Impact of GST- Onlinegst.in

The introduction of Goods and Services Tax (GST) in India looks to be a certainty. With the government making a lot of efforts to rope in the opposition to reach a consensus, it is likely that the implementation will happen by the year 2017. The impact of GST will be felt far and wide and no sector is likely to remain untouched by impact of GST. Already the "sin" industry which includes "pan masala", cigarettes, and tobacco are feeling the heat after the Subramanian panel report has proposed a taxation of 40% on them. Some sectors will benefit, while the others may see the benefits getting withdrawn when the GST is finally introduced. Let us see the impact of GST on some of these sectors.

Retail and dealerships: With the goods and services being taxed under the common head in GST, the retail and dealership sector is going to benefit the most. At present they pay VAT on the sale of goods and they are unable to offset the excise duty on procurement of goods and service tax gst on rentals, freight, and advertisement etc. This is going to be different and the taxes which were getting built into the cost of the goods will be available as input tax credit. The huge population of retailers and dealers is going to benefit from this change.

Services: The service providers are being taxed at a rate of 14.5% now. The rates of service tax have risen from zero levels to the current state over the years. Also more and more services have been brought under the ambit of service tax. The cost of services has thus gone up substantially. The goods manufacturers who utilized these services were unable to offset the service tax against the VAT or excise duty paid by them on the goods. Similarly the service providers were not able to offset the VAT and sales tax paid on infrastructure against the service tax on their services. The GST which is the common tax for goods and services will benefit the service providers as well as the buyers of the services.

Manufacturing: With the GST converting the country into one unified market, the interstate taxation is likely to go. The manufacturing industry that paid the CST and Octroi on interstate purchases and was not able to avail it as an input credit will see the change happening under GST. The state border checkpoints that slowed down the movement of the goods across states are likely to be eliminated or modified for faster clearances.

Pharmaceuticals: The industry pays CST on sale of goods in various states. To avoid this they have built warehouses in several states and transfer the goods there. With the GST transforming the country into one market, the pharmaceutical industry will be able to strategist the locations of the warehouses for purposes other than tax avoidance. The industry also pays a higher duty on the ingredients that it procures as compared to the duty that is levied on the sale of finished drugs. It always had a greater input tax credit which was not availed. This is likely to be streamlined with the GST and will be beneficial for the industry.

Similarly there are other sectors like textiles, automobile, and telecom etc. which are likely to feel the impact of GST. Each sector will have to do its own analysis and study and come out with an effective strategy to maximize the benefits from GST.

The author is a Certified Public Accountant (Cpa) who specializes in tax preparation and nonprofit accounting. She worked for big enterprises in India as a cost analyst. For more information about Gst, you can visit www.onlinegst.in.