Impact of Goods and Service Tax | CONCLUSION GST - GST In India

Tuesday, 21 March 2017

Impact of Goods and Service Tax | CONCLUSION GST

Impact of Goods and Service Tax
I. Food Industry The application of GST to food items will have a significant impact on those who are living under subsistence level. But at the same time, a complete exemption for food items would drastically shrink the tax base. Food includes grains and cereals, meat, fish and poultry, milk and dairy products, fruits and vegetables, candy and confectionary, snacks, prepared meals for home consumption, restaurant meals and beverages. Even if the food is within the scope of GST, such sales would largely remain exempt due to small business registration threshold. Given the exemption of food from CENVAT and 4% VAT on food item, the GST under a single rate would lead to a doubling of tax burden on food.

 II. Housing and Construction Industry In India, construction and Housing sector need to
be included in the GST tax base because construction sector is a significant contributor to
the national economy.
III. FMCG Sector Despite of the economic slowdown, India's Fast Moving Consumer Goods (FMCG) has grown consistently during the past three – four years reaching to $25 billion at retail sales in 2008. Implementation of proposed GST and opening of
Foreign Direct Investment (F.D.I.) are expected to
fuel the growth and raise industry's size to $95 Billion by 201835.
IV. Rail Sector

There have been suggestions for including the rail sector under the GST umbrella to bring about
significant tax gains and widen the tax net so as to keep overall GST rate low. This will have the
added benefit of ensuring that all inter – state transportation of goods can be tracked through
the proposed Information technology (IT) network.
V. Financial Services
In most of the countries GST is not charged on the financial services. Example, In New Zealand
most of the services covered except financial services as GST. Under the service tax, India has
followed the approach of bringing virtually all financial services within the ambit of tax where
consideration for them is in the form of an explicit fee. GST also include financial services on
the above grounds only.
VI. Information Technology enabled services To be in sync with the best International
practices, domestic supply of software should also attract G.S.T. on the basis of mode of
transaction. Hence if the software is transferred through electronic form, it should be considered as Intellectual Property and regarded as a service. And if the software is transmitted on media or any other tangible property, then it should be treated as goods and subject to G.S.T. 35 According to a FICCI – Technopak Report. Implemtayion of GST will also help in uniform, simplified and single point Taxation and thereby reduced prices.

VII. Impact on Small Enterprises There will be three categories of Small Enterprises in the GST regime. Those below threshold need not register for the GST Those between the threshold and composition turnovers will have the option to pay a turnover based tax or opt to join the GST regime. Those above threshold limit will need to be within framework of GST Possible downward changes in the threshold in some States consequent to the introduction of GST may result in obligation being created for some dealers. In this case considerable assistance is desired. In respect of Central GST, the position is slightly more complex. Small scale units manufacturing specified goods are allowed exemptions of excise up to Rs. 1.5 Crores. These units may be required to register for payment of GST, may see this as an additional cost.

GST is the most logical steps towards the comprehensive indirect tax reform in our country
since independence. GST is leviable on all supply of goods and provision of services as well
combination thereof. All sectors of economy whether the industry, business including Govt.
departments and service sector shall have to bear impact of GST. All sections of economy viz., big, medium, small scale units, intermediaries, importers, exporters, traders, professionals and
consumers shall be directly affected by GST... One of the biggest taxation reforms in India -- the
Goods and Service Tax (GST) -- is all set to integrate State economies and boost overall
growth. GST will create a single, unified Indian market to make the economy stronger. Experts
say that GST is likely to improve tax collections and Boost India’s economic development by
breaking tax barriers between States and integrating India through a uniform tax rate.
Under GST, the taxation burden will be divided equitably between manufacturing and services,

through a lower tax rate by increasing the tax base and minimizing exemptions.