What Effect Will the GST have on Business?

R Jayaraman

Author: R Jayaraman

Date: Mon, 2016-09-26 08:42

After a lot of political manoeuvring and chest thumping, the GST bill has been passed and the run in fact has been so fast that the President has already signed the bill before anyone could say “Timbuktu”. One is reminded of the popular Rajnikant joke that he came first as usual; Einstein was stunned that light came in second!

GST has gotten into India after many years of VAT, and is another milestone in the tax structure. In the days after independence, there was a great fear that businessmen will enrich themselves at the expense of the country if left free, and so, many layers of safeguards were built around their activities. Those who did all this didn’t reckon that these self-same safeguards will give rise to another monster – the corrupt politician. Unfortunately, the political class will find it difficult to live down this reputation. It will take many years before the country will even begin to forget the illegalities, the continuous cheating, the back stabbing and small minded thinking that this licence and permit raj brought about in its wake.

In all the actions after independence, this one aspect of the nation’s business development is perhaps the most painful one, and the most costly mistake. It is a carryover of the “lack of self-respect” of the Hindu that Subramanian Swamy, Rajiv Malhotra and others of their class talk about – we lacked the vision that the opening up of industry will usher in an era of prosperity instead of one that would lead/continue the exploitation. Experts and pundits will keep debating whether this was the right way to go, but the political leadership of those early years believed more in the negative effects than in the beneficial ones of business.

Now that the GST has become a reality, the business world in India needs to redeem itself and chart a new path of development, wealth creation and equitable distribution, sustainable growth and world class quality. The challenges confronting the Indian business community are far more multifarious than ever before. Just imagine the western business world has had an uninterrupted run of free enterprise over the last 100 years which has seen unbridled growth without the fetters of sustainability, conservation, environmental pollution and so on. These new factors, which are the results of the damages done by the huge consumption and growth, and which have made the cost of doing business a lot more than what it was before, have started affecting adversely the cost of doing business only in the last 10 to 15 years or so. And now the Indian industry will have to bear the full brunt of this increase.

The GST – consisting of CGST, SGST and IGST - is another attempt to smoothen the myriad tax laws that govern interstate transfer of goods. While the VAT tried to remove the double counting of taxes applicable for sales between companies in creating the final product, the GST will remove the layers of taxes and documentation that need to be done now to get goods across state borders.

Take for example, a producer in Maharashtra, who wants to sell goods in West Bengal. He has to transfer the goods using a C form which will allow for a tax free transport to WB. If the C form is not given, then the WB state sales tax of about 10%+  will be levied on the CIF value of the goods that leave the Maharashtra factory upon entry into WB. On top of this, the CST will become applicable when the goods are sold in WB. So there is an additional tax element of about 15% on the FOB value. Now this amount will be subsumed in the GST as IGST and will not be that high, providing some relief. Differential tax rates can be avoided to some extent, based on the rates that are finally decided by the central authority.

States where manufacturing happens will not get any revenue for the materials leaving the State. Earlier they would levy the State Sales tax on such transfers based on which the C form could be raised to avoid tax in the consumption state. Thus manufacturing states that stand to lose out on tax will be compensated for five years. By then, some mechanism will have to be found to remove this inequality.

The fact is that a whole host of central and state taxes – including Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and VAT/Sales tax, Luxury tax, State Cesses and Surcharges relating to supply of goods and services, Entry tax not in lieu of Octroi – will be subsumed under the GST. The entire mechanism will create a smooth tax collection and a transparent linkage structure, with lower sales tax rates overall, will come as a big relief to all those who are interested in doing business. As they say the GST has now announced to the world that India is ready for business. 

