The Goods and Service Tax was brought into effect on 1st July 2017 in India. GST aimed at simplifying the way India works its taxes. It came with a vision of “one nation, one tax.”
GST has eliminated the multiple taxes which were earlier charged on goods and services. These taxes included Service Tax, Value Added Tax, Excise duty, etc. All of these have now been eliminated, and a single tax is now applicable to all kinds of goods and services.
GST also eliminates the cascading effect of the taxes. This situation is also called a ‘tax on tax’ situation. The benefits of gst have come into light after its application.
Various benefits of GST
- It eliminates various indirect taxes like the VAT, Service Tax, CAD, SAD, and Excise Duty
- It comes with simple tax policy and reduced compliances
- Eliminates the cascading effect of taxes
- Features of availing an input tax credit, which removes the application of double taxes.
- Essentials have been charged with a lower rate of GST.
- Increase in the demand and use of various goods and services
- Easy filing and simple gst registration process
- Puts a mandatory check on all kinds of businesses, traders and shopkeepers
Impact of GST on the Indian Economy
The implementation of GST will have a major impact on the Indian economy.
- It will reduce the tax burden on manufacturers, and by reduced taxes, the manufacturing sector is set to boom.
- People will produce more and avail an input tax credit, which will reduce their tax expenses on the output.
- A single tax would eliminate the roadblocks created due to toll plazas and check posts.
- Transparency in the system and the consumers will know the exact amount they are paying as tax.
- Systematic implementation of GST will lead to an increase in the revenues of the Government.
- GST aims at removing custom duties that apply to exports. The lower transactional cost will increase the number of exports and imports.
Industries affected by the GST
Various major industries have been affected by the implementation of the Goods and Services Tax.
- The taxes were considerably reduced on coal.
- Capital goods saw a decline in the taxes applicable.
- The essential services, which include FMCGs, utilities, etc. have had a major upside due to the implementation of GST. The GST structure has been designed to place the essential commodities under a lower rate slab. The Luxury commodities are placed under a higher slab.
- The reduction in taxes will increase the positive sentiments of producers of essential commodities to produce more and push the sales figures.
- Fast Moving Consumer Goods (FMCG)
The GST implementation has benefitted the FMCG industry in the best possible way. With products like sugar, tea, coffee, and edible oil falling under the 5% slab rate, The FMCG sector is a clear winner. Also, products like milk, cereals etc. are exempted from tax.
- Capital Goods and Consumer Durables
All capital goods and industrial intermediaries come under the 18% GST slab. Earlier, they had to pay more taxes. The Electronics and white goods segment has been placed under the 28% slab.
This would mean that the prices for various appliances and white goods tend to increase. This will be done by the manufacturers to offset the tax costs. Also, the demand for ACs and refrigerators would increase in summers. This would be used as a window to increase costs.
- Movie Theatres and Multiplexes
Cinema Tickets have been brought under the 28% tax slab rate. 5-star hotels and casinos have also been brought under this category. The entertainment industry has been considered as a luxury service, therefore the highest slab.
Earlier, the cinema theatres had to pay a 15% service tax and an entertainment tax of 26%-100%. The application of a single tax will bring down their costs substantially. But the entertainment industry is not happy as it now comes under the highest slab and is placed along with gambling service providers.
- Telecom and Airline Sector
These services are placed under the 18% slab. This sector has seen a 3% increase from the existing rates. But this sector can avail the benefit of Input Tax Credit.
Tax on the economy flight tickets is 5%. This might act as an incentive for the airline companies to reduce costs. Also, the UDAAN program would benefit from this structure.
GST has had a major impact on the economy. A lot of industries have benefitted from the same. Some industries have also lost as they are now under the high.