Mumbai, 3 July, 2017 (GPN) : All businesses, small or large, will be impacted by this new indirect tax regime. GST will be levied on both, goods and services and will subsume and replace the current indirect taxes such as excise, VAT, and service tax. GST is destination tax, meaning the tax base will shift from origin to consumption. It will help to build a transparent and corruption free tax administration.
Currently, some sectors like the textile industry are exempted from taxes or pay low tax. There is no doubt that GST has increased the administrative cost because of inadequate infra structure facility like connectivity, electricity supply in remote areas, literate manpower, etc. All the stock transfer will lead to taxability under GST laws. The time gap in between the stock transfer and sale of stock will have a huge impact on the cash flow i.e. working capital. During each stock transfer the business needs to pay the tax under GST, while the input tax credit is effectively used when those stocks will be sold by the receiving branch location. In this case every time the business needs to pay the Tax amount for each stock transfer while he can utilize the credit against the output liabilities at the time of sale only. Thus, for many sectors the tax burden will increase which in turn will increase the price of the final goods.
For Common Man items to get cheaper: Prices of movie tickets may become cheaper in most states, Dining in restaurants, Televisions, etc.
For Common Man items to get costlier: Renewal premium for life insurance policies, banking and investment services, residential rent, school fees , etc.
Under GST the turnover limit has been reduced to Rs. 20 lakh thus increasing the tax burden for many manufacturing SMEs.
Once GST is implemented, most of the current challenges of this move will be a story of the past. India will become a single market where goods can move freely and there will lesser compliances to deal with for businesses.ENDS.