Impact of GST on Small and Medium Enterprises

This article explains impact of GST on Small and Medium Enterprises. GST has
promised to revolutionize the Indian tax system.
At present, the total tax collection in India is around 14.5 Lakh Crore, of which
34% is indirect tax. Indirect taxes include service tax, stump duty, customs duty,
VAT, etc. It refers to the collection of tax indirectly by the Government of India. In
most of the developing countries, the share of indirect tax is higher than the direct
tax. However, in the developed countries the share of indirect tax is much lower.
Therefore, the new GST implementation will allow the government to have a better
grip on the taxpayers. This should be capable of evolving the entire tax system.
How will GST help small to medium enterprises?
GST is meant to bring every indirect form of tax under one roof. For small and
medium sized businesses, owners or manufacturers have to take care of different
taxes and have to run to various departments to fulfil all the tax-related
documentations. Some file different taxes biannually, annually, half-yearly, etc.
The more the departments, the more is the harassment. Currently, the total tax
levied by the central and the state governments add up to 32%, but with the
implementation of GST, the business owners have to pay a much lower tax of
around 18-22 percent. Moreover, they do not have to pay different taxes to various
departments. It makes the job very much easier for every business owner.
Direct impact of GST on small and medium enterprises

 GST will help and ease the process of starting a business in India. Earlier, every
business in India was required to obtain VAT registration, which differs in
every state, and the rules and regulations are different. Thus it was a very
confusing procedure. However, under GST, the businesses have to only register
for GST which will have a centralized process, similar to service tax.
 Currently, for any business, it is mandatory to make a VAT payment if the
annual turnover is more than 5 lakh in few states and 10 lakhs in few other
states. This difference in various states creates confusion. Under GST a
business does not have to register or collect GST if the annual turnover is 10
lakh. This is applicable to every state. This will allow many small businesses
which have a turnover between 5 lakh – 10 lakh to avoid applying for the GST
return.
 GST allows small and medium business to do business with ease in India, due
to the less complexity. The distinction between the services and goods will be
gone, and this will make compliance easier.

REF: https://www.dbs.com/in/sme/businessclass/articles/economic-
outlook/impact-gst

Amidst economic crisis across the globe, India has posed a beacon of hope with
ambitious growth targets, supported by a bunch of strategic undertakings such as
the Make in India and Digital India campaigns. The Goods and Services Tax
(GST) is another such undertaking that is expected to provide the much needed
stimulant for economic growth in India by transforming the existing base of
indirect taxation towards the free flow of goods and services. GST is also expected
to eliminate the cascading effect of taxes. India is projected to play an important
role in the world economy in the years to come. The expectation of GST being
introduced is high not only within the country, but also within neighboring
countries and developed economies of the world.
Benefits of GST to the Indian Economy
 Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD,
and Excise.
 Less tax compliance and a simplified tax policy compared to current tax
structure.
 Removal of cascading effect of taxes i.e. removes tax on tax.
 Reduction of manufacturing costs due to lower burden of taxes on the
manufacturing sector. Hence prices of consumer goods will be likely to come
down.
 Lower the burden on the common man i.e. public will have to shed less money
to buy the same products that were costly earlier.
 Increased demand and consumption of goods.
 Increased demand will lead to increase supply. Hence, this will ultimately lead
to rise in the production of goods.
 Control of black money circulation as the system normally followed by traders
and shopkeepers will be put to a mandatory check.
 Boost to the Indian economy in the long run.
These are possible only if the actual benefit of GST is passed on to the final
consumer. There are other factors, such as the seller’s profit margin, that
determines the final price of goods. GST alone does not determine the final price
of goods.

How will GST impact the Indian Economy?

