When GST or goods or services tax rolls out on July 1, it will be the biggest tax reform since Independence.

GST will subsume a large number of central and state taxes into a single tax, paving the way for a common
national market. From free flow of goods and services to elimination of cascading of taxes, the potential
benefits to Indian economy are many. It is estimated that GST could raise GDP or gross domestic product
growth by 1.5-2 per cent in the long term.
To learn the difference between the current taxation and the new GST tax in India you will have to know
exactly what is GST tax. GST is basically a tax policy that will bring uniform market all around the country.
This system will reduce the complicated structure of taxation as it will create a common market. This will
also reduce the burden of a tax payer as it will reduce the indirect tax and will also reduce the import and
export taxes.

The business that have an income lower than 20 lakhs there is no requirement for registration in GST and
also it will remove several taxes that the payers pay without realizing as it is a tax on tax and GST also
provide a clear view of what tax you are paying.

In India GST tax will replace almost all the indirect taxes and bring a common market for easy tax structure
and simple tax payment. The cost of tax on all the commodities will lower as the result of GST
implementation. The excise is removed as the tax on tax is one of the major reason that the rate of tax
goes up once it is traded. But with GST this becomes several times less and easier.

Differences:

At the moment, we have VAT and service tax which are taken separately as VAT is for goods and service is
clearly for what it is mentioned while GST is common for both making it a simpler taxation system.

The current taxation gives rise to a high tax rate as it has several indirect tax and that increases the tax rate
along with every state having their own tax rate which increases the amount of tax rate as the goods are
being transported from state to state which will no longer be a problem when GST is implemented. It will
have no separate tax based on good or services and state borders which will make it easier and less
expensive for importers and exporters.

VAT was calculated on the value of sales of good or services which but with the tax rate that is already
levied on the goods. But it changed to only paying tax on value addition and separately for the service.
With GST coming into the picture the tax will be collected together without separate tax for goods and
services.

The benefits that one can get from GST implementation

Business to industry:

1. All work of taxation will available online. Like registration, returns, payments, etc. This will make
everything simpler for tax payers and increase the transparency of all the activities.
2. GST will remove all the differences in the structure of taxation in between the states and the
indirect tax this will lead to neutral tax and common market.
3. There are several hidden costs of doing business that piles up in the business chain which will be
filtered while paying tax with the help of GST.
4. The reduction in the taxation and improvement of tax policies will lead to better competition in
trade business.

Central and state governments

1. All the central, state and indirect taxes are replaced by GST making it all simpler to manage and
pay.
2. GST will make better tax compilation with the seamless transfer of input tax credit from one stage
to another in the chain of value addition.
 3. GST will be reducing the tax collection of the government which will lead to higher revenues.

Consumer

1. Due to the high tax rate and tax on every item and value being added by the time it reaches the
consumer the amount increases but with GST the consumer will be paying clearly only for one and
have a clear view of what is her or she paying for.
2. Overall tax burden will reduce and the consumers burden will decrease preventing leakages.

The taxes that are being charged by central and state are:

Central

1. Central excise duty

2. Service tax
3. Additional excise duty
4. Additional custom duty
5. Special additional duty of customs

State

1. Taxes levied by local bodies known as entertainment tax

2. Central sales tax
3. State value added tax or sales tax
4. Entry tax and Octroi tax
5. Purchase tax
6. Luxury tax
7. Taxes on lottery and betting and gambling

Impact of GST tax in India

After the GST is implemented there will be certain amount of impact in ever sector. Let us look at these
impacts one by one in a brief manner. Some of these impacts can be temporary while others may remain
permanent. The impact is expected in a high rate as the sudden change in the game of tax is going bring
slight or a huge leap in the world of business depending on the category of business.

Automobiles:

It will result in 10-17 percent of fall in prices assuming 18 percent GST rate. Lesser benefits might be
accrued by the tractors as these are against the taxes paid on input. Though looking on the bright side the
automobile sector will emerge as the tax that this field is paying a much higher tax than the tax that will be
acquired from it after the GST implementation.

It will lead to the easy and direct transfer of vehicles to the dealer. The stock will be transferred to your
own warehouse and further will be transferred from warehouse to dealer.