Share

Comments

Dear Sir, Thanks for penning down your views on GST. Life will definitely become simpler for all because there will be a “Single taxation system”. While there are several advantages of GST, as a consumer what matters to me is how the GST will benefit me. GST is applicable on goods and services at the place where final/actual consumption happens I.e. the consumer. However, GST will be collected on value-added goods and services at each stage of sale or purchase in the supply chain. The manufacturer or wholesaler or retailer will pay the applicable GST but can claim back through tax credit mechanism. So ultimately the GST will be paid by the consumer. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be 20-30% lower due to avoidance of multiple taxation. The mechanism for the retailer or manufacture to claim tax credit mechanism will further reduces the cost of doing business, thus enabling fairer prices for consumers. However, GST also comes with its set of disadvantages. Since it will be consumption-based tax, states with higher consumption of goods and services will have better revenues. Lastly, for successfully implementing the GST lot of changes and cooperation is required at the administration level & a sound IT infrastructure to handle the change needs to be developed. GST is one of the greatest reforms in history. There is no exaggeration in saying that GST has announced to the world that India is ready for business. The market is already bullish on the news of GST implementation on 1st July 2017 and this will give the required boost to the GDP.

As rightly said, GST will close many loopholes in the Indian Taxation system. GST is a consumption based tax system aimed to nullify the cascading effects of indirect taxes. Further with the introduction of GST, the rates of commodities will reduce since businesses will be able to claim Input tax credit from the Government. For example, a manufacturer purchases the raw materials from Gujarat and hence pays tax on same to Gujarat Govt. However, the manufacturer processes the raw material into finished good in Maharashtra and sells the item in home state only. Since he will be liable to pay the tax to home State Govt on trading of finished goods, the whole process leads to double taxation on same raw material but to different State Govts. But with the advent of GST, businessmen would be able to claim Input tax credit and it will encourage the free flow of trade between states, leading to reduction in price to end consumer. Secondly, GST would bring all the vendors at parity. For example, a factory in Nagpur has to procure the raw material on L1 basis. One of the vendor is situated in AP (nearer to purchaser), near AP-Maharashtra border and other one in Maharashtra (at a distance from purchaser). Even though the price of a vendor of AP is less than that of Maharashtra, he would claim VAT@5%, as compared to own state vendor who will charge CST@2% only. This way the vendor outside the state losses business and the industry lands up paying unnecessary high cost towards freight charges. In addition to the above, the implementation of GST will allow taxpayers to file the returns and claim the refund online only, minimizing the interface between the taxpayer and the Govt officials, which in turn would lessen the chance of corruption or fraud. Hence the successful execution of GST in India, will definitely boost the economy of country and will bring down the prices of commodities.

Sir, this blog was posted by you in Sep 16 when GST laws where in kind of draft stages. Really appreciate the coverage of important aspects of GST in your blog at that stage. I look at GST as Governance driven Statutory Tax. Yes it simplifies and subsumes all existing tax laws and makes it simple for a common man. Imagine in a simple hotel / restaurant bill, there is a component of VAT and then a component of service tax. Over and above this there is a component of service charges (at the discretion of the restaurant) on which again service tax is added. Similarly in the name of works contract, VAT and service tax were charged and this VAT basis was different from state to state. These kind of laws were making understanding of tax laws complicated to a common man. GST makes it simple, one tax for any goods or service, easy to understand and easy to comply. Coming to the compliance part, in the earlier tax regimes, there were several paper depots to take care of tax compliances!!! (goods were moved between states on stock transfer basis and then sold locally due to which full VAT credit can be taken). With GST this concept goes off as even interstate movements by the same company is also taxable. This would bring to a close the concept of paper depots. Furthermore under GST though number of returns to be filed are high, it is common and has no ambiguity as compared to the existing laws. Also the main issue of C Forms and issues related to inter state movements will come to a halt. The main reason which is thought of for implementing GST, was to bring down the prices. This should happen in view of reduced tax rates in the GST regime as compared to existing tax rates. The GST law is mentioning about anti – profiteering clause which states that no company should make profit out of these reduced prices on account of reduced taxes. As on date there is no clarity as to how government is going to ensure this. If companies maintain the same prices, though taxes have come down, the very purpose of GST implementation will not be felt by common man. Another aspect that needs to be looked into is the fact that the rates are determined and fixed for a period of 3 years. After 3 years, if a situation arises that the SGST (State GST) can be determined by the respective state government, then the uniformity in taxes concept would be lost. Also there is every possibility that the states will start using SGST taxes as a tool for getting votes as they can start exempting / reducing rates as part of their poll promises. Lets hope that these negative aspects does not arise and only positive aspects remains and GST really becomes Governance driven Statutory Tax.