 Reduces tax burden on producers and fosters growth through more production.
The current taxation structure, pumped with myriad tax clauses, prevents
manufacturers from producing to their optimum capacity and retards growth.
GST will take care of this problem by providing tax credit to the manufacturers.
 Different tax barriers, such as check posts and toll plazas, lead to wastage of
unpreserved items being transported. This penalty transforms into major costs
due to higher needs of buffer stock and warehousing costs. A single taxation
system will eliminate this roadblock.
 There will be more transparency in the system as the customers will know
exactly how much taxes they are being charged and on what base.
 GST will add to the government revenues by extending the tax base.
 GST will provide credit for the taxes paid by producers in the goods or services
chain. This is expected to encourage producers to buy raw material from
different registered dealers and is hoped to bring in more vendors and suppliers
under the purview of taxation.
 GST will remove the custom duties applicable on exports. The nation’s
competitiveness in foreign markets will increase on account of lower costs of
transaction.
A Brighter Economy
The introduction of the Goods and Services Tax will be a very noteworthy step in
the field of indirect tax reforms in India. By merging a large number of Central and
State taxes into a single tax, GST is expected to significantly ease double taxation
and make taxation overall easy for the industries. For the end customer, the most
beneficial will be in terms of reduction in the overall tax burden on goods and
services. Introduction of GST will also make Indian products competitive in the
domestic and international markets. Last but not least, the GST, because of its
transparent character, will be easier to administer. Once implemented, the proposed
taxation system holds great promise in terms of sustaining growth for the Indian
economy.
imapact of GST:
Here an attempt is made to illustrate the general impact and also specific sector-
wise analysis. Firstly discussing the general impact of GST on Indian
economy which can be listed as follows:

1. Competitiveness in exports: Under GST, exports will become competitive

due to elimination of cascading effect of taxes. A study done by National
Council of Applied Economic Research suggested that GST could boost
India’s GDP by 1%-2%. GST is like key “Brahmastra” for India’s GDP in
times of challenging global environment.
2. Creation of a common national market: The motto of GST is “one nation
one tax one market”. GST will turn the nation into a common national
market, due to which there will be seamless flow of credit across the nation
and also it will lead to seamless movement of goods across states and reduce
the transaction cost of businesses. A study found that truck drivers in India
spend almost 60% of their time off roads negotiating check posts and toll
plazas because of 11 categories of tax are levied on the road transport sector.
The GST will help bring down logistical costs.
3. Restructured indirect tax system: The GST will reshape the indirect tax
structure by subsuming almost all the indirect taxes e.g. Excise, Service Tax,
VAT etc. This will do away with the complex indirect tax structure of the
country, thus improving the ease of doing business in the country and hence
giving positive vibes for multi-national companies to work in India.
4. Increase in revenue for Government: Under GST, dealers will get credit for
all the taxes paid earlier in goods/services chain, thus incentivizing firm to
source inputs from other registered dealers. This could bring in additional
revenues to the Government as the unorganized sector, which is not part of
the value chain, would be drawn into the tax net.
5. Reduction in corruption: To claim input tax credit, dealers have an
incentive to ask for documentation from the dealer behind him in the value
added chain. Thus, new tax regime is seen as less intrusive, more self
polishing and hence more effective way of reducing corruption.
6. Push to “Make in India” programme: A Finance Ministry report said that
the GST regime will boost the “Make in India” programme as dealers will
get input tax credits for capital goods also.
7. Rise in inflation: The service tax rate will shoot up from the current level of
15% to 18% in GST regime. This has led to fears that inflation could rise in
 short term, which can probably last a year. Inflation in second year after
GST implementation will benefit favourably as the numbers would be
compared to already-high figures of first year of implementation.
8. Removal of cascading effect: As GST is based on single taxation regime, it
will reduce the cascading effect of multiple taxes.
9. Reduction in cost for industry: As the industry will have to pay a single tax,
it will make their goods and services relatively cheaper, ultimately resulting
in increased demand and consumption.
10.Reduction in administration cost for Govt.: Earlier indirect taxes
department were administered by the union and state governments. But, after
the implementation of GST, there is no need of having so many departments
and this will ultimately result in reduction of administration cost for Govt.
11.Increase in voluntary compliance and revenue collections: GST regime
will be much simpler than as of now, so it will encourage voluntary
compliance and thus resulting increased revenue collections for government.
12.Economic Growth: As it is neutral to business processes, business models,
organization structure, geographic location, product substitutes, it promotes
economic efficiency and sustainable long term economic growth.

Now, moving to analyze the impact of GST on sectoral basis:

Sr. Sector Positive Negative

No.

1 E-commerce GST will help free The tax collection at

movement and supply of
goods in every part of the
country. It will also
eliminate the cascading
effect of taxes on
customers which will bring
efficiency in product costs.
source (TCS) guidelines
in GST regime will
increase administration,
documentation workload
and other costs for
ecommerce firms.

