“GOODS AND SERVICE TAX AND ITS IMPACT ON BUSINESS”

*Saqib Ahmad **Aditya Narayan Dash

*Email- saqib786ahmad@gmail.com
**Email- adityan.dash31@gmail.com
1st Year MBA- Pondicherry University, Karaikal Campus

ABSTRACT

Goods and Service Tax is a comprehensive tax levy on manufacture, sale and consumption of goods and
services. GST is termed as biggest tax reform in Indian Tax Structure. It turned to iron out wrinkles of
existing indirect tax system and played a vital role in growth of Indian Economy. The purpose was to
eliminate tax on tax. The tax came into effect from July 1 2017 through the implementation of One Hundred
and First Amendment of the Constitution of India by the government. The impact of GST was considerable
on various sectors in the Indian Economy. It proposed new indirect tax regime, where one commodity will
have the same rate, pan-India. There could be exceptions based on local importance, in which case those
would be exempt. There is a body functioning under the governance of GST council i.e., the GST
Investigation Wing that Services Tax (GST) is a value-added tax levied on most goods and services sold for
domestic consumption. The GST is paid by consumers, but it is remitted to the government by the
businesses selling the goods and services. In effect, GST provides revenue for the government.GST will help
the economy to grow in more efficient manner by improving the tax collection as it will disrupt all the tax
barriers between states and integrate country via single tax rate.
Other than that, The GST Network (GSTN) is designed to capture all transaction
details up to invoice level. Hence, no one can escape the inputs or services used in providing the goods or
services. The paper documentations are eliminated completely. The whole data is visible to state as well as
central government officers, providing transparency in tax returns.

KEYWORDS:
INTRODUCTION:-

The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for
domestic consumption. The GST is paid by consumers, but it is remitted to the government by the
businesses selling the goods and services. In effect, GST provides revenue for the government.. The
purpose of GST was to replace all the taxes like central excise duty, service tax additional duties of
customers at the central level, VAT, central sales tax, entertainment tax, octroi, state surcharge, luxury
tax, lottery tax and other surcharge on supply of goods and services, with single comprehensive tax
bringing it all under single umbrella. The purpose was to eliminate tax on tax. GST was first introduced
by France in 1954 and now it is followed by 140 countries. Most of the countries followed unified GST
while some countries like Brazil, Canada follow a dual GST system where tax is imposed by central and
state both. In India also dual system of GST is proposed including CGST detects tax evasion or tax
frauds. The tax came into effect from July 1 2017 through the implementation of One Hundred and First
Amendment of the Constitution of India by the Indian government. The impact of GST was considerable
on various sectors like automobile, real estate, small & medium scale, FMCG etc. The Implementation of
GST exposed the Indian Economy to new technologies like GSTN and GST Software, for maintaining
database of tax returns .There is a body functioning under the governance of GST council i.e., the GST
Investigation Wing that detects tax evasion or tax frauds. Other than that, The GST Network (GSTN) is
designed to capture all transaction details up to invoice level. Hence, no one can escape the inputs or
services used in providing the goods or services. The paper documentations are eliminated completely.
The whole data is visible to state as well as central government officers, providing transparency in tax
returns.

LITERATURE REVIEW

RESEARCH METHODOLOGY
Being an explanatory research it is based on secondary data of journals, websites, articles, newspapers and
magazines. Considering the objectives of study descriptive type research design is adopted to have more
accuracy and rigorous analysis of research study. The accessible secondary data is intensively used for
research study.
GST & ITS ORIGIN
GST was first introduced by France in 1954 and now it is followed by 140 countries. Most of the countries
followed unified GST while some countries like Brazil, Canada follow a dual GST system where tax is
imposed by central and state both. In India also dual system of GST is proposed including CGST detects tax
evasion or tax frauds. The tax came into effect from July 1 2017 through the implementation of One
Hundred and First Amendment of the Constitution of India by the Indian government. The impact of GST
was considerable on various sectors like automobile, real estate, small & medium scale, FMCG etc. The
Implementation of GST exposed the Indian Economy to new technologies like GSTN and GST Software,
for maintaining database of tax returns .

TECHNOLOGY USED IN EXECUTION OF GST

A paradigmatic shift took take place in India which lead to a reform in the entire taxation system of India.
The huge number of modifications was done in the entire taxation system to make it successful tax
compliant. Almost everything included in the tax structure consists of great digitization. In order to make the
GST more effective, accurate and convenient, Government is making use of newer technologies. The team
of tax and technology experts has been appointed by GSTN (GST Network) to make the rollout smooth and
continuous.

How will the GSTN Work?

In the current scenario, the Centre and State indirect tax administrations and their IT systems work on
independent sites as they follow different laws, procedures, regulations, and formats. Combining all the
administrations and their complex IT systems altogether in one ecosystem for the GST implementation
would be difficult, that’s the reason GSTN (GST Network) has been appointed for handling the vast
database of the entire taxation system. Previously, it helped the Indian Government to create a robust IT
backbone to simplify the various tasks involved in the taxation system such as taxpayer registration,
handling invoices, and filing returns.

How will the Technology Help in the GST Compliance?

GST is a single tax that replaces all the indirect taxes. This changed the tax structure entirely by it tax rates,
calculating prices or paying taxes. Besides the biggest change that took place, one of the biggest questions
that come to everybody’s mind is that how the technology is going to be used and will make the working of
businesses and government easier? Currently, the government is able to track the tax evasions apart from
the complexity of a number of taxes. The objective of Indian Government by implementing GST was to
reduce and simplify the tax structure. However, the biggest challenge was to keep a record of millions of
invoices that the taxpayer uploads every month. This is why, the use of robust technology was important
because this simplifies the entire taxation process including invoice generation, uploading, paying and filing
of tax. It not only reduced frauds but is also expected to minimize the duplication of claims. Everything is
possible without the manual effort. Several others features were also included by GSTN such as alerting
capabilities, offline capabilities, mobile/tablet interface and additional mechanisms to remove duplication.

