The largest indirect tax solution since the year of independence, GST law requires bringing an economic change in the Indian economy. GST will help to streamline and consolidate the method of indirect taxation and will make it more efficient and simpler than before. The players of the Tax will pay the consolidated tax in spite of the several taxes such as Central Excise; State Value added tax, Entry tax or several indirect taxation policies.
GST will be paid though the actual price which is payable or paid which is known as the transaction value. This includes commission, packing cost, and other several expenditures such as sales. The tax amount will be payable during the final point of all the consumption. The GST has two components such as the State GST, Central GST and thus it will empower both the central and state government to administer and legalize the individual taxes.
Ease of the start-ups
Any new startups require registration for VAT from the department of the sales tax. Operating a business in other states has to encounter several problems regarding fees and different methods in all the states. GST will make a centralized registration and uniformity in a process that can help the startups in this country in an easier manner.
Higher expectations from the new companies
As per the recent construction of the goods and service tax, any business with earnings of more than five lacks will have to pay and get a VAT registration. GST will turn the restriction higher to at least ten lakh. It is announced that a business of ten to fifty lakhs of turnover will have to pay comparatively lower tax rates. This will change the burden of the build a new business.
Right now a startup invests a lot of energy and time to coordinate the taxes at several points. Depending on the various regulations of different places make the method more complicated. GST will ease the processes by turning the mode of tax simpler that includes all sorts of taxes. Businesses such as restaurants will come under both service tax and sales to calculate the service and VAT tax.
The impact of GST on the common man
For many individuals, GST is the biggest economic reform since the time of independence. However, if someone is used to commute via cabs, then cab rides would be cheaper from now on. The previous 6% tax that was levied on cab rides would now be reduced to 5%. Moreover, tax on personal care products that include soaps, detergent and Kajal would be brought down to 18% from 24%. Clothing apparels have also gone cheaper as natural fibers will see a tax imposition of 5% and apparel clothing below 1000 rupees would be taxed at 5%.
Impact of GST on economy
It is quite a fascinating thing to note that the Goods and Service Tax would help in lowering the inflation levels in the economy. It is so because as per many economists, many of the goods have been priced at lower rates. The GST can usher in huge advantages in the form of the huge leap in the transaction norms and the efficiencies in logistics. Furthermore, this new tax regime would force many organizations in restructuring their operations. On the flipside, the RBI would not lower policy interest rates in a prompt manner.
Impact of GST on various sectors
With the implementation of the GST, the FMCG sector is all set to benefit from. The GST rate for products like soaps and hair oils has been lowered by 500-600 bps. On the other hand, the pharmaceutical products would see 12 % GST as opposed to 10% GST in the earlier times. Quite interestingly, the healthcare sectors would be exempted from GST, but the patients would experience rising operational costs. Furthermore, traveling in business class would become costlier, and the tax rate would increase from 9% to 12%.
Impact of GST on the agriculture sector
It is worthwhile to note that agriculture is a 20% contributor to total GDP in India. Moreover, as GST’s primary objective is to usher in a unified tax structure, it is likely to strengthen the National Agriculture Market. Many of the agricultural items have been exempted from this new tax regime. It is primarily done to make sure that the agricultural sector contributes wholeheartedly to GDP.