2 Telecom For handset makers, GST Call charges, data rates

will bring in ease of doing will go up since normal
business as they may no tax rate will be 18%.
 longer need to setup state
specific entities and
transfer stocks to them.
Dealers are also likely to
pass on to consumers cost
benefits they will get from
consolidating their
warehouses and efficiently
managing inventory.
3 Automobiles On road price of vehicles
could drop by 8%, as per a
report. Lower prices can be
construed as indirect
stimulus to boost volumes.
4 Technology GST will eliminate
multiple levies. It will also
allow deeper penetration of
digital services.
5 Media Taxes can go down by 2%- No negative could be
4% resulting in lower figured out as of now.
average ticket prices and
increase the footfalls in
multiplexes.
6 Insurance No positive could be
figured out as of now.
Tower firms will be able
to set off their input duty
liabilities as petro-
products are likely to be
included in GST purview
later on.
Demand for commercial
vehicles may get a hit in
the medium term. With
fleet productivity
increasing, operators may
not feel the need to
expand in mid-term.
With GST, companies
might require each centre
to generate a separate
invoice to every
contracting party.
Insurance policies (life,
health and motor) will
cost more from July 2017
 as taxes will go up by 300
basis points.

7 Airlines No positive could be Flying to become

figured out as of now.
expensive. Service tax on
fares currently ranges
between 6%-9%. With
GST, the tax rate will get
almost doubled.

8 Cement Effective rate of tax for No negative could be

cement companies was figured out as of now.
25% earlier as compared to
18% in GST. So, it will
lead to savings in
transportation cost. One
common market will bring
down the number of depots
in the country.

Conclusion:
GST is indeed the need of hour for Indian economy. The people are sick of
complying with multiple laws, and many times they are penalized for not
complying the laws they are not even aware of. GST will ensure broader tax base,
and hence covering most of the dealers into its ambit. This will create a unified
market and credit flow chain will work properly without any hindrances. It will
also add up to the revenue generation for the Government as many unorganized
sector will get organized once GST is implemented.
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.
After analyzing all the pros and cons, we as an Indian citizen should welcome the
upcoming change with open arms, after all we want to see India being entered
down in the list of super powerful economies, and GST is one of the biggest
measure of making that happen.

Introduction of Goods and Services Tax (GST) in India

India November 14 2016

The President of India approved the Constitution Amendment Bill for Goods and
Services Tax (GST) on 8 September 2016, following the bill's passage in the
Indian parliament and its ratification by more than 50% of state legislatures. This
law will replace all indirect taxes levied on goods and services by the central
government and state government and implement GST by April 2017. The
implementation of GST will have a far-reaching impact on almost all the aspects of
the business operations in India. With more than 140 countries now adopting some
form of GST, India has long been a stand-out exception.
GST is a value-added tax levied at all points in the supply chain, with credit
allowed for any tax paid on input acquired for use in making the supply. It would
apply to both goods and services in a comprehensive manner, with exemptions
restricted to a minimum.
In keeping with the federal structure of India, it is proposed that the GST will be
levied concurrently by the central government (CGST) and the state government
(SGST). It is expected that the base and other essential design features would be
common between CGST and SGSTs for individual states. The inter-state supplies
within India would attract an integrated GST (IGST), which is the aggregate of
CGST and the SGST of the destination state.
The following are the salient features of the proposed GST system:

 The power to make laws in respect of supplies in the course of inter-state

trade or commerce will remain with the central government. The states will
have the right to levy GST on intrastate transactions, including on services.
 The administration of GST will be the responsibility of the GST Council,
which will be the apex policy-making body for GST. Members of GST
 Council will comprise central and state ministers in charge of the finance
portfolio.
 The threshold for levy of GST is a turnover of Rs. 1 million. For a taxpayer
who conducts business in a northeastern state of India the threshold is Rs.
500,000.
 The central government will levy IGST on inter-state supply of goods and
services. Import of goods will be subject to basic customs duty and IGST.
 GST is defined as any tax on supply of goods and services (other than on
alcohol for human consumption).
 Central taxes such as central excise duty, additional excise duty, service tax,
additional custom duty and special additional duty, as well as state-level
taxes such as VAT or sales tax, central sales tax, entertainment tax, entry
tax, purchase tax, luxury tax and octroi will be subsumed in GST.
 A provision will be made for removing imposition of entry tax/ octroi across
India.
 Entertainment tax, imposed by states on movies, theatre, etc., will be
subsumed in GST, but taxes on entertainment at panchayat, municipality or
district level will continue.
 Stamp duties, typically imposed on legal agreements by states, will continue
to be levied.
 The key benefits associated with GST are:
 Offers a wider tax base, necessary for lowering tax rates and eliminating
classification disputes
 Eliminates the multiplicity of taxes and their cascading effects
 Rationalizes the tax structure and simplifies compliance procedures
 Automates compliance procedures to reduce errors and increase efficiency
GST would be levied on the basis of the destination principle. Exports would be
zero-rated, and imports would attract tax in the same manner as domestic goods
and services. In addition to the IGST in respect of supply of goods, an additional
tax of up to 1% has been proposed to be levied by the central government. The
revenue from this tax is to be assigned to the origin states. This tax is proposed to
be levied for the first two years or a longer period, as recommended by the GST
Council.
With GST, it is anticipated that the tax base will be comprehensive, as virtually all
goods and services will be taxable, with minimum exemptions. GST would bring
in a modern tax system to ensure efficient and effective tax administration. It will
bring in greater transparency and strengthen monitoring, thus making tax evasion
difficult. While the process of implementation of GST unfolds in the next few
months, it is important for industry to understand the impact and opportunities
offered by this reform. GST will affect all industries, irrespective of the sector. It
will impact the entire value chain of operations, namely procurement,
manufacturing, distribution, warehousing, sales and pricing.
impact of GST on Indian economy
The introduction of Goods and Service Tax (GST) in India is now on the horizon.
The Constitution Amendment Bill to replace existing multiple indirect taxes by
uniform GST across India is likely to be taken up for voting in Rajya Sabha during
this week. Lok Sabha has already passed this Bill.
The current indirect tax structure is major impediment in India’s economic growth
and competitiveness. Tax barriers in the form of CST, entry tax and restricted input
tax credit have fragmented the Indian market. Cascading effects of taxes on cost
make indigenous manufacture less attractive. Complex multiple taxes increase cost
of compliance. In this scenario, the introduction of GST is considered crucial for
economic growth. GST will have quite a favourable impact on Indian economy.
Some sectors will have more favourable impact compared to others under the
proposed GST.
Removal of tax barriers on introduction of uniform GST across the country with
seamless credit, will make India a common market leading to economy of scale in
production and efficiency in supply chain. It will expand trade and commerce.
GST will have favourable impact on organised logistic industry and modernised
warehousing.
GST will remove cascading effect of taxes imbedded in cost of production of
goods and services and will provide seamless credit throughout value chain. This
will significantly reduce cost of indigenous goods and will promote ‘Make in
India’. The sectors which have long value chain from basic goods to final
consumption stage with operation spread in multiple states such as FMCG,
pharma, consumer durables, automobiles and engineering goods will be the major
beneficiaries of GST.
GST will facilitate ease of doing business in India. Integration of existing multiple
taxes into single GST will significantly reduce cost of tax compliance and
transaction cost.
Stable, transparent and predictable tax regime will encourage local and foreign
investment in India creating significant job opportunities.
Electronic processing of tax returns, refunds and tax payments through ‘GSTNET’
without human intervention, will reduce corruption and tax evasion. Built-in check
on business transactions through seamless credit and return processing will reduce
scope for black money generation leading to productive use of capital.
Significant reduction in product and area-based exemptions under GST will widen
the tax base with a consequent reduction in revenue neutral rate. This will enable
the government to keep GST rates lower which may have favourable impact on
prices of goods in the medium term. The tax rate for services however may go up
by 2 to 3% from the present level of 15%. The adverse impact of rate increase on
services will be partially neutralised by availability of seamless input tax credit.
GST will eliminate the scope of double taxation in certain sectors due to tax
dispute on whether a particular transaction is for supply of goods or provision of
service such as licensing of intellectual properties like patents and copyrights,
software, e-commerce and leasing.
While the GST will simplify tax structure, it will increase the burden of procedural
and documentary compliance. Number of returns will increase significantly so also
the extent of information. For instance, a real estate developer or contractor will
have to file 61 returns in a year compared to 24 returns at present. Similarly a
taxable person providing services from several states will have to take registration
and file return in all such states. Currently a single centralised registration is
required in such cases.
GST will also have impact on cash flow and working capital. Cash flow and
working capital of business organisations which maintain high inventory of goods
in different states will be adversely affected as they will have to pay GST at full
rate on stock transfer from one state to another. Currently CST/VAT is payable on
sale and not stock transfers.
It is also pertinent to note that all indirect taxes will not be subsumed in GST.
Electricity duty, stamp duty, excise duty and VAT on alcoholic beverages,
petroleum products like crude, natural gas, ETF, petrol and diesel will not be
subsumed in GST on its introduction. These taxes will form part of the cost of
these goods when used as inputs in downstream products. Hence those sectors
where these goods form significant input cost such as plastics and polymers,
fertilisers, metals, telecom, air transport, real estate will not get full benefit of
GST.
Major beneficiary of GST would be sectors like FMCG, Pharma, Consumer
Durables and Automobiles and warehousing and logistic industry.
High inflationary impact would be on telecom, banking and financial services, air
and road transport, construction and development of real estate,
While GST is eagerly awaited by the industry, the legal process to implement GST
in India is quite long and complex. After the Constitution Amendment Bill is
passed by the Parliament with two-thirds majority, it will have to be passed by at
least 15 states. There after GST council has to be constituted which will
recommend model GST law and GST rates. On such recommendation, GST Act
and Rules have to be enacted by the Parliament and each state assembly. Then
implementation date has to be notified. It is therefore quite important that the
Constitution Amendment Bill is passed in the current Monsson Session if GST is
to be implemented during the tenure of present Parliament which ends during
2019.

