GST is proposed to be a comprehensive indirect tax levy on
manufacture, sale and consumption of goods as well as services at the national
level. More than 150 countries have implemented GST so far. The major argument
put forth for heavy reliance on indirect taxes was that the India’s majority of
population was poor and thus widening base of direct taxes had inherent
limitations. Once GST is implemented, all these taxes would cease to exist.
There would be only one tax, that too at the national level, monitored by the
central government. GST is also different in the way it is levied — at the
final point of consumption and not at the manufacturing stage.
The tax came into effect in India from July 1, 2017 through
the implementation of one hundred and first amendments by the Government of
India. The tax replaced existing multiple cascading taxes levied by the central
and state governments. Goods and Service Tax is all set to be a game changer
for the Indian economy, GST is the only indirect tax that directly affects all
the sections of our economy.
The present paper focused on explaining the importance of
GST and its impact on business in India. Then it discusses the need and
features of proposed GST and how does it works. It highlights the positive
impact,negative impact .This paper shows how small scale enterprises,automobiles,E-commerce
etc industires are influenced by GST.
Keywords: GST, Positive Impact, Negative Impact,
Business, Indirect Taxes.
Goods and services tax
basically known as GST was implemented on 1st July,2017 at midnight
in India by the former President of India Pranab Mukherjee and former Prime
Minister Narendra Modi. It has been implemented by both the houses of
parliament i.e, Lok Sabha and Rajya Sabha at the Central Hall of the Parliament. This session was attended by
many high profile guests but boycotted by oppositions claiming that it leads to
problems for poor and middle class families/people. Basically the members of
Congress boycotted the GST launch altogether and were joined by other parties
like Trinamool Congress, Communist Parties of India and DMK.
GST is a comprehensive tax levy on
manufacturing, 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 be
implemented on a national level in India. GST will be an indirect tax at all
the stages of production to bring about
uniformity in the system.
GST, goods and services fall under five tax categories: 0 per
cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent and these taxes are different in each state and businesses
end up paying tax on taxes. For corporates, the elimination of various
taxes will improve the ease of doing business. And for consumers, the biggest
advantage would be in terms of a reduction in the overall tax burden on goods. Further, these taxes are different in each state and
businesses end up paying tax on taxes. It is estimated
that the GDP of the country will rise by 1 – 2.
The Research paper is based on
emperical study. It is a type of descriptive research paper. The study focuses
on study of Secondary data collected from various books, national &
international journals, government reports, publications from various websites
which has been published and focused on various aspects of Goods and Service
of the study
The first and foremost objective of this
research paper it to have an idea about what is GST and functioning of GST in
The second objective is to explain the impact
of GST on Business in India.
of the study
The study will highlight the effect of GST on
It will prove to be of great help to a common
man or people struggling to understand the concept of GST.
It removes the tension of GST among the
business community members.
This paper is a descriptive paper based
on secondary data collected from different books news-paper articles and
Need for GST
reason behind introducing GST is to improve the economy of the nation.
The GST will
greatly increase the revenues available at the states’ and centre’s disposal by
expanding the tax base. More importantly, the resources of the poorer states
(or consumer states) like, Uttar Pradesh, Bihar and Madhya Pradesh will
The GST will
facilitate ‘Make in India’ by converting the geographical landscape of the
country into a single market. Despite being one country, India is a union of 30
or more markets.
The GST would
improve tax governance in two ways:
· One, like the value added tax (VAT), it is a
self-collecting and self-enforcing tax.
due to the dual monitoring structure of the GST – one by the states and another
by the Centre – it is difficult to evade tax.
The disparity in the rate of taxes as levied by
respective states has lead to business structuring their transactions only to
achieve a tax advantage.
is one indirect tax for the entire nation, which will make India “one unified
2) It will replace multiple
taxes like VAT, CST, Excise Duty, Entry Tax, Octroi, LBT, Luxury Tax etc.
3) There are four types of GST
· SGST –
State GST, collected by the State Govt.
· CGST –
Central GST, collected by the Central Govt.
· IGST –
Integrated GST, collected by the Central Govt.
– Union Territory GST, collected by the Union Territory.
Payers with an aggregate turnover in a financial year up Rs. 20 Lakhs &
Rs. 10 Lakhs for North Eastern Sates and Special Category States would be
exempted from tax.
5) GST slabs are starting
from 5%, 12%, 18% & 28%.
of GST on business in India
As two sides of a coin, even
GST on business in India has both Positive Impact as well as Negative Impact.