Sir, Agree with your views on a few aspects of GST, that with the advent corporate world will need to redeem itself and chart a new path of development, wealth creation, equitable distribution, sustainable growth and world class quality. With implementation of GST input credit would be available for items which earlier would not classify to be available, thus, reducing the costs to the companies which are expected to be passed onto the public at large. This would largely benefit all industries especially with respect to capital equipment’s where the indirect tax on the purchase of capital equipment was considered as a cost but now the same can be taken as an input credit thus, helping lower costs for the company. Similarly, many companies who were registered for service tax would loose credit for excise and VAT which would now be available. Availability of input credit will be seamless unless there is a breakage of chain on account of someone not charging GST. Again as rightly pointed out today we have number of indirect taxes and there is a confusion and litigation on applicability as also the rate at which it shall be applicable. It is estimated that for an average size service company, there could be a saving of between 2-6% on the costs. However, GST which is referred to as “one nation one tax” and so technically one would imagine that there should have been one registration and one set of returns. But, considering the political scenario and the power they wield, the law as it has been passed, we have as many registrations required for the number of states and union territories in which one operates. This is purely as each state had revenues and state government did not want to concede the power like in most developed countries, where there would actually . To substantiate the claim, a service company operating in 10 states, would normally file just 2 service tax returns annually, but with GST coming in it shall have to 37 returns annually and hence, a whopping 370 returns for the 10 states. Further, input credit in one state cannot be set off against the input credit of another state, which will lead to requirement of huge working capital and increase costs as well in some cases. Further, we are just a few days away from such a major change, but we still do not have resolution or clarity on area based exemptions, operations of e-way bill, rules for SEZ and anti-profiteering clause to name a few. Systems of companies are to be upgraded considering the automation expected under GST of matching each invoice. Finally, it is going to put a lot of pressure on cash flows initially as the input credits shall be available only when the vendors have paid the taxes. If the same is not paid, the input credits, will not be available causing additional tax liability for the first party. All in all my view is GST is just old wine in new bottle, instead of multiple tax names, we may have one tax (which of course as pointed by you would be split as IGST, CGST and SGST), but we would be required as many registrations as earlier (more for service companies), file more returns and do more compliance, invest more working capital and hope to avoid any litigation on tax rates or anti-profiteering part. GST transition will take about 12-18 months and will entail considerable disruptions to cash and increase in the compliance burden of companies. Now with this we will have to see what the world says once we implement as the world has been lauding the efforts of the current government. Hope the transition goes smooth and we can live upto the expectation of the world and spur growth which is the prime reason to move to GST.