Thinking about GST Pros and Cons? The Goods and Services Tax is a unified,
destination-based tax that was implemented in India from July 1, 2017 to effectively
replace all the existing indirect taxes, including service tax and vat. The GST has
directly affected the businesses involved in the selling/buying of good and services, as
well as consumers, in the country.

Whereas the prices of some goods/services have gone down, some other facilities have
become costlier in the post-GST regime. There are some predefined tax rates for
various commodities under GST and some basic items like food, milk, etc., have been
kept tax-free, while petroleum products have not yet been included under the cover of
GST. The impacts of GST are being noticed as we move forward into this new tax era.

Let’s discuss the major GST Pros (advantages) and Cons (disadvantages) we
have experienced so far.
Positive Impacts (Pros/Advantages) of GST Implementation

 GST is expected to build a more transparent and corruption-free tax system in India.

 It is easy to start a business in the post-GST regime and tax regulations are easier than
before.
 Composition mechanism is there to reduce the tax burden from small businesses and
startups.
 Input credit (ITC) mechanism ensures an uninterrupted flow of cash for businesses and
reduced price of goods/services for the end consumers.
  The merging of all the indirect taxes makes it easier to process the tax payment for the
government as well as for the taxpayers.

 Tax harmonization

 More simplified movement of goods and/or services between states and within the
country.

 GST is calculated on the total amount, irrespective of the type of sales and services.

 GST has eliminated the cascading effect of taxes by introducing a unified tax system.

 Since it is a destination based tax, the tax will only be paid by the consumer upon
delivery of goods/services.

 The implementation of Goods & Services tax puts India in the line of international tax
standards, making it easier for Indian businesses to sell in the global market.

 Inflation is expected to stay under control after the implementation of GST.

 GST is expected to reduce the price of production, operational and others costs that will
benefit the end consumers.

 The cost of collecting the tax is reduced thus resulting in a higher revenue for the
government.

 GST has the mechanism of integrated tax that makes sure that the tax burden is split
impartially between manufacturing goods and services.

 The complexity of tax compliance is reduced as all the returns are being filed and taxes
are being paid through a single platform.

 Since all the records and data are now available on a single platform, it has become
easier for the tax authorities to identify and deal with tax evasions.

 One major benefit of GST is that the government is now receiving more taxpayer
registrations than ever before.
Negative impacts (Cons/Disadvantages) of GST in India
As for the disadvantages, GST has a few. The implementation of GST in India has
created troubles for some sectors by increasing the cost of manufacturing and/or supply
or by reducing the value of the product. For example, the value of some second-hand
items and refurbished items diminished due to the increased cost of processing or
supply.
Let’s take a brief look at the disadvantages of GST, as reported so far.
 GST compliance and tax filing has increased the implementation cost for businesses, as
they are required to invest in computers, accounting (GST) software and/or trained GST
experts (CAs and accounting experts).

 The process of GST compliance is also proving daunting as most businesses are not yet
fully aware of the rules, provisions and processes of the new tax system, including the
process of return filing, GST registration, returns filing schedule, invoicing and billing,
etc.
 The overall cost of doing business is going to increase, at least in the first few months of
GST.

 The implementation of GST in the middle of the financial year is creating a lot of
confusion among business, as to whether to follow the old tax rules or new ones or both.

 Many businesses, especially small businesses and startups, do not usually have the
money or tech resources to get compliant with the digital GST system. A cloud-based
(online) GST software like theGen GST could be a perfect solution to this problem.
 The tax relaxation limit for small manufacturing businesses, which was 1.50 crores
earlier, is now Rs. 20 lakh under the GST system. This has effectively increased the tax
burden for such businesses.

