How you will be impacted by GST

The Goods and Services Tax (GST) is an indirect tax where most of the existing taxes will be merged into a single taxation system, and will be implemented across the country from July 1, 2017.Simply put, the Goods and Services Tax would put all taxes levied by state and Central government in one basket and merge them into a single-tax system, thus doing away with multiple taxes and promoting the concept of a common market for all.

The biggest differentiating factor will be the fact that the taxes will be imposed where the goods are consumed and not from its production hub. At present, many goods are produced in many states and consumed in many states. As these goods move from the point of origin to their final destination for consumption, many taxes have to be paid.

The taxes are different in different states. For instance, goods produced and consumed in the same state have a 5 per cent value added tax (VAT) whereas goods produced in one state and consumed in another state will have central sales tax (CST) of 2 per cent. Same is the case in services, where there is service tax and VAT which is levied. These rates vary from 12 per cent to 26 per cent based on the source and destination of consumption. Under GST, it is proposed to bring a uniform tax rate, maybe 18 per cent which will benefit producers, distributors and consumers alike.

From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork

MULTIPLE TAXES ELIMINATED

With the Goods and Services Tax coming in, Central-level taxes like Sales Tax, Excise Duty, and state-level taxes like Value-added Tax (VAT), Entertainment Tax and Luxury Tax will be subsumed.The goods and services tax (GST) is expected to reduce prices by eliminating multiple levies, but price of certain prod ucts may, however, increase.

Currently, there are differential rates of VAT for the same goods in different states with further fragmentation of VAT rates and levy of entry tax in certain states. This has in the past resulted in classification disputes and entry tax litigations. However, with abolition of entry tax in GST and given that GST rates at both the Central and state level are expected to be uniform, the same is likely to bring down the disputes.

MANY SECTORS TO BENEFIT

The GST Council has approved a four-tier uniform tax slab of 5, 12, 18 and 28 per cent on goods and services, plus an additional cess on demerit goods such as luxury cars, aerated drinks and tobacco products.

There is expected to be huge savings for manufacturing, logistics, retail companies who in turn can pass on the benefit to consumers.

Vehicle prices are also expected to come down. As per the current structure, tax levied on small cars is around 28 per cent and on midsized cars is around 39 per cent. This tax eventually adds up to the value of the product.

With VAT, Service Tax and other taxes being eliminated cost of all cars and bikes could come down.

In fact, the current proposed GST stands at 18 per cent, and if that is implemented, the result will be a massive reduction in car prices. The vehicle prices are expected to be more affordable and thus will create demand.

Export of goods or services will be treated as Zero-rated supplies, therefore, GST will not be charged on the export of goods or services. The credit on inputs used for making export supplies will be available to the exporter. The exporters have two options, either to export goods under Bond and claim refund of input credit or to export goods under rebate claim and claim the refund of output tax The Compensation GST Bill will provide compensation to states for the loss of revenue they may incur owing to implementation of the Goods and Services Tax.

The new tax system will also benefit small and medium businesses to access credit. As GST filings are set to become a significant data source for flowbased lending, both banks and digital lending entrepreneurs find GST filings to be a good source of information to lend to small businesses with reduced risks and cost cuts.Food inflation is expected to get lower with GST.

As, so far, both the tax-payer and the consumer paid levies on the sale of produce, to both the state and the centre, which lead to increase in the prices of commodities. Under GST all agriculture products like, fruits, vegetables, oilseeds and food grains, etc.including dairy and poultry will be on zero duty and are expected it be cheaper for the end user. It shall lead to an increased demand and benefit the famers too.

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