What is the Role of GST Software?

GST compliance tools and software are required for both small and large businesses for handling their
accounting process. Software such as GST Keeper and ERP (enterprise deploy specialized software) helps
to simplify the accounting procedure by making it fully automated. These software werer designed keeping
in mind the businesses need. Instead of updating and modifying their older accounting software versions, it’s
advisable to make use of robust GST software such as GST Keeper. It is a cloud-based software that is
simple to set-up, easy to use, organizes your sales data accurately and is capable of preparing comprehensive
GST reports. The unique features of GST Keeper software the reconciliation of invoices, GSTR preparation,
maintaining filing archives and managing multiple users.

IMPACT ON BUSINESS IN INDIA

Small and Medium Enterprises

The combining of Central (CGST) and state (SGST) taxes in the new tax regime, enterprises whose annual
turnover of Rs 20 lakhs or above (10 lakhs in some specific states) will have to follow all the GST
provisions. The new GST rule adversely influences the SMEs working capital. Under the previous tax
regime, the exemption limit for SMEs was Rs. 5 lakhs, whereas in the new tax regime the exemption limit is
enhanced to Rs. 20 lakhs ( 10 lakhs in some specific states) which have a positive impact.
Ease of doing business removes cascading effect (double taxation), reduces the tax burden on new
businesses, improved logistics and faster delivery of services are some of the positive points of the newly
implemented of Goods and Services Tax (GST).

Impact on Real Estate Industry

The real estate is one of the important sectors which play the significant role in generating employment in
India. Under the Goods and Services Tax Regime, all under- construction houses or properties imposed 12
percent on property value (excepting stamp duty and registration charges). It must be noted that 12 percent
tax rate is not be applicable to ready-to-move-in houses and completed projects, as such no indirect taxes
applied in the sale of under constructed properties. Stamp- duty and registration charges will bear by the
buyer in case of uncompleted projects or under-construction projects.
The GST rate on under-constructed houses or projects increased from 6.5 percent previous regime to 12
percent in the new regime. The actual GST rate on real- estate sector is 18 percent. A total cost of building
charged by the developer, out of them one- third of the tax to be deducted from the land value.
The GST provides an option of claiming input tax credit, which will not be available on ready-to-move-in
projects. Under GST, either developer will have to bear the high tax burden or further pass to end-
consumers and increase the overall prices of houses or projects to meet the requirements of the new tax
burden.
House of Hiranandani Chairman and managing director of Surendra Hiranandani said:- “While developers
might still get some benefits for projects that are in nascent stages, they will have to bear the tax burden for
the ready-to-move-in projects since they are kept out of the GST ambit.”

Impact on Automobile Sector

Automobiles sector is one of the sectors in India which manufacturer large number of cars annually. Under
the Goods and Services Tax (GST) several taxes imposed by the central and state government such as road
tax, excise, sales tax, VAT, motor vehicle tax and registration duty will be eliminated in the new tax regime.
Though still, there is some confusion due to different tax rates and exemptions furnished by several states to
the manufacturers/ dealers for producing bus/ bike/ cars. Recently, the GST Council has increased cess on
mid-sized to hybrid variant to luxury ones, from 15 percent to 25 percent. A new rule has been implemented
in the Act in the motor vehicles has the capacity to transport up to 13 people would impose 25 per cent cess.
Under the new indirect tax regime, which subsumed several central and state levies in the biggest tax
reform since Independence, cars imposed highest GST rate i.e. 28 percent tax.

Impact on FMCG Companies

According to the report by Edelweiss Securities stated that advertising and consumer promotion spending
will be recobacked the bill. GST would be a comprehensive indirect tax on manufacture consumption and
sale of goods and services throughout India, to replace taxes levied by central Govt. and state Govt. GST
would be levied and collected at each stage of sale or purchase of goods and services. Taxable goods and
services are not distinguished from one another and are taxed at single rate in supply chain till goods and
services reach the consumer. The easy passage was facilvered in the second half of FY17, along with 15%
percent growth. According to the reports, it is expected that customers will spend a more money on FMCG
in the festive months rather than the other months in a financial year. To increase customer base, some
FMCG companies have decided to invest a money in advertisements. Some of the renowned FMCG
companies including Marico, Pepsico, Dabur, and Parle have big expectations with the festive seasons and
are trying to enhance their investments in ads over coming months. It is expected that in the period of
October- December accounts for 40 percent of ad- industry revenues.

IMPLICATIONS
1. GST is a transparent tax and also reduce number of indirect taxes.
2. GST will not be a cost to registered retailers therefore there will be no hidden taxes and and the cost
of doing business will be lower.
 3. Benefit people as prices will come down which in turn will help companies as consumption will
increase.
4. There is no doubt that in production and distribution of goods, services are increasingly used or
consumed and vice versa.
5. Separate taxes for goods and services, which is the present taxation system, requires division of
transaction values into value of goods and services for taxation, leading to greater complications,
administration, including compliances costs.
6. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to
be split equitably between manufacturing and services.
7. GST will be levied only at the final destination of consumption based on VAT principle and not at
various points (from manufacturing to retail outlets). This will help in removing economic distortions
and bring about development of a common national market.
8. GST will also help to build a transparent and corruption free tax administration.
9. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the
manufacturer, and it is again levied at the retail outlet when sold.
10. GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.

CONCLUSION

REFERENCES