Textiles

The tax for textile industry is divided into 9 categories at the moment that varies from 4 to 12 percent. The
textile sector is also bound to pay taxes to the unorganized players who extract tax based on the size of the
business. It depends on the fiber if it is natural or manmade as the synthetic requires high service and the
natural requires almost no duty. The mills are taxed at higher rate more than the power looms which
discourages the integration of production. The GST implementation will boost exports as it will have no
complicated schemes.

Engineering, capital goods and power equipment

GST will have a positive impact on these and it will improve the prospects of engineering, capital goods and
power equipment (ECPE) sector by reducing all the complications.

These industries are involved with both manufacturing and servicing of the goods which makes the tax rate
of these business high because of double tax and also creates a puzzle ground of structure. This will be
broken down into much simpler structure with help of GST due to common tax.

Hotels

Let us estimate that the GST rate will be 18% in this case the impact will remain neutral as currently the
hotels pay 8.7 percent and luxury tax at around 8-12%. Restaurants pay service tax at around 5.6% and VAT
at around 12%- 14.5%.

Logistics

GST will lead to elimination of central sales tax and inter-state value-added tax arbitrage possibilities. This
will lead to consolidation of warehouses and increased efficiencies in the logistics chain.

Pharmaceuticals

It could bring a negative impact on this sector. The indirect paid by this sector could increase by 60 percent
which is a thing to worry about and MRP could increase by 4 percent.

FMCG

The FMCG will receive a positive for household and personal care space. It will reduce 200 to 500 basis
points, apart from reducing the warehousing and logistical requirements. However the working capital for
retailers and additional tax rates for jewelry and cigarette manufacturers are negatives and will attract
higher GST regime than companies like ITC which are going to be affected adversely.

Telecom

All the service related sectors are expected to suffer from this implementation as the service tax might
shoot up. Even the moderate rise in tax could blow a hit on demand and profits.

Overall impact of GST tax in India

According to the prediction the economic growth of at 2% is expected once GST is implemented
It will widen the tax regime by covering goods and services and increase its transparency
It will subsume all the indirect taxes at the center and state level
It will free the manufacturing sector from cascading effects of taxes and leading to the
improvement of cost competitiveness of goods and services
The prices of goods and services will go down thus increasing the tax GDP ratio
Doing business in India will be much easier as the rules and structure will be made much simpler
Taxes on manufactured goods will come down to 24- 25 percent to 20- 21 percent
Taxes on retail will go up from present 12.5% to 20%
Local taxes (counter vailing duty) on imported items would go up by around from present 16% to
20%
Manufacturers and service providers will have to register separately in each state
There will be a dual control on the GST where state and central authorities will
 All the invoices will be captured online by GSTN
Only three accounts will have to be maintained CGST, SGST, IGST. This will simply all the tax system
that we currently have.
GST is beneficial for both economy and corporations as it will reduce several burdens on production
cost and making exporters more competitive.
It will reduce corruption as it will help in building a transparent and corruption free tax
administration. There will also be a reduction of departments which will reduce corruption
The entire country market will be unified market which will make every cost lower for doing
business in other states and importing or exporting.
Suppliers, manufacturers, wholesalers, retailers will be able to recover GST incur more input costs
as tax credits. This will reduce the cost of doing business, thus enabling fairer prices for consumers.
Companies which are under organized sector will come under tax regime. More business entities
will come under the tax system hence, widening the tax base. This will lead to more revenue
collections.
Will bring support to smaller business as it will not collect tax from business that do not have
enough revenue according to the GST rule.
The present tax gives an incentive to evade taxes because excise duty was a cost for traders, there
by taking it attractive for them to purchase without invoice.
The poorer states will have to pay equal amount of tax which will help them to develop.
Any new business requires making a VAT registration from sales department. There are different
process in every state and that makes it difficult for business owners to start branches in different
states which will be removed with GST implementation.
It will remove the layered tax from some goods and hence the prices are likely to come down for
such products.

Wider base of SMEs will be in the GST basket

The SMEs restrict their trade to local purchase and sales as they are forced to bear the tax burden
on the interstate sales for which they cannot avail the input set-off, thereby increasing their cost of
production. This case will no longer prevail with GST implemented as the main tax.