GST or Goods and Service Tax GST is an indirect tax regime that is in use in India in the supply of services and goods. Where many companies have experienced great growth in their business due to GST, many others might find it like an obstacle in the way of their business growth. So, is GST good for Indian businesses or not?
GST began to take effect on July 1, 2017, with the introduction of the One Hundred and First Amendment of the Constitution of India by the Government of India. GST replaced the existing tax system of multiple taxes that were imposed by states and the central government.
GST has brought about a single tax for all nations It is a broad multistage, destination-based tax system that has successfully eliminated nearly all indirect taxes with the exception of some state taxes. The impact of this tax regime on various industries may be slightly different. The first distinction is based on whether the company is dealing with manufacturing, distribution, retailing, or providing services.
Impact Of GST On Businesses
1. On Manufacturers And Retailers
Goods and Services Tax is actually improving competition and efficiency in the manufacturing industry. However, a decline in exports, and the high amount of infrastructure investment, are just a few issues in this sector. There were previously multiple indirect taxes that pushed up the administrative expenses for distributors and manufacturers. However, now, with GST being in place and relaxation on compliance burdens, as a result, the industry is expected to increase its growth rate.
With the implementation of GST businesses that weren’t subject to any tax regime before will be required to sign up. Therefore, GST can also reduce the tax evasion possibilities.
2. Impact On Service Providers
According to the report from March 2014, there were more than 12-lac assessment taxpayers for services in India however, it was only those in the top fifty who percent paid more than half the tax collected throughout the country. The bulk of the tax is collected through domains like IT-related services, the insurance industry, telecom services, and business support services. Banking and Financial services etc.
These pan-India enterprises are already operating as a single market and will be able to reduce their burden of compliance following GST. The benefits are all a part of GST and also require a crucial step from the side of service providers and they’ll have to separately register each place of their business in every state.
After describing the impact of GST on Distributors, Manufacturers retailers, and service providers, Let’s take a look at the analysis of the impact on specific sectors.
3. GST Effect on Agriculture
You already know that with around 16 percent of Indian GDP agriculture sector has the highest contribution to the overall Indian GDP. It doesn’t mean everything is profitable prior to the introduction of GST among the main issues in this industry concerned the movement of agricultural products across state lines throughout India. GST with lower taxation can help, but it’s still not enough and it is expected that the GST to solve the problem of transportation.
4. Effect Of GST on Automobiles
There’s a lot to gain from GST in the field of Cars. GST has actually brought the greatest benefits to buyers and virtually every aspect of the sector. The Indian automotive sector is a huge business that produces a huge number of vehicles each year.
There were many kinds of taxes that were applicable to this industry, including VAT, excise, sales tax, road taxes on motor vehicles, registration fees, etc. prior to GST but everything is changed to GST. Buyers are required to pay an extra fee in addition to GST applicable.
5. Impact of GST on FMCG
The FMCG sector is also gaining some advantages as a result of the new tax regime. There are significant reductions in distribution and logistics costs. This is due to the fact that the GST eliminates the necessity for multiple depots for sales.
6. Impact Of GST on Freelancers
The freelance industry in India is not yet an extensive business, and the regulations and rules for the growing field are being debated. GST’s online tax scheme makes the majority of the process much easier for freelancers to submit the tax online.
Under the GST scheme, freelancers are taxed as service providers and the tax structure has created transparency and accountability in this field.
7. E-commerce and GST
The Ecommerce sector is expanding quickly within India and GST helps to boost the e-commerce sector’s growth in various ways. However, longer-term impacts are likely to be fascinating due to the fact that the GST law has introduced the tax collection at source (TCS) method.
The E-commerce industry is not satisfied with TCS but at the moment, it is at 1%. TCS is at 1percent. Recently, a new section was added, section 194-O, which defines the scope of TDS for transactions made through E-commerce.
8. Impact Of GST on Logistics
India is a huge country, and the logistics sector is the core of the country’s economy. It is easy to conclude that a well-established and mature logistics sector is able to provide an increase for “Make in India,” The “Make in India” initiative of the Government of India to a desired and appropriate position in the near future.
9. Impact of GST on Pharma
If we examine the performance of the pharma and healthcare companies, it is clear that the GST has benefited these industries. The GST has created an equal playing level for generic drug manufacturers and is also helping to increase medical tourism. In addition, it reduced structuring taxation. But, the concern about the pricing structure alone and the industry is waiting for a tax break If it does happen, the healthcare system will become more accessible affordable, and accessible for all.
10. GST Impact on Real Estate
It is among the most important areas that make up the Indian economy. Real Estate is playing an important role in the creation of jobs in India. The effects of GST aren’t likely to be evident until the end of the year because of the dependence on tax rates. However, the real estate market will reap huge benefits due to GST implementation because it has brought transparency and accountability to this sector.
11. Impact of GST on Startups
It will bring some positive changes already in this industry like increased restrictions for registration and the possibility of a DIY conformity model as well as a tax credit for purchases, as well as a free flow of services and goods. Prior to the introduction of GST was implemented, numerous Indian states had various VAT laws, which could be complicated for companies with an international presence, particularly in the e-commerce market. A majority of the problems have been resolved with GST.
12. Impact on Telecommunications
We’ve seen a few instances of price reductions in this area too however due to the frequent changes, finding the right answer isn’t easy. In the telecom, industry prices dropped after GST for a while. Manufacturers will reduce costs by efficient inventory management and also by consolidating their warehouses.
Additionally, it will be simpler for handset makers to market their products or equipment, as they can sell their products or equipment since the GST system has eliminated the need to establish state-specific entities, and also transfer inventory, which results in the reduction of logistics costs.
