IMPACT OF GOODS AND SERVICE TAXES (GST) IN VARIOUS SECTORS

IMPACT OF GOODS AND SERVICE TAXES
(GST) IN VARIOUS SECTORS
Abstract
GST also known as the Goods and Services
Tax as the giant indirect tax structure
designed to support and enhance the
economic growth of a country. More than
150 countries have implemented GST so
far. However, the idea of GST in India was
mooted by Vajpayee government in 2000
and the constitutional amendment for the
same was passed by the Loksabha on 6th
May 2015 but is yet to be ratified by the
Rajyasabha. However, there is a huge hue
and cry against its implementation. It
would be interesting to understand why
this proposed GST regime may hamper the
growth and development of the country.
This paper made an attempt to explain the
history and impact of various industries
this GST (goods and services tax) on the
growth of the economy, and benefits for the
business and government and for the
consumers.
Government of India set up the Empowered
Committee of State Finance Ministers with
the Hon’ble State Finance Ministers of West
Bengal, Karnataka, Madhya Pradesh,
Maharashtra, Punjab, Uttar Pradesh,
Gujarat, Delhi and Meghalaya as members
with the following objectives:
• To monitor the implementation
of uniform floor rates of sales tax
by States and Union Territories
• To monitor the phasing out of the
sales-tax based incentive
schemes;
• To decide milestones and
methods of States to switch over
to VAT
• To monitor reforms in the
Central Sales Tax system existing
in the country.
The Following laws have been
passed by the Parliament
followed by President’s
Law Status

Objectives of GST:
Central Passed by Parliament
 To Study on History and Background GST Bill, 2017 followed by Hon’ble
of GST. President’s assent
 To Analyze the impact of GST in Integrated Passed by Parliament
various Sectors. GST Bill 2017 followed by Hon’ble
President’s assent
History of GST:
Union Passed by Parliament
“Good and services tax” means any tax on Territory- followed by Hon’ble
supply of goods, or services or both except GST Bill, 2017 President’s assent
taxes on the supply of the alcoholic liquor GST Passed by Parliament
for human consumption. The origin of (Compensation followed by Hon’ble
Goods and Services Tax could be traced to States) President’s assent
back to 17th July 2000, when the
State To be passed in
GST Bill, 2017 respective State
Assemblies
IMPACT GST:
GST has been implemented from 1st
July 2017. With the introduction of GST,
most of the indirect taxes will be replaced
by “one nation one tax” regime. GST council
has proposed four different tax slab rate of
5%, 12%, 18% and 28% on the different
category of goods and services. The full-
fledged impact of goods and services tax in
real terms should come out after the period
of 2-3 years. One tax regime is designed for
the ease of doing of business in India. Under
the current regime, financial services and
transactions attract 15% of service tax but
with the introduction of GST financial
services would attract 18% of tax. With the
new GST regime, surely, we are going to be
impacted. Let us see how and in what
manner it will impact your money.
Impact of GST on consumer products
Consumers goods are expected to become
cheaper under one tax regime. The present
rate of taxation is around 25-30 percent on
consumer goods and proposed goods and
services tax rate is around 18 percent
hence making it cheaper. GST is also
supposed to address the challenge of tax
leakage in the supply chain. GST is quite
beneficial for the consumable good .
Impact of GST on real estate
The impact of goods and services tax on
real estate sector will be positive as GST
will helps to remove the multiple taxations
which are a pain for both the consumers
and builders. Some of the clauses in model
goods and services tax law restrict credits
on goods and services acquired for the
construction of immovable property which
may lead to the rise in litigation. GST is
supposed to benefits real estate sector by
ensuring a uniform and easy compliance
with the tax structure.
Impact of GST on Automobile sector
To see the impact on automobile industry
we have to understand the current tax
structure. Currently, automobile sector is
paying taxes around 27 percent to 45
percent, though this tax structure ranges
from a small car to SUVs. The proposed one
tax regime rate for the automobile sector is
18 percent and for a luxury vehicle,
proposed rate is only 28 percent hence this
would result in the lower cost of purchase
for the consumers.
Impact of GST on Mutual Funds
Investors have to pay more tax as
compared to current tax regime but in
reality, change is so minimal that it will not
affect them. Mutual funds impose a Total
Expense Ratio (TER) on investor which
ranges from 1.25 percent to 2.75 percent.
