How GST will Affect Businesses

GST will Affect Businesses

Goods and Services Tax Bill Explained
Goods and Services Tax Bill Explained

Goods And Services Tax

The Rajya Sabha on August 3, 2016 passed the Constitution Amendment Bill for Goods and Services Tax (GST), with this passage, the Government of India demonstrated its committed to replace all the indirect taxes levied on goods and services by the Centre and various State governments and implement GSTin 2017 – 18. It is anticipated that the law will come into force with effect from Apr 2018, however, the government will confirm once all the logistics and various approvals in place. It is expected that the GST rate will be in the range of 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} – 20{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} and will have marginal impact on inflation.GST will Affect Businesses

GST the game changer: GST will be a game changing reform for Indian economy by developing a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the Tax Structure, Tax Incidence, Tax Computation, Tax Payment, Compliance, Credit Utilization and Reporting leading to a complete overhaul of the current indirect tax system.

GST will have a far reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, IT, accounting, and tax compliance systems.

This is a path-breaking reform and will have significant positive impact on Indian economy by developing a common Indian market and reducing the multiple cascading addition of various tax on the cost of goods and services. This reform will impact the Tax Structure, Tax Incidence, Tax Computation, Tax Payment, Compliance, Credit Utilization and Reporting leading to a complete overhaul of the current indirect tax system.

GST will have a far reaching impact on almost all the aspects of the business operations in the country.

The industry wise impact will be as follows :

Positives of Goods & Service Tax (GST):

  1. Consumer Staples – Current effective tax rate is 22{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} which will be reduced to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with introduction of GST.
  2. Media Industry – Current effective tax rates is 22{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} (Including Service Tax and Entertainment Tax) which will be reduced to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with introduction of GST.
  3. Automobile Industry – Current tax rate is 27{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} which will be reduced to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with introduction of GST.
  4. Cement Industry – Current tax rate is 27{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} which will be reduced to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with introduction of GST.

Negatives of Goods & Service Tax (GST):

  1. Banking Sector – Earlier, the service tax rate was 15{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} on all services provided, which will increase to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with advent of GST.
  2. Telecom Sector – Earlier, the service tax rate was 15{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} on all services provided, which will increase to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with advent of GST.
  3. Pharmaceutical Sector – Earlier, the service tax rate was 15{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} on all services provided, which will increase to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with GST coming into effect.
  4. Aviation Industry – Earlier, the service tax rate was anywhere between 6{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} to 9{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} on all services provided, which will increase to 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} with introduction of GST.

Salient features of Goods & Service Tax (GST)

  • The power of creating laws in respect of supplies in the course of inter-State trade or commerce will be vested only in the Union government.
  • States will have the right to levy GST on intra-State transactions including on services.
  • Centre will levy IGST on inter-State supply of goods and services. Import of goods will be subject to basic customs duty and IGST.
  • GST defined as any tax on supply of goods and services other than on alcohol for human consumption.
  • Central taxes like, Central Excise duty, Additional Excise duty, Service tax, Additional Custom duty and Special Additional duty and State level taxes like, VAT or sales tax, Central Sales tax, Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will subsume in GST.
  • Petroleum and petroleum products i.e. crude, high speed diesel, motor spirit, aviation turbine fuel and natural gas   shall be subject to the GST on a date to be notified by the GST Council.
  • Provision for removing imposition of entry tax / Octroi across India.
  • Entertainment tax, imposed by States on movie, theatre, etc will be subsumed in GST, but taxes on entertainment at panchayat, municipality or district level to continue.
  • GST may be levied on the sale of newspapers and advertisements and this would give the government’s access to substantial incremental revenues.
  • Stamp duties, typically imposed on legal agreements by the state, will continue to be levied by the States.
  • Administration of GST will Affect Businesses of the GST Council, which will be the apex policy making body for GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio.

You May also be interested in Reading: GST And Its Implications On Your Business

Overall we think it will ease up the taxation complexity in the country and will boost business activity in India.

If you need anytype of consulting with respect to setting up your best Taxation Structure for GST, Contact Experts from our Platform Now.

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