Sir, I appreciate your views. Actually, GST is a much talked and deliberated topic these days. It’s one of the biggest tax reforms (indirect tax) in India since independence, proposed to roll out on July 1st 2017. Undoubtedly it’s going to make the tax structure easier and also it will remove cascading effect of taxes which is prevailing in the current tax regime. In spite of economic crisis across the globe, India has posed a beacon of hope with quite ambitious growth targets, supported by few strong strategies e.g., Digital India, Make in India etc. GST is another such undertaking that is expected to provide much needed stimulant for economic growth in India by transforming the indirect taxation structure towards free flow of goods and services and removing the state barriers. Expected benefits of GST implementation are as below:  I. Reduce overall tax burdens on manufacturers and foster growth through more production.  ii. Different tax barriers (entry tax, octroi levies, check posts etc.) removal will speed up the business process and reduce the transportation cost and time.  iii. It will result in higher Tax Revenue to the Govt. as tax base will be extended.  iv. Free flow Tax Credits if goods and services are procured from a registered dealer.  v. Removing customs duty will make businesses more competitive in foreign markets.  vi. More transparent system where customer knows exactly how much taxes are being charged and on what base. Nevertheless, we cannot overrule the challenges being observed in its smooth implementation. Some of the limitations and challenges are as below: 1. Increased Compliances – In post-GST environment, a small scale manufacturing company with operations in only one state will have to file a minimum of 37 tax returns in place of 13 in existing tax regime. It will increase the compliance activities massively for the industries, accountants and banks. 2. State-wise Tax Returns – Tax returns as mentioned above are to be filed for every state where the company is operating / doing business. It means, if the company is operating in 3 states in India then it has to file a total of 111 nos. of tax returns in a year. For companies having all India operations (like Oil PSUs) will have huge no. of tax returns to be filed, more than 1100 tax returns in a year. 3. Availment of Tax Credit – Tax credit will be available to the purchasers subject to correct uploading of invoice wise details of purchases by purchasing dealer and invoice wise details of sales by selling dealer on GST Portal. Both purchasers and sellers have to upload tax return on GST Portal and in case of any deviation / difference in invoice details for the month, Tax credit will not be given to the purchaser resulting in higher taxes and accordingly higher cost of the product. I completely agree on point of view as mentioned by Mr. R. Jayaraman and definitely there will be positive impact of GST on businesses in India in long run however, talking realities, in India where there are huge number of small scale industries / Small and Medium Enterprises and also where technology advancement is gradually picking up the pace, it will be quite difficult for us to streamline the tax structure in a small span of time and though businesses in India is expected to get a number of benefits from GST implementation, it’s transitional challenges will be crucial for its successful implementation.

I would like mention the Philosophy to bring Goods Services Tax roll out is mainly bring entire nation in one indirect taxation which avoid multiple & complex current taxation system. GST will also give benefit by cascading effect of tax on inflation and thereby elevate economy at large scale. If we see on historical front the journey of GST Approval in Parliament was very tough & challenging. GST was first introduced by Hon Mr. Pranab Mukharaji. GST approval journey was so long with 17 years India was waited for important taxation decision which will impacted on Common man life as well as business environment. There were lot reason for the approval of GST & one of the main reason is that Stable & Majority Government after approx. 25 years with Single majority Govt. which has empowered to take Nation important decision like GST , Any way From 1 st July 2017 The GST gets rollout in India which brings befits as well challenges going ahead . As common business man understanding, we have Direct & Indirect Tax system where Indirect Taxes, the liability of the tax can be passed on to someone else & GST will play vital role in Indirect Tax or We can say Indirect taxes will be replaced by GST The current indirect taxation system have cascading effect of tax on any service where a tax is paid on tax and the value of the item/ service keeps increasing every time . Cascading effect of Tax had always impacted on Business environment in India with comparison with Global front on Competitiveness I would like to mention here that GST completely changes the fiscal architecture of modern India with regard to matters of taxation & this is biggest tax reform after independence For example in shorter way in hypothetical way , I am purchasing any item with Mafg. + Tax. = Wholesaler + valu add Rs.+tax =Retailer + value add rs. +tax = Shopkeeper + value add Rs. + tax = Customer pay the final price with addition of multiple indirect tax in whole supply chain GST is based tax tax on consumption of goods and services. Major change in GST Rollout is Shiftfrom“Originating”to“Destination”basedConsumptionTaxmodel & Apply to all stages of the value chain For example if we see the GST structure on day to day business front , Tax Structure of Invoice •Basic Value 100 •CGST@9%09 •SGST@9%09 •Total Value118 I fully agree with the views of Mr. R Jayaraman & This will definitely positive impact on Indian business world

Well, as rightly said the Goods and Services tax (GST) has been passed by the government in a matter of seconds. But, one must note that the industry and the consumers have been waiting with bated breath for the single tax regime for almost a decade. The new taxation system will help remove tax barriers between states, thus creating a single market. The roll-out will replace a plethora of cascading central, state, interstate and local taxes with a single, nationwide, value-added tax on goods and services. GST has brought a mixed bag of optimism and apprehensions among industry, however, some still are confused over the implementation. GST will replace more than a dozen central and state taxes such as excise duty, service tax, VAT into a 'one nation, one tax' regime. But as you said, GST will remove the layers of taxes that need to be done to get goods across state borders, I feel the small businessmen will face difficulties and need to shell out more doing the same. Take for example, Kumartuli artisans in Kolkata, who is known for making and exporting idols. These artisans also make fibre idols, which are mostly sent to foreign countries. With GST, these artisans are facing trouble with an increase in service tax of 18% and extra delivery charges, which in turn, has been creating confusion in terms of logistics. So, I feel the business industry – whether small or big are somehow confused over the implementation of the new tax system. With GST, the Indian business industry should change itself from the traditional form, and should enroute towards development and growth.

