GST Impact and Analysis
GST was implemented in India with the slogan and motive of “One nation one tax”, although this was the biggest reform in the Indian economy the impact of it was pretty much different on the various industries such as manufacturing, distribution, service providers etc. Let us throw some light on the impact on various industries.
Manufacturer, Distributor and Retailer
Before GST every other manufacturer, distributor and retailer have to bear the burden of different indirect taxes (central and state both) which increased the administrative cost for them. Earlier under the VAT regime, Vat credit was not allowed on Excise Duty & there were multiple taxations as VAT was charged on Excise Duty.
But after the implementation of GST the situation of manufacturers, distributor and retailer have turned upside down. Now the GST has subsumed all the indirect taxes. It has removed the multiple points of taxation which were there earlier and even provide an input tax credit on the goods and services to them.
Before GST, in the year 2014, there were around 12,76,000 service providers who were paying taxes out of which more than 45% of tax was collected countrywide from them. Every IT industry, telecom industry, the insurance industry, banking and financial services etc. had a tax burden. But after the implementation of GST the deadweight of the tax is becoming lesser day by day but now they have register every place of business separately. In addition to this input tax credit is available on the goods, whereas earlier they use to get only service based credits. Now after GST it has become easier for them to determine whether a transaction is the supply of goods or service.
GST Impact on Sectors
Logistics industry in India provides employment to around 22 million people in India. Before the implementation of GST, it was witnessing growth but at the lower rate due to different taxes that they had to follow which decreased the work efficiency of them. But now after the implementation of GST, it is rapidly growing and according to a survey it will furthermore improve from 165 Billion USD to 215 Billion USD in the year 2020. Earlier before GST, there was no centralized system like e-way bill which had created hurdles for them to expand their businesses.
Pharmaceutical and Health
Before GST the growth of pharmaceutical and health industry was growing slowly due to the complex tax structure. But now the situation has changed as now GST has hit the high spot by boosting the growth of generic medicine manufacturers and also has promoted medical tourism by simplifying the tax structure. Furthermore, these industries are hoping for a tax rebate to make the medicines more affordable for the common public.
The e-commerce industry is progressing and growing rapidly in India. Introduction of GST has simplified the tax burden on the e-com sector as well as people who are the suppliers to these e-com operators. GST has introduced tax collection at source (TCS) to this sector due to which every e-commerce operator is liable to deposit the tax collected to the appropriate GST account. Currently, the rate of TCS is 1% which has to be adhered by all the e-commerce operator. In addition to this, it is mandatory to e-com operator to have a registered office or to have an authorized representative so as to gain the customer trust and loyalty.
Before GST it was important for every handset manufacturer had to set up their warehouses in every state and transfer stock. But after the implementation of GST, this industry has seen progress due to seamless stock management and by consolidating the need for warehouses in every state which in turn reduced the logistics cost too.
After logistics, the rate of employment to both skilled and unskilled labour in the textile industry is pretty high especially in remote areas or rural areas. Textile and apparel sectors contribute around 14% industrial production and provide India’s export earnings of around 15% and these figures are likely to see an increase due to GST.
Real estate sector is the vast growing sector in the Indian economy and under GST it will see substantial growth due to the simplified tax structure. Soup to nut Impact of the GST cannot be determined on the real-estate industry but it gave transparency to the work-structure to this industry.
The agriculture sector in India is the most pivotal sector of the Indian economy. It gives employment to around 50% of people in India and comprises 18% of Indian GDP. GST has solved the problem of transportation of agricultural product across India by eradicating the check posts.
The automobile industry is the vast progressing industry as it manufactures thousands of vehicles on the daily basis. This industry caters the need of people by giving them vehicles to travel and the consumption rate is getting higher day by day. Introduction of the GST has given aid to the growth of this by unifying all the indirect taxes and thus increasing the production efficiency.
Under the GST regime, India has seen many startups rise and shine by giving them a growth-friendly environment. GST India model has brought many features such as tax credit on purchases, easy registration and tax payments, unrestrained movement o goods and services which has proved to be helpful for the growth of startups.