IMPACTS OF GST ON INDIAN ECONOMY. Mrs.D.Sivasakthi Assistant Professor: B.Com (PA) Dr. N.G.P. Arts and science college (Autonomous) Coimbatore

Transcription

1 141 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep 17 IMPACTS OF GST ON INDIAN ECONOMY Mrs.D.Sivasakthi Assistant Professor: B.Com (PA) Dr. N.G.P. Arts and science college (Autonomous) Coimbatore S.Pavithra Student Dr. N.G.P. Arts and science college (Autonomous) Coimbatore X.Daniel Arul Leo Student Dr. N.G.P. Arts and science college (Autonomous) Coimbatore ABSTRACT:Goods and Service Tax (GST) as it is known is all set to be a game changer for the Indian Economy. GST is one of the crucial tax reforms in India which has been long pending. It was supposed to be implemented from April It is a game changing reform for Indian Economy by developing a common Indian market and reducing the cascading effect of tax on the cost of Goods and Services. It is also defined as the giant indirect tax structure designed to support and structure designed to support and enhance the economic growth of the country. More than 150 countries have implemented GST so far. GST is intended to include all these taxes into one tax with seamless ITC and charged on both goods and services. The exercise duty, special additional duty, VAT to name a few will get repealed and will be added to GST. It is comprehensive tax system that will subsume all indirect taxes of states and central governments and unified economy into a seamless national market. It is expected to wrinkles of existing indirect tax system and play a vital role in growth of India. Many taxes such as central excise duty, service tax, central surcharge and cess etc. levied by central government and VAT/sales tax, entertainment tax, octroi & entry tax, purchase tax, luxury tax, taxes on lottery etc. levied by state governments. This paper presents an overview of impacts on GST in Indian Economy. INTRODUCTION: The proposed GST is likely to change the whole scenario of current indirect tax systems. It is considered as biggest tax reform. GST is the taxation system where there is a single tax in the economy in the entire country for all goods and services. GST is the name used in example New Zealand, Singapore, Australia, Canada. The reason for this is that, although it is charged on local consumption and it is borne by local consumers, it is collected at each stage office production and distribution chain by registered vendors, who have to account for the tax on the value that they have added to goods and services. The president of India approved the constitution amendment bill for goods and service tax (GST) on 8 September 2016 following the bill passage in the Indian parliament and its rectification by more than 50% of state legislature. This law will replace all indirect taxes levied on goods and service by central and state government and implemented GST by April

2 142 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep With more than 140 countries now adopting some form of GST, India has long been a stand out exception. 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 SGST for individual states.the interstate supplies within India would attract an integrated GST (IGST) which is the aggregate of CGST and the SGST of the destination state. SALIENT FEATURES OF GST: The power to make laws in respect of supplies in the course of interstate trade or commerce will remain with the central government. The state will have the right to levy GST on intra state 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. The members of GST council will comprise Central and State Ministers in charge of the Finance Portfolio. The threshold of levy of GST is a turnover of Rs 1 million. For a tax payer who conducts business in a North Eastern State of India the threshold is Rs 5 lakh. The central government will levy IGST on interstate supply of goods and services. Import of goods will be subject to basic customs duty on a IGST. GST is defined as any tax on supply of goods and services (other than 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. A provision will be made for removing imposition of entry tax/octroi across India. Entertainment tax imposed by states on movies theatres etc will be subsumed in GST, the taxes on entertainment at panchayat, municipality or district level will continue. Stamp duties, typically imposed on legal agreement by states will continue to be levied. BENEFITS OF GST: For Business and Industry: Easy complaints Removal/mitigation of cascading/double taxation Improved competitiveness For central and state governments Simple and easy to administered Better control on leakage Consolidation of tax base Higher revenue efficiency and collections

3 143 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep 17 For the Consumer: Single and transparent tax propionate to the value of goods and services Reduction of prices Increase in real income and purchasing power Other benefits: Tax structure will made lean and simple The average tax burden on companies will fall which will reduce the cost of Indian Goods and services in the international market and give boost to Indian exports It can facilitate seamless movement of goods across state and reduce the transaction cost of business. It is good for EOUs as it is not applied for goods and services exported out of India Uniform tax rates across the states There is no input tax credit available for CST and the introduction of GST, CST will be removed. IMPACTS OF GST: After a lot of deliberation, GST council has finalized the rates for all the goods and major service categories under various tax slabs and the GST is expected to fill the loopholes in the current system and boost the Indian Economy. The tax rate in GST are said at 0%, 5%, 12%, 18%, and 28% for various goods and services. Almost 50% of goods and services comes under 18%of tax rate. GST on some day to day goods and services: Footwear and apparel /garments: Footwear = Rs 500 GST rate = 185 Earlier rate = 14.41% Below = 500 GST = 5% Garments: GST = 12% Earlier = 18.16% Cab and Taxi Rates: GST = 5% Earlier = 6% Airline Tickets: GST: Economy class = 5% Business class = 12% Train fare: GST = 5% Earlier = 4.5%