I agree to the fact you have described in the article on how Goods and Service Tax (GST) will benefit Indian economy. It’s a vision of our honorable Prime Minister Sh. Narendra Modi clean India in terms of hygiene and corruption. The consumer pays an extra amount due to many tax slabs and multiple taxes which ultimately increase the final price of the product. So by applying GST the extra taxes will be cut down and the final selling price of the product would decrease. By reducing the hassle involved in multiple taxes will increase the number of tax payers which ultimately increase the tax received by government. Also as number of tax payers increase the income tax rate can be reduced which will benefit everyone. In some countries tax payers are blessed with health insurance and other advantages. The same can be given in India which would motivate tax payers contributing towards the countries growth. The other benefit which I see is reduced corruption in public sector. We have proven instances of bribes being taken on borders to pass the product without incurring the tax to the government. The same will be reduced by GST. The cost of goods in different states would become similar as taxes would be same. So the goods which were transferred illegally without paying tax by innumerable means will be controlled. Linking the aadhar card number with this scenario will increase the number of fair transactions as cashless transactions are also increased after demonetization. The more emphasis is being given on making official payments through check and other online means of transaction. Its time to get your business ready for GST. So ultimately Indian economy is moving forward towards being more transparent and will prove boon in the near future.

I am totally agreeing with the authors facts on Goods and Services Tax (GST) positive impacts on Indian businesses. GST have turned Indian market into one common market, where there is a greater ease of doing businesses and cost savings on logistics across various sectors. By including most of the State and the Central taxes into a single tax and by permitting a set off of all prior primary taxes for the transactions across all the chain, GST would diminish the ill effects of all the cascades of taxes, revamp competitiveness and the liquidity of businesses. The mid-term impact of GST on micro and macro-economic is expected to be positive. Inflation rate will definitely be reduced as cascades of taxes will be removed. The revenues from taxes of the government would go high with the expanded net tax and, fiscal deficit would remain in control. In addition to that exports would evolve as more competitive on global perspectives, while Foreign Direct Investment (FDI) is also more likely to be stimulated. GST will eradicate the need of maintaining records and showing compliance with mass of indirect tax laws of State and Central government such as Excise Tax, Service Tax, VAT etc. They only need to maintain and show various compliance's in respect with Central Goods and Services Act and State GST for all the intra and interstate supplies. It will help in reducing the duties that is been imposed on imports of goods and services along with reduced incentives on exports. As India is an agriculturist country, having agriculture sector contributing to 13.7% of economy, so implication of GST will lead farmers and traders to have impartial and transparent trading in a regulated market. GST have brought several important gains to our economy if we see the after-math’s India’s first GST revenue collected is Rs 92,200 crore from 3.9 million tax payers, that is more than the estimates. Various industry leaders and I too believe that India would climb many steps in the ease of having business with the implementation most important tax reform in the history of our country.