With the introduction of GST, it will rose to
4-7 basis points. 100 basis points
accumulate to form 1 percent. Hence it is
quite clear that 4-7 basis point increase in
Total Expense Ratio (TER) will not affect
investors.
Impact of GST on banking sector
Like every sector, banking sector is also
getting impacted by the new goods and
services tax regime. One tax regime effect
on banking sector is twofold. Banking
services like fund transfers, ATM
withdrawal, and loan processing fee, which
attracts service tax under current regime is
15 percent now will attract tax at the rate
of 18 percent and services which do not
attract service tax under current tax regime
like opening bank account and fixed
deposits, will not be impacted by the
introduction of new goods and services tax
regime.
Impact of GST on insurance policies
Under current tax regime premium on
insurance policies is taxed at the rate of 15
percent but with the introduction of Goods
and Service Tax (GST) it will increase up to
18 percent. But this increase in tax rate will
be offset by input tax credit.
Impact of GST on cement industry
Looking to the current scenario cement
industry is paying around 27 to 32 percent
as tax and with the introduction of goods
and services tax, it is supposed to come
down around 28 percent. Cement industry
does not have much relief from the
proposed goods and services tax regime.
One tax regime is likely to have a negative
impact on cement industry and it is also
supposed to bring the downfall in
manufacturing and mixture sector as well.
Impact of GST on Chemical Industry
GST will have a positive impact on the
chemical industry. Almost every
predictable impact of the goods and
services tax on any sector of Indian
economy seems positive but for the
chemical industry, it seems much positive.
Chemical sector in India has long suffered
the wrath of multiple additional taxes on
their consumption capacity as well as their
consumption demands but now this seems
to end with the introduction of goods and
services tax. The easing of CGST and SGST
will result in the lower cascading effect of
multiple taxations on the production
capacity of chemical industries resulting in
a reduction of production costs hence
benefiting the chemical industries.
Impact of GST on telecom sector
The proposed goods and services tax will
end the issues related to the classifications
of software, sim card, and franchise fee,
among others. Like all other sectors, the
elimination of duality of taxes is expected to
help the growth of telecom sector as well
and ease the doing of business. However,
proposed rate of telecom sector under the
goods and services tax is 18 percent which
is higher than the earlier rate of 15 percent.
Impact of GST on Pharmaceutical
Industry
In terms of value, Indian pharmaceutical
industry is world’s 14th largest
pharmaceutical industry. goods and
services tax will benefit the pharmaceutical
industry by making the taxation process
easier and replacing most of the indirect
taxes and duties. The new one tax regime
taxation rates have included
pharmaceutical products into two tax slab
one is of 5 percent and another one is 12
percent. Ayurvedic drugs and medicines
would become costlier after the
introduction of GST.
Hotel and Tourism
Tourism and hotel industry play an
important role to India’s GDP.
GST rates for hotels are different according
to their tariffs
 Less than Rs. 1000 = 0% (GST free)
 Rs. 1000 to 2500 = 12%
 Rs. 2500 to 7500 = 18%
 Above Rs. 7500 = 28%
It is expected that the cost of tour packages may
come down due to the relief to tour operators
under GST regime. 5% tax is liable on tour
operators currently.
Logistics Industry
The logistics industry is the backbone
of Indian economy and it is estimated to be
worth about $200 up to 2020. After the
GST, the time taking clearance process has
become easy i.e less transit time.
Corruption activities are reduced in logistic
services. GST reduces the overall cost of
logistics services and increases business
revenue.
Banking Sector
18% GST rates levied on banking services
like insurance policies, ATM transactions
etc. The earlier tax rate was 15%. Banking
and financial services become costly. GST
has reduced indirect taxes, i.e. Ease of doing
business in the banking and financial sector
Which leads to increase in business. It will
increase demand for funds and digital
transactions in the banking industry.
Gold Industry
18% GST rates levied on banking services
like insurance policies, ATM transactions
etc. The gold industry is the biggest market
in the world. GST on the gold industry hits
to consumers. 3% GST rate that is
applicable to 10% import duty and 5%,
making charges which lead to rising the
jewellery prices in India. The demand for
Gold may fall 50 to 70 percent. But there is
more transparency in the gold industry due
to the GST implementation. It will definitely
turn in a positive impact on a long term.