4 144 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep 17 Movie tickets: Tickets Rs 100 = 18% GST Tickets above Rs 100 = 28% GST Jewellery: GST = 3% on gold, 5% on making charges Earlier 2% Buying a Property: GST: Unstructured property= 18% Effective rate =12% (Due to input tax credits) Hotel stay Room rent = RS 1000(No GST) Room rent above % of GST Buying a car GST =28% Addition GST will be levied which can be either 1%, 3%, or 15% depending on the particular car segment Mobile bills GST = 18% Earlier = 15% (However telecom companies may absorb 3% rise due to fierce competition) Restaurant bill (depending on a/c or non a/c) Five star hotel GST = 18% Non A/c restaurant = 12% Small hotels =5% IPL and Other related events IPL (tickets) GST =28% Earlier = 20% Related events (Dramas, Indian classic music, folk dance, etc) GST =18% DTH and CABLE SERVICES GST =18% Earlier =10 to 30% (apart from service tax of 15%) Amusement parks; GST =28% Earlier =15%

5 145 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep 17 THE FOLLOWING WERE THE GST RATE AMONG THE ASIAN COUNTRIES: COUNTRIES YEAR OF INITIAL CURRENT IMPLEMENTATION RATE RATE INDONESIA THAILAND SINGAPORE PHILLIPPINES CAMBODIA VIETNAM LAOS IMPACT OF GST ON INDIAN ECONOMY: GST is the better tax system. It is more transparent, efficient, effective, self-policing, and less bureaucratic. GST would eliminate double taxation under the current SST. Consumer will pay fair prices for most goods and services compared to SST. As such, Malaysian exporters will become more competitive in the global market as no GST is imposed on exported goods and services. This will strengthen our export sector which would contribute to the economic growth of the country. To make our exports more competitive, GST on exports will be zero rated and the exporter can recover all the input tax incurred in the course of hoes business. At present imported goods are subject to import duty and sales tax unless exempted.under GST imported goods will still subject to import duty but sales tax will be replaced with GST.As to whether the imported goods will be cheaper or more expensive will depend on a number of factors besides the GST rate. There will be a positive impact on the Indian economy due to the following Reduction in the business cost. 1. Special scheme to alleviate cash flow problems 2. Credit offset mechanism 3. Can claim the input tax due based on the invoice produced Lead to more competitive pricing Speed up economic union of India Better compliance and revenue buoyancy replacing the cascading effect ( tax on tax) created by existing indirect tax, tax incidence for consumers may fall lower transactions cost for final consumers. Makes our export more competitive as exports are zero rated Increase in gross domestic product By merging all levies on goods and services into one GST acquires a very simple and transparent character Reduce shadow economic activities Uniformity in tax regime with only one or two tax rates across the supply chains as against multiple tax structure as present.

6 146 Journal of Management and Science ISSN: e-issn: Special Issue. No.1 Sep 17 It is a tool to manage the economy e.g. tourist refund scheme is proposed as a mean to boost the tourism industry and tourism spend in the country, exports are zero based to make our goods more competitive globally. Increased tax collection due to wide coverage of goods and services. Improvement in tax competitiveness of goods and services in the international market. WHAT THE FUTURE LOOKS LIKE: The long term benefits, it is expected that GST would not just mean a lower rate of taxes, but also minimum tax slabs. Countries where the goods and services tax has helped in reforming the economy, apply only 2 or 3 rates- one being the mean rate, a lower rate for essential commodities, and a higher rate of tax for luxurious commodities. Currently in India we have five slabs with as three rates an integrated rate, central rate and a state rate. The impact of GST on macroeconomic indicators is slightly to be very positive in the medium term. Inflation would be reduced as the cascading (tax on tax) effect of taxes would be eliminated. Moreover, exports would grow while FDI (foreign Direct Investments) would also increase. CONCLUSION: On the priority it is up to the government to address the capacity building amongst the lesser- endowed participants. GST will become good and simple, only when the entire country works as the whole towards making it successful.more than 140 countries have implemented GST 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. It 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. *****