GST Implementation

In India

By: Saransh Agarwal

CRO0612618
• The Goods and Services Tax (GST)

• Reform that took more than a decade of

intense debate

• Implemented with effect from 1 July 2017

• Formation and launch - a mammoth task

• The Goods and Services Act 2017

subsumed 17 indirect taxes and a host of
cessess
• Hindu called GST as unjust and shocking, Economic
times called it a beauty

• Arun Jaitely expressed his concern on the disruption

this reform would bring to the Indian economy.

• We have come a long way since 2017 and still have a

long way to go
• It got overwhelming support from the industry

• But a growing realization of its far-reaching impact

and the challenges that GST brought with it was
soon realized.
• GST has encouraged formalization of
economy- transparent digital processes and
incentive of input credit and invoice matching.
• Aligned India with global regimes; the new
regime provided for:
• Free flow of tax credits,
• Boosting company financials and
• Reduced prices for consumers.
• Ensuring a single law for the whole country with
uniform procedures and rules and
• Reduction in compliance burden and business
complexity.
GST’s Implementation In 3
most Important sectors of
economy

•The manufacturers,
•The traders and
•The service providers
The Manufacturers
• Boost to competitiveness and performance
in India’s manufacturing sector
• Taken away the cascading taxes
• Lower administrative costs
• Reduced compliance burden
• Process has become much easier with
same rate of GST applicable throughout
the country
Logistics - the backbone of Indian industry

• long lines of stalled truck have now disappeared

• unpredictable delivery time,
• production slowdowns due to delayed shipment and
• missed delivery deadlines
No more exists.

And are replaced with:

• easier clearance process

• reduced corruption
• reduced cost of logistics
• increased business revenue
Implementation of e-way bill

• common network for way bills - valid throughout

India
• nullify the idle time spent at check posts
• reduced the number of documents required to be
carried by a person
• relieved from carrying invoice and other paperwork.

However,
• unregulated transporters have limited connectivity
• portal has seen a tremendous improvement.
The Trading Sector
• Wholesale market- fundamental to extending
the reach of goods and services to the interiors of
the country.

• Good chance that cash transactions are not

accounted for, which was previously a concern
but ceases to be one under GST.

• 92% of the retail market in India-unorganized

and on cash basis.
• Wholesalers and retailers availing ITC -
benefitted with
I. cost advantages
II. better borrowing opportunity and
III. recognition of supply chain.

• India continues to remain 16th largest export

economy
• exports contributing to one-third of the GDP
• subsuming of various local state level taxes has
had a direct impact on imports and exports
• Every import is treated as inter-state
supply and is subjected to IGST and a Basic
Custom Duty ranging from 5 to 40 percent.

• For import of service, the mechanism of

reverse charge basis has been introduced
where tax is paid by the person availing such
services.

• Implementation of GST shows promise to propel

India onto the international trade arena in the
trading sector.
THE SERVICE SECTOR
• IT services, telecommunication services, Insurance
industry experience even a lesser burden of
compliance

• Cascading effect has been positively addressed

• Multiple registrations in various states has lead to

enhanced compliance costs

• Not given much advantage to the banking sector

• only 50% of the CENVAT credit availed is to be

reversed consequently increasing the cost of capital
Effect on real estate and construction
• GST has been a sentiment booster for the industry

• seeks to revive buyer and investor interest by

bringing more transparency in taxation

• Builders have multiple options in case of under

construction housing units/ affordable homes with
multiple rates for passing tax credits as well

• State specific taxes such as VAT and service tax have

been done away with

• Although stamp duty and registration charges still

exist.
On the whole
• Benefiting the pharma and healthcare industries by
creating a level playing field for generic drug makers

• Bought coherence and accountability in freelancing

sector

• Majority of indirect taxes sector like excise, VAT, sales

tax, road tax, motor vehicle tax, registration duty have
now been subsumed by GST in automobile industry

• GST regime truly augurs well for the

Indian startup scene
 FUTURE ROADMAP
1. Expansion of tax base
• Input of exempted and zero rated supplies, as well their compliance-
related requirements, have become fairly complicated.
• This is in effect defeating the Government’s purpose in implementing
the new tax regime.

2. Pruning of tax rates

• While there has been a substantial reduction, reducing the rate from
28% to around 22% should also be considered
• Clubbing of 12% and 18% brackets.

3. Tax administration
• Need of sound digital backbone to the GST
• Maintenance and use of substantial amount of data collected from
taxpayers
4. Legislative changes
• Contradicting provisions need to be amended and taken
care of
• Liberalisation of credit is expected and credit blockages in
the law should be done away with
• Seamless flow of credit to be encouraged.

5. GST public forum

• Launching of an India GST forum to facilitate public
involvement and transparency
• Setting up an open forum to provide a supervised and
regulated discussion
• Businesses given opportunities to represent their concerns