Textile/Readymade Garment Sector
Textile industry will be benefitted through
GST implementation in India
The advantages are following:
 Break in input credit chain supply
 Reduction in manufacturing price
 Input credit allowed on the capital
goods
Ready-made garments up to Rs. 1000 is
exempted from GST and branded garments
above Rs. 1000 will be taxed at 12%.
IT industry
All IT services and software products, as
well as freelancers, are levied 18% GST
rate. Overall positive impact on IT industry
of GST. Cascading effect is removed through
GST implementation. IT will make changes
in the process of business process. ITC
under GST will Bring down the operating
costs and increase the profitability of the IT
industry.
FMCG industry (Fast Moving Consumer
Goods)
FMCG sector is one of the biggest economic
platforms in India. After the GST
implementation, Mostly FMCG products
and services are taxed under 18 to 20
percent. Lower GST rates, give Benefits to
the business holder, manufacturers and
consumers directly.
E-commerce
E-commerce websites such as Flip kart and
Amazon.in will have to collect TCS (tax
collected at source) at a fixed 1% rate, and
pay this collection to the sellers listed on
their websites. This is likely to impact
prices and make online shopping more
expensive. Though the issued by the
government stated that the provisions of
“TDS (Section 51 of the CGST/SGST Act
2017) and TCS (Section 52 of the
CGST/SGST Act, 2017) will be brought into
force from a date which will be
communicated later.”
Also to deal effectively with GST, e-
commerce platforms are regularly engaging
and training the sellers on their stores.
Commenting on GST’s impact Rajiv Kumar,
Founder, e-commerce website Store Hippo
has stated: “We are thrilled to announce the
reformation of our tax engine in accordance
to GST. E-Commerce platforms need to
provide flexible and powerful tax solutions
after the implementation of GST and Store
Hippo facilitates this through its new move,
aimed at simplifying GST for all involved.”
Benefits of GST
GST has been envisaged as a more efficient
tax system, neutral in its application and
attractive in distribution. The advantages of
GST are: Wider tax base, necessary for
lowering the tax rates and eliminating
classification disputes
 Elimination of multiplicity of
taxes and their cascading effects
 Rationalization of tax structure
and simplification of compliance
procedures
 Harmonization of center and
State tax administrations, which
would reduce duplication and
compliance costs
 Automation of compliance
procedures to reduce errors and
increase efficiency
One point single tax:
There would be focus on business rather
than worrying about their taxation that
may crop at later stages. This will help the
business community to decide their supply
chain, pricing modalities and in the long
run helps the consumers being goods
competitive as price will no longer be the
function of tax components but function of
sheer business intelligence and innovation.
Reduces the corruption:
As the number of taxes reduces so does the
number of visits to multiple departments
reduces and hence, the reduction in
corruption. In all cases except a few
products and States, there would be
uniformity of tax rates across the States.
CONCLUSION:
The proposed GST regime is a half-hearted
attempt to rationalize indirect tax
structure. More than 150 countries have
implemented GST. The government of India
should study the GST regime set up by
various countries and also their fallouts
before implementing it. At the same time,
the government should make an attempt to 7. http://www.livemint.com/Politics/
insulate the vast poor population of India q3JIl1G2gPxrzY3mAJY8nJ/How-
against the likely inflation due to GST-impacts-auto-real-estate-retail-
implementation of GST. No doubt, GST will telecom-and-retai.html
simplify existing indirect tax system and
will help to remove inefficiencies created
by the existing current heterogeneous
taxation system only if there is a clear
consensus over issues of threshold limit,
revenue rate, and inclusion of petroleum
products, electricity, liquor and real estate.
Until the consensus is reached, the
government should resist from
implementing such regime.
GST will also motivate foreign direct
investors to invest and setup industry here
in India. This will create job opportunities,
and for a developing economy like India it’s
always a favorable situation. It will make
the supplies being priced competitively so
benefitting the ultimate consumers.
References:

1. Kankipati Ajay Kumar, A Journey of

Goods and Services Tax (GST) and
Structural Impact of GST on the
Growth of GDP in
India, International Journal of
Journalism and Communication.
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usiness-news
3. http://www.gsthelplineindia.com/b
log/2018/02/26/impact-of-gst-on-
various-sectors/
4. https://www.dbs.com/in/sme/busi
nessclass/articles/economic-
outlook/impact-gst
5. https://gst.caknowledge.com/list-
taxes-included-gst-benefits/
6. https://blog.allindiaitr.com/how-
gst-can-impact-various-sectorss