Thanks a lot sir, for writing such a brilliant article on GST. Gone are those days, when we find check posts on interstate borders or businessman making a plan of how to evade a tax. GST- “One Nation, One Tax” may be the solution for all of our Indirect tax-related problems and will make India one unified common market. In the previous fiscal year of 2016-17, the net tax collected was 17.1 lacs and out of it, about 50.5% i.e. 8.63 lakh crores were collected from Indirect taxes. So, any measure which can revolutionize such a large tax base will itself be a very promising device and the whole nation will have high hopes for it. Still, GST is in its very nascent stage and how it is going to affect the entire indirect tax mechanism will be an interesting research topic. The most significant effect of GST is that it has subsumed various central and state level taxes into one tax i.e. GST. The GST can be divided into CGST and SGST (for intrastate movement of goods and services) and IGST (for interstate movement). GST is applicable on both goods and services and it is expected that it will lead to a reduction in prices of goods while the increase in the price of services. Moreover, it has led to the uniformity of tax rates and structures across states, removed cascading of taxes and will lead to easy compliance of taxes through robust IT structure. Now, its mandatory for all small and big firms, industries and businessman to get registered over GST site and thus tax payment will be very transparent and it will definitely curb any possible tax evasion or tax-related corruption. In nutshell, GST has been smartly designed and has removed all loopholes that existed in the previous tax structure. On a contrary note, there are certain points which must be under government scanner. Our IT network is still not so deep and thus small traders living in rural areas or small towns may face few problems like registration and e tax filling. GST have five different tax rates (5%, 12%, 18%, 28%) coupled with few surplus taxes and thus we expect that GST will be further simplified in nearby future. Certain items like petroleum products, Alcohols are not under it and we expect that GST will cover these items very soon. The entire GST is based on an IT structure and even a single failure can affect everyone across the country. Thus, a robust and attack proof IT system is a must. Although, it has increased price of various services so common people have high hopes of getting it reduced in nearby future. As GST is a destination based consumption tax and thus has affected manufacturing states to a great extent. Although the government is providing financial losses for next five years but the proposed solution is temporary and further deep thinking is a must. So, GST has its both pro and cons, but it was inevitable and we can hope that with the support of common people and current government we will be able to achieve at least 2% GDP growth from it.

Well Sir , as you have rightly said, There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa. The new GST rule will adversely influence the SMEs working capital. Under the previous tax regime, the excemption limit for SMEs was Rs 5 lakhs, whereas in the new tax regime the exception limit is enhanced to Rs 20 lakhs which have a positive impact. GST would replace VAT all over India. This means that a business wouldn't have to worry about keeping up with VAT compliances that are different in every state. Carrying business activities will become comparatively easy as they do not have to deal with different kinds of VATs levied in different states. It will be of immense help to the logistics sector and will also result in the faster transportation of goods as there will be no hour long waits at the sales tax check posts across borders due to the elimination of several indirect taxes. Moreover, ease of doing business removes cascading effect ( double taxation) , reduces the tax burden on new business, improved logistics and faster services are some of the positive points of the newly implemented of goods and service tax. And the government estimates the GST will save companies around $14 billion because it will allow them to organise their warehouses and supply chains more effectively. There is no VAT tax anymore which means the business wouldn't have to worry about VAT compliances for entry. GST is likely to bring many of the entrepreneurs, who are not paying taxes today, under the tax net and increase the governments revenue.

GST! What an emotional turmoil the entire nation has been through every time they have heard these three letters together! It was touted as India’s biggest tax reform and is expected to improve the ease of doing business and boost the overall economic outlook of the country. As India moves 30 notches up to feature in the top 100 nations in the World Bank's Ease of Doing Business Rankings for 2018, Finance Minister Arun Jaitley seems hopeful that GST will further improve India's rankings in the years to come. The GST tax regime is supposed to enhance foreign direct investments across all the sectors in India, due to the transparency of tax. It is likely to shift unorganized players to the organized sector and it is now possible to keep track of all transactions throughout the value chain from the retailers to the manufacturers. This would help businesses with centralized data collection. Moreover, under the GST regime, tax compliance burden for small businesses can be reduced as a businesses with a turnover of Rs.25lakhs to Rs.75 lakhs has the option to lower taxes by utilizing the composition scheme. GST is likely to keep effective tax rates intact for most of the sectors. The impact of GST on the Auto sector, IT sector and companies dealing with paints, biscuits and cigarettes, remains neutral while there is positive impact on construction, cement, toothpaste, adhesive and soap companies. However, few sectors like the Print Media, Multiplexes and Telecommunications would be adversely affected under the GST when compared with the earlier tax regime. It may be too early to make any proper analysis on impact of GST across various sectors in India as it has been implemented only recently. We will all have to wait for at least a year to have a precise understanding of the impact of GST on the various businesses in India. Till then, let’s keep our fingers crossed and hope for the best!

