A Beginner’s Guide to GST

We currently stand at the beginning of a new chapter in the history books, as we witness one of India’s biggest fiscal reforms since we gained Independence; introducing GST.

Goods & Services Tax, or GST, is the Indian Govt.’s solution to the complex tax structure that has existed for decades. The impact of this new Indirect Tax regime will be felt across the sector by all businesses, small and large. The aim of GST is to subsume and replace existing Indirect Taxes, such as Excise Duties, VAT, and Service Tax, and will be levied on both goods and services alike.

GST provides a wide range of benefits to the following stakeholders -

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 Employees

  • The average salaried person will face GST on almost all of their regular expenses, right from Food & Beverage to Entertainment.
  • The rate of GST varies according to multiple factors influencing a specific sector. Employee expenditure will either rise or fall based on the rate of GST.
  • Employees will benefit from a simpler tax breakdown on their purchases, as they no longer have to worry about multiple taxes and can simply focus on the GST charged. Instead of having to encounter multiple different taxes, such as Entertainment Tax, Luxury Tax, Service Tax, VAT etc., individuals now only have to worry about GST.
  • GST has no influence on Income Tax or Tax Deducted at Source, as it is an Indirect Tax.

Companies

  • GST lowers the cost of doing business, as Suppliers, Manufacturers, Retailers and Wholesalers have the opportunity to recover the GST incurred on their input costs, in the form of Tax Credits.
  • Companies present in the unorganised sector will also be brought under this Tax Regime, ensuring a more organised system.
  • Exports will benefit as from GST as they are zero-rated for taxes, in order to encourage their ability to compete in the international market. The resulting fall in manufacturing costs, on Goods and Services, under GST will allow these Indian products to hold a competitive edge around the world.
  • GST will simplify the tax procedure for companies who no longer have to pay dozens of different kinds of taxes, as was the case in the previous tax regime.
  • Areas of business such as Consumption (Warehousing) and Logistics (movement of Heavy Vehicles) would benefit from GST, while a positive impact will be felt due to lower Duties on Construction material and large-scale Industrial Manufacturing.

Common Man

  • The new GST regime is expected to create over 1,00,000 immediate new employment opportunities, offering the market an overall boost and benefitting specialised roles such as Taxation, Accounting and Data Analysis etc.
  • The need for GST specialists will undoubtedly arise, creating a significant number of job opportunities for professionals trained in GST Management, Up-gradation and Reconciliations.
  • Maximum creation of new jobs will be seen in sectors with a High Demand (E-Commerce, Logistics) and a High Profitability Rate (Cement Industry).
  • Studies show that GST will lead to an overall growth of 11% in Hiring, across sectors.
  • The lower tax burden from GST will ultimately translate into lower prices on consumer goods, and the consumer will be free from the issue of cascading taxes.

Startup

  • The implementation of GST has the potential to successfully integrate the Indian economy and establish a common national market.
  • GST is capable of uniting the entire Indian market, which will lead to lower business costs.
  • GST will reduce numerous transaction costs, thereby lowering the overall cost of business.
  • Export-oriented businesses will benefit greatly as GST is not applied on exported goods and services.
  • A huge advantage of GST is its ability to even out the tax structures of various states, and remove the location bias that currently exists. This allows companies to establish factories, premises in their preferred locations, with no hesitation about the potential taxes faced by them.
  • The introduction of GST helps detach the question of taxes from your investment decision, allowing even undeveloped locations to attract new businesses and investment.
  • Digital Services will have the opportunity to thrive in a market free from multiple levies.
    GST Impact on Income Tax
  • Indirect Tax includes all the Goods and Services which we use in our daily lives, whereas Direct Tax is paid on your annual income. As it is strictly an Indirect Tax, GST has no influence on Income Tax or Tax Deducted at Source.
  • Proprietor Companies will be affected by GST, if not registered, as all income will be calculated as income of the Owner.

GST Impact on E-Commerce

  • GST will encourage the free movement and supply of goods in every part of the country, in the form of a single, unified market across India, and will increase efficiency in product costs by eliminating the cascading effect of taxes on customers.

GST Impact on Telecoms

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  • GST will provide Handset makers with an increased ease of doing business, as there will be no need to set up warehouses in each State. The reduction in Handset prices will also allow Manufacturers to afford more cost benefits to consumers, thanks to warehouse consolidation and efficient inventory management.

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GST Impact on Technology

  • Through GST, the elimination of multiple levies will benefit the IT sector greatly by allowing a deeper penetration of Digital Services.

GST has caused an -

• Increase in GDP
• Increase in Production
• Increase in Employment
• Increase in Govt. Revenue

The general public stands to greatly benefit from GST, and the notion of ‘One Tax, One India’.

Overall, the positive impact of GST will ensure access to goods and services, at competitive and affordable rates, and will improve the quality life of every Indian citizen.

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