Overall GST Impact, Analysis of GST Impact on Indian Economy 2018
Overall GST Impact, Analysis of GST Impact on Indian Economy 2018. Impact of GST on Various Sectors, Check Detailed Guide for GST Impact on India. Sector wise GST Impact analysis like – Change in tax-rates, Change in law and procedure, Credit availment based on vendor’s invoices etc. Now check more details for Overall GST Impact from below….
Overall GST Impact
(a) Change in law and procedure: Since it is a major indirect tax reform in India, there would be new legislations and procedures. The entire indirect tax code would be a new one.
(b) Change in tax-rates: The standard rate of 12.5 % for central excise, Service tax, along with residuary rate of VAT at 12.5-14.5% brings the overall rate to 25%-30%. But, post GST, the general rate will be 18%; a net gain of almost 7%-12%. Most of the dealers and consumers would experience the change in tax rates, either significantly or marginally. When the tax rates are increased for some products it could lead to tax evasion as well.
(c) GST based on HSN: The central excise tariff based classification would no longer be applicable. It would reduce the interpretational issues in respect of class of commodities.
(d) Availment of tax credit: GST would facilitate near seamless credit across the entire supply chain and across all States under a common tax base. At present no cross credits are available across central excise/service tax to local VAT/sales tax. Under the GST law, the input tax credit (ITC) (set off) would be given for Central GST against CGST and the States would give input tax credit (ITC) SGST to SGST. Cross-utilization of credit between Central GST and State GST would not be allowed.
(e) Credit availment based on vendor’s invoices: The credit of excise duty paid is available based on the excise invoice raised by manufacturer or service provider. The credit is available under the Service Tax law when the invoice amount is paid within 3 months of the invoice date. In respect of joint charge and reverse charge, based on receipt of payment on the basis of payment challans of the assessee. Under State VAT law, credit is allowable on the basis of tax invoice. Under GST the credits could be availed based on the invoices of vendors under CGST and SGST. But the onus may shift onto the assessee to ensure that the amount of the CGST/SGST has been deposited in the respective Government treasury by the vendor. This provision has been added to bring in tax discipline but smaller businesses may find transaction cost increasing due to this.
(f) Avoidance of Double Taxation: Presently, several transactions suffer VAT as well as Service Tax such as works contract or licensing of software. This could be resolved under the GST regime by redefining what is goods and service.
(g) Changes in the Accounting Software: Dealers and service providers need to modify/replace the accounting and taxation software. Initially there could be investment costs, costs of training in GST of people at each level starting from junior/mid to higher level managerial staff, management group/stakeholders.
(h) Training: Comprehensive training would be required to the staff members of the business community, both at senior level and also at junior level across the purchase, sales and finance functions. VAT + CE/ ST officers would also need to understand the law well.
(i) Competent Professionals: There are specialized consultants for Excise Duty, Service Tax and VAT. With the GST, only a single consultant maybe required who can handle all GST matters. Compliance for the SME may necessitate competent tax preparers
(j) Amending existing contracts: Assessees have to incorporate an extra clause in the existing contracts to collect CGST and SGST as applicable.
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