GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
GST – One Nation One Tax
GST Highlights
Impact of GST
The GST has subsumed central and state taxes inevitably changing the indirect tax landscape of India from July 1, 2017. While the actual impact and effect of the massive reform can be gaugedsometime after its implementation, the immediate effect will be: cheaper, costlier and same priced products. While a few products may weigh heavily on your pockets, there will be some which may calm down your nerves and there will be no change in others The GST Council has made four primary tax rate slabs for various items – low rate of 5 percent, standard rates of 12 percent and 18 percent, and high rate of 28 percent. Some of these products had higher effective tax rates before GST implementation but the new tax policy will lessen the burden on consumers. Meanwhile there will be some products which will now be taxed at a higher rate, thereby increasing their prices. However, it must be noted that the government has kept essential items of daily use tax free, that is, either at zero tax rate or completely out of the ambit of tax under GST. There is a huge number (1,211 items and 600 services) put under the tax brackets, and it may be a burden to keep a track of all of them, here are a few things whose price will increase or decrease or stay the same after the GST. Cheaper under GST Food: Unpacked food grains, unbranded Atta, Maida, besan, fresh vegetables and fruits, salt, food at small restaurants, cutlery, ketchup, sauces and pickle. Personal Care: Soaps, hair oil and toothpaste. Travel and Auto: Airfares for economy class travel, bikes or scooters with engine capacity below 350 cc and SUVs. Household: Pressure cookers and pans. Entertainment: Movie tickets that cost less than Rs 100. Hotels: Rooms at non-luxury hotels and hotels with tariffs of less than Rs 7,500. Others: Footwear and Apparels, Weighing machinery, UPS, revenue stamps. Costlier under GST: Food: Tea and coffee, food at fine dining restaurants or those inside five-star hotels. Personal Care: shampoos and deodorants. Travel and Auto: Airfare for business class and train tickets, bikes which have an engine capacity of over 350 cc. Household: TVs, refrigerators, ACs, washing machine. Entertainment: Movie tickets above Rs 100. Hotels: Hotels which have room tariffs over Rs 7,500. Courier services, mobile phone tariffs, insurance premiums, banking charges, broadband services. Sin: Aerated drinks, tobacco and luxury goods. Others: Mobile bills, tuition fees, salon visits and buying a flat or shop. Tax free items: There will be no tax imposed on items like: Salt, eggs, milk, buttermilk, unpackaged curd, natural honey, fresh fruits and vegetables, flour, besan, bread, Prasad, lassi, unpacked paneer, fresh meat, fish, chicken, Palmyrajaggery, hulled cereal grains, unbranded and unpackaged tea and coffee, vegetable oil, children’s picture, drawing or coloring books, muddhas made of sarkanda and phoolbaharijhadoo, jute, kajal (other than kajal pencil sticks), bindi, sindoor, bangles, handloom, stamps, judicial papers, printed books, newspapers, unbranded dried leguminous vegetables, silkworm laying, raw silk, silk waste, uncarded or uncombed wool, Gandhi topi, khadi yarn, coconut, coir fibre, unspun jute fibres, Indian national flag, Puja items, prasad, contraceptives, hotels and lodges with tariff below Rs 1,000, education and healthcare services. Sector-wise Impact Analysis : GST is purported to bring in the ‘one nation one tax’ system, but its effect on various industries will be slightly different. The first level of differentiation will come in depending on whether the industry deals with manufacturing, distributing and retailing or is providing a service. Logistics : In a vast country like India, the logistics sector forms the backbone of the economy. We can fairly assume that a well organized and mature logistics industry has the potential to leapfrog the “Make In India” initiative of the Government of India to its desired position E-commerce : The e-com sector in India has been growing by leaps and bounds. In many ways, GST will help the e-com sector’s continued growth but the long-term effects will be particularly interesting because the model GST law specifically proposes a tax collection at source (TCS) mechanism, which e-com companies are not too happy with. The current rate of TCS is at 1% and it’ll remain to be seen if it dilutes the rapid boom in this sector in any way in the future. Pharma : On the whole, GST is expected to benefit the pharma and healthcare industries. It will create a level playing field for generic drug makers, boost medical tourism and simplify the tax structure. If there is any concern whatsoever, then it relates to the pricing structure (as per latest news). The pharma sector is hoping for a tax respite as it will make affordable healthcare easier to access by all. Telecommunications : In the telecom sector, prices are expected to come down after GST. Manufacturers will save on costs through efficient management of inventory and by consolidating their warehouses. Handset manufacturers will find it easier to sell their equipment as GST will negate the need to set up state-specific entities, and transfer stocks. The will also save up on logistics costs Textile : The Indian textile industry provides employment to a large number of skilled and unskilled workers in the country. It contributes about 10% of the total annual export, and this value is likely to increase under GST. GST would affect the cotton value chain of the textile industry which is chosen by most small medium enterprises as it currently attracts zero central excise duty (under optional route). Real Estate : The real estate sector is one of the most pivotal sectors of the Indian economy, playing an important role in employment generation in India.The probable impact of GST on the real estate sector cannot be fully assessed as it largely depends on the tax rates. However, it is a given that the sector will see substantial benefits from GST implementation, as it will bring to the industry much required transparency and accountability. Agriculture : Agricultural sector is the largest contributing sector the overall Indian GDP. It covers around 16% of Indian GDP. One of the major issues faced by the agricultural sector, is transportation of agri products across state lines all over India. It is highly probable that GST will resolve the issue of transportation. GST may provide India with its first National Market for the agricultural goods. However, there are a lot of clarifications which need to be provided for rates for agricultural products. FMCG : The FMCG sector could see significant savings in logistics and distribution costs as the GST will eliminate the need for multiple sales depots. The GST rate for this sector is expected to be around 17% which is way lesser than the 24- 25% tax rate paid currently by FMCG companies. This includes excise duty, VAT and entry tax – all of which will be subsumed by GST. Freelancers : Freelancing in India is still a nascent industry and the rules and regulations for this chaotic industry are still up in the air. But with GST, it will become much easier for freelancers to file their taxes as they can easily do it online. They will be taxed as service providers, and the new tax structure will bring about coherence and accountability in this sector. Automobiles : The automobile industry in India is a vast business producing a large number of cars annually, fueled mostly by the huge population of the country. Under the current tax system, there are several taxes applicable on this sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty which will be subsumed by GST. Though there is still some ambiguity due to tax rates and incentives/ exemptions provided by different states to the manufacturers/ dealers for manufacturing car/bus/bike, the future of the industry looks rosy Startups : With increased limits for registration, a DIY compliance model, tax credit on purchases, and a free flow of goods and services, the GST regime truly augurs well for the Indian startup scene. Currently, many Indian states have very different VAT laws which can be confusing for companies that have a pan-India presence, specially the e-com sector. All of this is expected to change under GST with the only sore point being the reduction in the excise limit. BFSI : Among the services provided by Banks and NBFCs, financial services such as fund based, fee-based and insurance services will see major shifts from the current scenario. Owing to the nature and volume of operations provided by banks and NBFC vis a vis lease transactions, hire purchase, related to actionable claims, fund and non-fund based services etc., GST compliance will be quite difficult to implement in these sectors Thus, we can conclude that GST is in its initial phases of Implementation. We will face some problems on its way but at the end it would prove to be aboon for the nation enabling fulfillment of our cherished dream of making India a progressively sustainably growing economy Recommended Articles
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