Let’s see in detail.
A. Positive Impact
Easy to Run a Business across all States
out business activities will become comparatively easy as they do not have to
deal with different kinds of VATs levied in different states.
Fewer Tax Compliances
Central GST would
replace – Service Tax, Central
Excise 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.
Faster Transportation of Goods
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.
4) Indirect benefit to startups
required to register for VAT if their turnover is more than 5 lakhs, and in
some states 10 lakhs. With the coming of GST, businesses with an annual
turnover of over 10 lakhs (uniform across all states in India) are required
in Foreign Investment
The goods manufactured within India will become more
competitive in the International markets due to reduced costs, which will
inturn foster the growth of Indian exports.
B. Negative Impact
The rate of GST
is proposed to be higher than the current VAT rate in India, which although
reducing the price in the longer run, will be of no help in cutting down prices
business will be indirectly controlled by both the Centre and the State in all
tax related matters. The State will lose autonomy to change the tax rate which
will be regulated by the GST Council.
Since GST is mostly related to the
manufacturing segment, most manufacturing states may incur losses. But the
government has proposed to compensate for those losses for a period of 5 years.
Sectors that are
currently enjoying no excise duty or have enjoyed a lot of tax benefits will
have to bear the burden of a higher tax. These include Textile, Dairy Products,
Media, Pharma, IT/ ITeS, and Telecom.
of GST on Small and Medium Enterprises
Small scale or medium
enterprises are those with very less capital and are being operated on a small
scale. GST makes a very huge impact on these enterprises.
Ø To reduce the compliance pressure on small
businesses, the GST Council has set a limit of annual turnover of Rs 20,00,000
for registration under GST. Businesses with turnover below this amount do not
require GST registration.
Ø GST Council has offered an additional benefit
in the form of Composite Scheme. Under this scheme, businesses with turnover of
upto Rs 75 lakhs per annum can opt for this scheme, where they can pay a flat
tax in the range of 1-5%.
of GST on Manufacturers, Distributor and Retailers
GST is expected to boost competitiveness and performance in
India?s manufacturing sector. Declining exports and high infrastructure
spending are just some of the problems of this sector. Multiple indirect taxes
have also increased the administrative costs for manufacturers and distributors
and it is being hoped that with GST in place, the compliance burden will ease
and this sector will grow more strongly.
on Real Estate Industry
The real estate is one of the important sectors
which play the significant role in generating employment in India. Under the
Goods and Services Tax Regime, all under- construction houses or properties
imposed 12% on property value (excepting
stamp duty and registration charges).
The GST rate on under constructed houses
or projects increased from 6.5 percent previous regime to 12 percent in the new
regime. The actual GST rate on real- estate sector is 18 percent. A total cost
of building charged by the developer, out of them one- third of the tax to be
deducted from the land value.
Impact on Automobile Sector
Automobiles sector is one of the sectors in
India which manufacturer large number of cars annually. Recently, the GST
Council has increased cess on mid-sized to hybrid variant to luxury ones, from
15 percent to 25 percent.
A new rule has been implemented in the Act in
the motor vehicles has the capacity to transport up to 13 people would impose
25 per cent cess. Under the new indirect tax regime, which subsumed
several central and state levies in the biggest tax reform since Independence,
cars imposed highest GST rate i.e 28 percent tax.
Impact on Textile
Indian textile industry provides employment to a large number of skilled and
unskilled workers in the country. It contributes about 10% of the total annual
export, and this value is likely to increase under GST.
would affect the cotton value chain of the textile industry which is chosen by
most small medium enterprises as it currently attracts zero central excise duty
(under optional route)
Impact on E-Commerce
e-com sector in India has been growing by leaps and bounds. In many ways, GST
will help the e-com sectors continued growth but the long-term effects will be
particularly interesting because the model GST law specifically proposes a tax
collection at source (TCS) mechanism, which e-com companies are not too happy
is at the infant stage in Indian economy. It will take some time to experience
its effects on Indian economy. GST is designed in such a way that it is
expected to generate good amount of revenue for both central and state
government. It will bring transparency in collection of indirect taxes
benefiting both the Government and the people of India. It will eliminate all
the other indirect taxes like VAT, Service tax etc and stands out to be one
unifying tax in the form of CGST(Central Goods & Services Tax) and
SGST(State Goods & Services Tax).