 No clarification about tax holidays has further increased operation costs for textile,
pharma and other manufacturing industries.

 The chaos among businesses has ended up creating a disruption in the industry.

 Consumers are not very hopeful about GST benefits and implementation and therefore,
they are reluctant to adapt to the new system.

 The tax rate has been increased for many products, thus increasing their costs.
 Although there is a provision of input credit in GST, some businesses are not willing to
pass on its benefits to their consumers.

 The cost of refurbishing has increased due to increased tax, thus increasing the price of
refurbished products.

 Businesses are required to have separate registrations for multiple business entities in
different states. It will increase the burden of tax compliance.

 GST has reduced the tax revenue of some states as they are now required to share
revenues with the central government.
  The tax will be paid by the end consumer, which makes it a non-consumer-friendly tax
system.
Conclusively, the GST has both its pros and cons, and it is expected to bring a
positive change in the tax system of India. For now, we should hope for the best. Follow
our GST Helpline for help and guidance regarding the implementation of GST.

How Goods And Service Tax (GST)

Impacts Five Key Sectors Of India's
Economy
A bill is clumped together with others at a restaurant with the new Goods and Services
Tax (GST) added to it, in Mumbai, India, Friday, July 01, 2017. (Photo Credit: AP
Photo/Rajanish Kakade)

Since GST’s implementation over the past few days, startups have been
pinging @askGST_GoI, the official Twitter handle of the Government of India, for
clarity on this new tax reform. As their enterprises are vulnerable to any major
changes in economy due to a new policy implementation, founders and employees
of these companies are extremely concerned about the impact of the four tax
slabs of 5%, 12%, 18%, and 28% that have been specified in GST. Many Indian
businesses have limited capital and resources at their disposal, meaning that any
confusion can quickly escalate into panic.

Along with these concerned parties, millions of customers are wondering about the
impact of this new tax system on the amount of money they will need to shell out to
avail of their preferred goods and services.

In this article, I'll attempt to break down the impact of GST on the most popular
sectors of India's startup ecosystem, including real estate, e-commerce, hospitality,
smartphones, and ride hailing.

Real Estate

Under the new tax structure, due to the input credit benefits that most builders will
get on the key raw materials they buy, the base price of property projects launched
post 1 July 2017 will be comparatively cheaper. Buying under-construction
properties will attract a net effective rate of 12% as against the earlier rate of 5.5%
(including value added tax and service tax). Real estate players such as Proptiger and
Quikr want to pass this cost benefit on to property buyers. “For new projects with
100% input credit passed to the buyer and land cost being 50% of the project cost,
we expect property prices to fall by around 1% in western and northern markets and
around 3% in southern markets,” said a report by Edelweiss. However, prices of
ready-to-move-in apartments with completion certificates, before implementation
of GST on 1 July, would remain steady as these properties are out of the GST ambit.
Any price change in the segment will depend purely on demand and supply.

E-commerce

E-commerce websites such as Flipkart 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 latest notificationissued 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 StoreHippo 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 StoreHippo facilitates this through its new move, aimed at simplifying GST for
all involved.”

Indian tourists enjoy Shikara, a traditional wooden boat, with the backdrop of snow
covered mountains at the Dal Lake in Srinagar, India. (Photo Credit: AP Photo/Dar
Yasin)
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

Benefits To Trade Benefits To Consumers

Reduction in multiplicity of taxes Simpler Tax system

Mitigation of cascading/ double Reduction in prices of goods & services

taxation due to elimination of cascading

More efficient neutralization of

Uniform prices throughout the country
taxes especially for exports

Development of common national

Transparency in taxation system
market

Simpler tax regime (1.Fewer rates

and exemptions, 2. Distinction
Increase in employment opportunities
between Goods & Services no
longer required
Reduces transaction costs and unnecessary wastages: A single registration and a
single compliance will suffice for both SGST and CGST provided government produces
effective IT infrastructure and integration of states level with the union.

Eliminates the multiplicity of taxation: The reduction in the number of taxation

applicable in a chain of transaction will help to reduce the paper work and clean up the
current mess that is brought by existing indirect taxation laws.

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 average tax burdens: The cost of tax that consumers have to bear will be
certain and it is expected that GST would reduce the average tax burdens on the
consumers.

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.

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 insulate the vast poor population of India against the likely inflation due to
implementation of GST. No doubt, GST will 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.