidance regarding the implementation of GST.
How Goods And Service Tax (GST) Impacts Five Key Sectors Of India's Economy A bill is clumped together with others others at a restaurant restaurant with the new Goods and Services Services Tax (GST) added to it, in Mumbai, India, Friday, July 01, 2017. (Photo Credit: AP Photo/Rajanish Kakade) Since GST’s implementation over implementation over the past few days, startups have been pinging @askGST_GoI @askGST_GoI,, the official Twitter handle of the Government of India, for clarity on this new tax reform. As their enterprises are vulnerable to any major changes in economy due to a new policy implementation, founders and employees of these companies are extremely concerned about the impact of the four tax slabs of 5%, 12%, 18%, and 28% that have been specified in GST. Many Indian businesses have limited capital and resources at their disposal, meaning that any confusion can quickly escalate into panic. Along with these concerned parties, millions of customers are wondering about the impact of this new tax system s ystem on the amount of money they will need to shell out to avail of their preferred goods and services. In this article, I'll attempt to break down the impact of GST on the most popular sectors of India's startup ecosystem, including real estate, e-commerce, e- commerce, hospitality, smartphones, and ride hailing. Real Estate
Under the new tax structure, due to the input credit benefits that most builders will get on the key raw materials they buy, the base price of property projects launched
post 1 July 2017 will be comparatively cheaper. Buying under-construction properties will attract a net effective rate of 12% as against the earlier rate of 5.5% (including value added tax and service tax). Real estate players such as Proptiger and Quikr want to pass this cost benefit on to property buyers. “For new projects with 100% input credit passed to the buyer and land cost being 50% of the project proj ect cost, we expect property prices to fall by around 1% in western and northern markets and around 3% in southern markets,” said a report by Edelweiss. Edelweiss. However, prices prices of ready-to-move-in apartments with completion certificates, before implementation of GST on 1 July, would remain steady as these properties are out of the GST ambit. Any price change in the segment will depend purely on demand and supply. s upply. E-commerce
E-commerce websites such as Flipkart and Amazon.in will have to collect TCS (tax collected at source) at a fixed 1% rate, and pay this collection to the sellers listed on their websites. This is likely to impact prices and make online shopping more expensive. Though the latest notificationi notificationissued by the government stated that the provisions of “TDS (Section (Section 51 of the CGST/SGST Act 2017) and TCS (Section 52 of of the CGST/SGST Act, 2017) will be brought into force from a date which will be communicated later.” Also to deal effectively with GST, e-commerce platforms are regularly engaging and training the sellers on their stores. s tores. Commenting on GST’s impact Rajiv Kumar, Founder, e-commerce e-commerce website StoreHippo has stated: “We are thrilled to announce the reformation of our tax engine in accordance to GST. E-Commerce platforms need to provide flexible and powerful tax solutions after the implementation of GST and StoreHippo facilitates this through its new move, aimed at simplifying GST for all involved.”
Indian tourists enjoy Shikara, a traditional wooden boat, with the t he backdrop of snow covered mountains at the Dal Lake in Srinagar, India. (Photo Credit: AP Photo/Dar Yasin)
Benefits of GST GST has been envisaged as a more efficient tax system, neutral in its application and attractive in distribution. The advantages of GST are:
Wider tax base, necessary for lowering the tax rates and eliminating classification disputes
Elimination of multiplicity multiplicity of taxes and their cascading effects
Rationalization Rationalizatio n of tax structure and simplificat simplification ion of compliance procedures
Harmonization of center and State tax administrations, which would reduce duplicatio duplication n and compliance costs
Automation of compliance procedures to reduce errors and increase efficiency
Benefits To Trade
Benefits To Consumers
Reduction in multiplicity of taxes
Simpler Tax system
Mitigation of cascading/ double taxation
Reduction in prices of goods & services due to elimination of cascading
More efficient neutralization of taxes especially for exports
Uniform prices throughout the country
Development of common national market
Transparency in taxation system
Simpler tax regime (1.Fewer rates and exemptions, 2. Distinction between Goods & Services no longer required
Increase in employment opportunities
Reduces transaction costs and unnecessary wastages: A single registration and a
single compliance will suffice for both SGST and CGST provided government produces effective IT infrastructure and integration of states level with the union.
numbe r of taxation Eliminates the multiplicity of taxation: The reduction in the number applicable in a chain of transaction will help to reduce the paper work and clean up the current mess that is brought by existing indirect taxation laws.
One point single tax: There would be focus on business rather than worrying about their
taxation that may crop at later stages. This will help the business community to decide their supply chain, pricing modalities and in the long run helps the consumers being be ing goods competitive as price will no longer be the function of tax components c omponents but function of sheer business intelligence and innovation.
Reduces average tax burdens: The cost of tax that consumers have to bear will be
certain and it is expected that GST would reduce the average tax burdens on the consumers.
Reduces the corruption: As the number of taxes reduces so does the number of visits to
multiple departments reduces and hence, the reduction in corruption.
In all cases except a few products and States, there would be uniformity of tax rates across the States. The proposed GST regime is a half-hearted attempt to rationalize indirect tax structure. More than 150 countries have implemented GST. The government of India should study the GST regime set up by various countries and also their fallouts before implementing it. At the same time, the government should make an attempt to insulate the vast poor population of India against the likely inflation due to implementation of GST. No doubt, GST will simplify existing indirect tax system and will help to remove inefficiencies created by the existing current heterogeneous taxation system only if there is a clear consensus over issues of threshold limit, revenue rate, and inclusion of petroleum products,
electricity, liquor and real estate. Until the consensus is reached, the government should resist from implementing such regime.
