GST is a comprehensive consumption tax on goods and services. It will cover in its ambit all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
GST will be the biggest reform in the Indian tax legislature. It can rightly be given nomenclature as the “Sanjeevani” for the ailing Indian Economy. A game-changer in itself, GST will significantly restructure the power to tax between Union and State Governments and substantially expand the taxcoverage and revenue. It will reduce the cascading effect of tax on the cost of goods and services and will have significant impact on the point of taxation, tax structure, tax computation, tax payment, tax compliance, credit utilization and reporting. It is expected to bring about a sea change in almost all fields, be it finance function, IT infrastructure or supply chain, and would virtually touch base and have impact on almost all functions of business.
GST is likely to be implemented from 1st July 2017 and in order to make it effective at the earliest, Government has taken a series of speedy decisions and steps. GST council has already been set up and with the announcement of rates (5% being rate for merit goods & Services, 12% for standard goods & services, 18% again being standard rate and 28% for the sin goods or the luxury goods including luxury
goods, tobacco products and aerated drinks), initiation of registration process, GST is all set to come to life soon.
Corporates also need to gear up for this radical change and equip themselves with the processes to take into account a number of change areas required under the new tax regime. Many companies have already taken cognizance of the multitude of changes under GST.
Chartered Accountants will have a prominent role under GST regime. They will be required to understand the intricacies of GST in their respective fields and provide professional services to the Companies. One important area that needs special consideration involves review of contracts and agreements and the related cumbersome tasks with which the in-house legal teams / corporate legal cells will be flooded with. The new regime would require review of all contracts and agreements entered into by the Companies and keep in mind several new aspects while entering into future agreements since these agreements will spell the taxing point under GST regime. Careful structuring of the agreements in GST scenario may prove out to add savings to organizations and avoid litigations.
Benefits of GST for the Centre and the States:
Experts are predicting a $15 billion a year in financial gains post implementing the GST as it has created a split of burden between the manufacturing and services/retail in taxes. GST will promote more exports thereby creating more employment opportunities and thus will boost the growth.
Benefit of GST for individuals and companies:
Individuals will be also get benefited as the prices will come down and lower prices mean more consumption, and more consumption means more production, so it will foster the growth of the companies too.
POSITIVE IMPACT OF GST:
The Positive Impact of GST are :
- Increase in Foreign Investment : With GST, India is now a unified market and the foreign investment has increased in India. The goods that are manufactured within India because of their reduced costs have become more competitive in international market leading to growth in export. 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.
- Fewer Tax : GST has two constituents: The central GST and the State GST. The Central GST will replace – Service Tax, Central Excise Duty, and Custom Duty etc. The State GST will replace – State VAT, Central Sales Tax, Tax on Advertisements, Luxury Tax, Purchase Tax, Entertainment Tax etc. Before GST, there were so many taxes and now they have replaced all these taxes and duties with Central GST and State GST.
- Reduce the cost of doing business : GST has changed VAT all over India. Now we do not need to pay different amounts of taxes in different states. It is one tax system for all states of India and so we have already got rid of various taxes and duties on our businesses.
- Transparency : The tax administration has started working corruption free. Also enabling sales invoices to show the tax applied has resulted in transparency.
NEGATIVE IMPACT OF GST:
The Negative Impact of GST are :
- Dual Control : GST is being referred to as a single taxation system but in reality it is a dual tax because both the state and centre both will collect separate tax on a single transaction of sale and service.
- Incumbent increase of the cost of some commodities : The tax rate has been increased for many products, thus increasing their costs.
- Some sector are at a loss : Sectors like Textile, Media, Pharma, Dairy Products, IT and Telecom are bearing the brunt of a higher tax. Also the price of commodities has increased like jewellery, mobile phones and credit cards.
- Real Estate Market affected : Economists are of the opinion that GST in India has already had a negative impact on the real estate market. It has added up to 8 percent to the cost of new homes and reduced demand by about 12 percent.
There are approximately 140 countries where GST has already been implemented by Australia, Germany, Japan, and Pakistan. India is one of the most stable economies of the world and we have proved to be quite adept at adjusting to major economic renovations.
As the coin has two sides, same way implementation of GST impacts a nation both ways, positively and negatively. If we ignore the negative aspects and consider the positive effect, then it is a way to reduce the black money. GST is having a few initial problems, but with time, we will be able to see the bigger picture and it will surely result in an economic integration.