Goods and services taxbasically known as GST was implemented on 1st July,2017 at midnightin India by the former President of India Pranab Mukherjee and former PrimeMinister Narendra Modi. It has been implemented by both the houses ofparliament i.e, Lok Sabha and Rajya Sabha at the Central Hall of the Parliament. This session was attended bymany high profile guests but boycotted by oppositions claiming that it leads toproblems for poor and middle class families/people.
Basically the members ofCongress boycotted the GST launch altogether and were joined by other partieslike Trinamool Congress, Communist Parties of India and DMK. GST is a comprehensive tax levy onmanufacturing, sale and consumption of goods and services at a national level.The Goods and Services Tax Bill or GST Bill, initiates a Value added Tax to beimplemented on a national level in India. GST will be an indirect tax at allthe stages of production to bring aboutuniformity in the system. UnderGST, goods and services fall under five tax categories: 0 percent, 5 per cent, 12 per cent, 18 per cent and 28 per cent and these taxes are different in each state and businessesend up paying tax on taxes.
For corporates, the elimination of varioustaxes will improve the ease of doing business. And for consumers, the biggestadvantage would be in terms of a reduction in the overall tax burden on goods. Further, these taxes are different in each state andbusinesses end up paying tax on taxes.
It is estimatedthat the GDP of the country will rise by 1 – 2. ResearchMethodology The Research paper is based onemperical study. It is a type of descriptive research paper. The study focuseson study of Secondary data collected from various books, national &international journals, government reports, publications from various websiteswhich has been published and focused on various aspects of Goods and Servicetax. Objectivesof the study1) The first and foremost objective of thisresearch paper it to have an idea about what is GST and functioning of GST inIndia.2) The second objective is to explain the impactof GST on Business in India. Importanceof the study1) The study will highlight the effect of GST onIndian Economy.
2) It will prove to be of great help to a commonman or people struggling to understand the concept of GST.3) It removes the tension of GST among thebusiness community members.Data Collection This paper is a descriptive paper basedon secondary data collected from different books news-paper articles andresearch journals.Need for GST1) The mainreason behind introducing GST is to improve the economy of the nation.2) The GST willgreatly increase the revenues available at the states’ and centre’s disposal byexpanding the tax base. More importantly, the resources of the poorer states(or consumer states) like, Uttar Pradesh, Bihar and Madhya Pradesh willincrease substantially.
3) The GST willfacilitate ‘Make in India’ by converting the geographical landscape of thecountry into a single market. Despite being one country, India is a union of 30or more markets. 4) The GST wouldimprove tax governance in two ways:· One, like the value added tax (VAT), it is aself-collecting and self-enforcing tax.· Two,due to the dual monitoring structure of the GST – one by the states and anotherby the Centre – it is difficult to evade tax. 5) The disparity in the rate of taxes as levied byrespective states has lead to business structuring their transactions only toachieve a tax advantage. Featuresof GST 1) GSTis one indirect tax for the entire nation, which will make India “one unifiedcommon market”.2) It will replace multipletaxes like VAT, CST, Excise Duty, Entry Tax, Octroi, LBT, Luxury Tax etc.3) There are four types of GSTnamely:· SGST –State GST, collected by the State Govt.
· CGST –Central GST, collected by the Central Govt. · IGST –Integrated GST, collected by the Central Govt. · UTGST– Union Territory GST, collected by the Union Territory.
4) TaxPayers with an aggregate turnover in a financial year up Rs. 20 Lakhs &Rs. 10 Lakhs for North Eastern Sates and Special Category States would beexempted from tax. 5) GST slabs are startingfrom 5%, 12%, 18% & 28% Impactof GST on business in IndiaAs two sides of a coin, evenGST on business in India has both Positive Impact as well as Negative Impact.Let’s see in detail. PositiveImpact 1) Easy to Run a Business on Geographical basis Carryingout business activities will become comparatively easy as they do not have todeal with different kinds of VATs levied in different states.2) Lesser Tax Consents Central GST wouldreplace – Service Tax, CentralExcise Duty, Duties of Excise, cesses and surcharges and custom duties.
