GST i.e Goods and service tax or according to our Rajasthani folks GST means Ghadho saaro Tax. Yes off course it is not like this but for general public who are still not aware of what is GST and what changes are to be implying to them after the implementation of GST.
Through this article, I don’t make any attention towards the point that what is GST and how will our Government take any action for its implementation.
Here I only present the current and after scenario which is directly or indirectly related to common man.
*Important note : On 3rd November,2016 a four tier GST rate structure has been passed, the final slab rates being agreed upon are 5%,12%,18% and 28%.
Final GST Slab rates are :
- Zero rated items: Food grains used by common people. ( A sigh of relief…hmmm…)
- 5% Rate: Items of mass consumption including essential commodities will have low tax incidence.
- 12% and 18 % Rate: Two standard rates have been finalized as 12% and 18%.
- 28% Rate: White goods like Air conditioners, washing machines,refrigerators,soaps and shampoos etc.that were taxed at 30-31% shall be now taxed at 28%.
Demerit goods like tobacco,tobacco products,pan masala, aerated drinks and luxury cars shall be charged at the highest rate of 28%. An additional cess on some luxury goods shall also be imposed.
Services that are now taxed at 15% shall be taxed at a higher rate of GST @ 18%. Various goods have been classified to fit into the above categories.
Positive Impact of GST on the Common man or Advantages of GST :
- A unified tax system removing a bundle of indirect taxes like VAT, CST, Service tax, CVD,SAD,Excise etc.
- A simplified tax policy as compared to earlier tax structure. However, its not as simple as it seems to be.
- Removes cascading effect of taxes i.e. removes tax on tax.
- Due to lower burden of taxes on the manufacturing sector, the manufacturing costs will be reduced, hence prices of consumer goods likely to come down.
- Due to reduced costs some products like cars, FMCG etc. will become cheaper.
- This will help in lowering the burden on the common man i.e. you will have to shed less money to buy the same products which were earlier costly.
- The low prices will further lead to an increase in the demand/consumption of goods.
- Increased demand will lead to increase supply. Hence, this will ultimately lead to rise in the production of goods.
- The increased production will lead to more job opportunities in the long run. But, this can happen only if consumers actually get cheaper goods.
- It will curb circulation of black money. This can happen only if the “kacha bill” system,normally followed by traders and shopkeepers is put to check.
- A unified tax regime will lead to less corruption which will indirectly affect the common man.
But, this is possible only if the actual benefit of GST is passed on to the final consumers. There are various other factors also like the sellers profit margin that determine the final price of goods. GST alone does not determine the final price of goods. The anti-profiteering clause has been inserted in the GST Act to protect the interest of the consumers.
Negative Impact of GST on the Common man or Disadvantages of GST :
- The first and the foremost point of concern : All small traders and service providers dealing in interstate supply of goods or services need to get registered, pay GST and file GST returns also irrespective of the sales/income they generate (whether high or low).
- The number of GST returns that you need to file i.e. you have to file 3 monthly returns, this amounts to total of (3*12) 36 returns plus 1 annual return.Filing 37 returns in a year…Moreover, this applies to one state, if you function in different states, you need to register in each state separately and file the respective returns. Isn’t that too much for a small trader or service provider or an online service provider who has just started working?
Although big businesses having ample staff can handle the whole process very easily. But, what about small traders/service providers or individuals who have just started their business or service, isn’t that getting a bit complex for them?
Service tax rate @ 15% is presently charged on the services. So, After the GST implication the cost of services will rise. GST shall be charged @18% on maximum services and shall reach up-to 28%. In simple words, all the services like telecom, banking, airline etc. will become more expensive.
- Increased cost of services means, an addition on to your monthly expenses.
- You will have to reschedule your budgets to bear the additional services cost.
- Being a new tax, it will take some time for the people to understand it completely. Its actual implications can be seen after a certain period of time.
- There are always some complications attached. It is a consumption based tax,so in case of services the place where service is provided needs to be determined.
- If actual benefit is not passed to the consumer and the seller increases his profit margin,the prices of goods can also see a rising trend.
- An increase in inflation might be seen initially.
- A strict check on profiteering activities will have to be done, so that the final consumer can enjoy the real benefits of GST.
However, GST or Goods and Services tax is a long term strategy planned by the Government and its positive impact shall be seen in the long run only. A well designed GST Policy can bring a qualitative change in the tax system of India.
Talking about the different sectors, some might gain, some might lose. But, ultimately we will have to get used to this new tax, that is going to be a landmark reform having a great impact on India and its taxation system.