Implementation of GST is indeed one of the boldest steps taken by Narendra Modi government to improve the tax system in India. It was done mainly with target of creation of a national market, ease of doing business, achieving greater productivity and transparency, streamlining the tax system and reduce the tax evasions. India has been adopting defensive policies since the independence, on all fronts. It was in 1991 that the economy was made open to the global market and which in turn boosted the economy. Since majority of the population was employed in agricultural sector (it still is), policies benefitting any other sector had to face a lot of political opposition and the policies used to be turned down. And because of the lack of government support and complex tax systems, it was really difficult to start and operate a business in India and it had been ranking low in ‘the ease of doing business’ consistently. The implementation of GST has helped improving the situation and India jumped 30 places in the recent ’ease of doing business’ rankings. GST has summed all the different taxes into mainly 2 components – CGST and SGST. This has enabled easy transfer of goods between the states i.e. creation of one national market. And as you have mentioned in the article, with GST, Indian tax system had shifted from production based to consumption based one. Earlier, the states who used to produce goods were able to generate taxes and the one consuming them had to rely on the state duties to generate revenues. Now, due to consumption based tax model, the state where goods are consumed gets to generate taxes. For example, before GST, if a product is manufactured in Maharashtra and sold in Delhi, Maharashtra state used to collect the taxes. Now, post GST, in same situation, Delhi government gets the taxes and not Maharashtra government. Although in the initial phase the implementation of GST faced criticism and had created a lot of turmoil among the industry and common people, the situation is improving now. The overall tax collections have restored to pre-GST regime and 38 Lakh new tax payers have joined under the GST regime. As the tax-payers have to submit receipts for the transactions, the system has become more transparent and tax evasion has become difficult. Looking at the positive impacts observed in past 1 year of GST regime, we can surely hope for better results in longer run!

Thanks sir for sharing your key insights on GST. This is really helpful read for young professionals like us who are dealing with nuisances of GST. I understand your opinion however I believe that GST is like a coin which has two sides. As you must be already aware that GST was rolled out on 1st July 2017. It had lot of positive impacts on Indian businesses but also had lot of challenges initially when it got introduced. The best part about GST is that entire nation is under one single uniform taxation process. This completely replaced the loopholes in taxation system during VAT regime which was having a cascading effect since multiple state, city taxes were involved. With roll out of GST the prices of all items will come down since all manufacturers, wholesaler or retailer can claim input tax credit. One single tax system of GST also welcomed interstate trade due to same percent of tax also leading to price benefit for customer. GST implementation also allowed taxpayers to file return and claim applicable refunds online only which minimizes corruption as well. GST also led to significant reduction in corruption since entire money spent has to be filed and every business has to be GST Compliant. However entire roll out also had its disadvantages coming along with the kitty. Since the complete system is online a lot of business got affected due to software purchases, increase in operational costs and also I believe enough time was not provided to handle smooth transition between GST and VAT. Projects at my organization also got delayed since the pricing of all items changed and thereby slowing down the business in manufacturing industry. A lot of small dealers, wholesalers who dealt in cash also got affected since bills have to be done with GST billing which was also a mandate while filing tax returns. As per GST the seller requires registering in all states they do business with which increases lot of complexities for seller. However from a long term perspective I believe that GST has much more advantages than disadvantages which is clearly laid out in your article. Would love to have your feedback on my views which would actually help me assess and learn further.

As you predicted GST is a game changer and this will become absolutely correct that GST became game changer and it is affected in the most of the industries in India. Thanks editor for this information.

Add new comment

SPJIMR
Bhavan's Campus
Munshi Nagar | Dadabhai Road,
Andheri West | Mumbai - 400 058, India
Tel:+91-22-2623-0396/ 2401
      +91-22-2623-7454
Fax:+91-22-26237042
 

Delhi Centre
Bharatiya Vidya Bhavan Campus, 3rd Floor
Gate No. 4, Copernicus Lane
Kasturba Gandhi Marg, New Delhi-110001
Tel: 8383059670, 011-23006871, ext-871 

Locate SPJIMR