State GST would replace – State VAT, State Cesses and Surcharges,Central Sales Tax, Tax on Advertisements, Lottery, Gambling, Purchase Tax,Luxury Tax and Entertainment Tax. 3) Faster Transportation of Goods It will be of immense help to the logisticssector and will also result in the faster transportation of goods as there willbe no hour long waits at the Sales Tax check posts across borders due tothe elimination of several indirect taxes. 4) Benefitto startups Startups arerequired to register for VAT if their turnover is more than 5 lakhs, and insome states 10 lakhs. With the coming of GST, businesses with an annualturnover of over 10 lakhs (uniform across all states in India) are requiredto registerfor GST. 5) Increasein Foreign Investment The goods manufactured within India will become morecompetitive in the International markets due to reduced costs, which willinturn foster the growth of Indian exports. A.
Negative Impact 1) The rate of GSTis proposed to be higher than the current VAT rate in India, which althoughreducing the price in the longer run, will be of no help in cutting down pricesof commodities. 2) Abusiness will be indirectly controlled by both the Centre and the State in alltax related matters. The State will lose autonomy to change the tax rate whichwill be regulated by the GST Council.3) Since GST is mostly related to themanufacturing segment, most manufacturing states may incur losses.
But thegovernment has proposed to compensate for those losses for a period of 5 years. 4) Sectors that are currently enjoying noexcise duty or have enjoyed a lot of tax benefits will have to bear the burdenof a higher tax. These include Textile, Dairy Products, Media, Pharma, IT/ ITeS,and Telecom. Impactof GST on Small and Medium Enterprises Small scale or mediumenterprises are those with very less capital and are being operated on a smallscale. GST makes a very huge impact on these enterprises. Ø To reduce the compliance pressure on smallbusinesses, the GST Council has set a limit of annual turnover of Rs 20,00,000for registration under GST.
Businesses with turnover below this amount do notrequire GST registration. Ø GST Council has offered an additional benefitin the form of Composite Scheme. Under this scheme, businesses with turnover ofupto Rs 75 lakhs per annum can opt for this scheme, where they can pay a flattax in the range of 1-5%. Impactof GST on Manufacturers, Distributor and Retailers GST is expected to boost competitiveness and performance inIndia?s manufacturing sector. Declining exports and high infrastructurespending are just some of the problems of this sector. Multiple indirect taxeshave also increased the administrative costs for manufacturers and distributorsand it is being hoped that with GST in place, the compliance burden will easeand this sector will grow more strongly.
Impacton Real Estate IndustryThe real estate is one of the important sectorswhich play the significant role in generating employment in India. Under theGoods and Services Tax Regime, all under- construction houses or propertiesimposed 12% on property value (exceptingstamp duty and registration charges).The GST rate on under constructed housesor projects increased from 6.5 percent previous regime to 12 percent in the newregime. The actual GST rate on real- estate sector is 18 percent. A total costof building charged by the developer, out of them one- third of the tax to bededucted from the land value.Impact on Automobile SectorAutomobiles sector is one of the sectors inIndia which manufacturer large number of cars annually. Recently, the GSTCouncil has increased cess on mid-sized to hybrid variant to luxury ones, from15 percent to 25 percent.
A new rule has been implemented in the Act inthe motor vehicles has the capacity to transport up to 13 people would impose25 per cent cess. Under the new indirect tax regime, which subsumedseveral central and state levies in the biggest tax reform since Independence,cars imposed highest GST rate i.e 28 percent tax.Impact on TextileIndustryTheIndian textile industry provides employment to a large number of skilled andunskilled workers in the country.
It contributes about 10% of the total annualexport, and this value is likely to increase under GST. GSTwould affect the cotton value chain of the textile industry which is chosen bymost small medium enterprises as it currently attracts zero central excise duty(under optional route)Impact on E-CommerceThee-com sector in India has been growing by leaps and bounds. In many ways, GSTwill help the e-com sectors continued growth but the long-term effects will beparticularly interesting because the model GST law specifically proposes a taxcollection at source (TCS) mechanism, which e-com companies are not too happywith. ConclusionGSTis at the infant stage in Indian economy. It will take some time to experienceits effects on Indian economy. GST is designed in such a way that it isexpected to generate good amount of revenue for both central and stategovernment.
It will bring transparency in collection of indirect taxesbenefiting both the Government and the people of India. It will eliminate allthe other indirect taxes like VAT, Service tax etc and stands out to be oneunifying tax in the form of CGST(Central Goods & Services Tax) andSGST(State Goods & Services Tax).