GST or Goods and Services tax is the hot and trending topic these days. With the introduction of GST in India on 1st July,2017 a new indirect tax regime has replaced a number of earlier taxes like VAT, Service tax, CST, Central excise etc. GST has indeed brought strong implications on the different sectors in the country. All the key sectors have been greatly influenced by the introduction of this momentous indirect tax reform: GST in India.
GST has brought a mixed bag of reactions and there may be initial hiccups to be seen all around. It has directly or indirectly affected different sectors in the country. Also, the substantial impact of GST on common man can’t be ignored. However, it is projected that GST shall simplify the taxation system and lead the economy towards the growth path.
Few queries that emerge out are…To what extent the key sectors are affected in this transformation from existing system into the new GST system? Who emerge out to be the Winners and who are the Losers under this new taxation system?
In order to answer these queries, we shall have a closer look at the Impact of GST on Key sectors and the final consumers as well.
GST Impact on Different Sectors & On Final Consumers:
1. Impact on FMCG Sector:
FMCG is a fast growing sector in the country. FMCG or Fast Moving Consumer goods seem to be the clear winners and a key beneficiary in the post-GST era. The reduced logistic costs coupled with streamlined supply chain management and seamless input tax credit makes way to cheaper products. Less distribution costs, easy storage and transportation shall lead to considerable savings for the FMCG sector.
Basic food items like milk, wheat, fresh vegetables etc. being out of the purview of GST and some necessary products fixed at lower GST rates are a reason to cheer up for the common man.
2. Impact on Telecommunications sector:
Telecom sector is a basic infrastructure service or we can say the communication lifeline of our country. Post-GST the tax liability on telecom services shall shoot upto 18% (from 15%).No doubt, the telecom sector can save in logistics costs and avail input credits, but the impact is going to be marginal on the final users as well.
The higher tax rate means, you as a consumer will have to shed extra money out of your pocket to avail telecom services. So, the basic telecom services are bound to become expensive even though this is an essential service in the present scenario.
3. Impact on Automobiles Sector:
The automobile sector is foreseen as the gaining sector post GST due to the reduction in the number of taxes as well as the rate of GST on various category of automobiles. Various other provisions like benefit to importers/dealers for claiming GST paid, improved supply chain mechanism and procurement of auto parts at lower rates shall lighten the overall burden of the automobile industry and the consumers.
The reduction in manufacturing cost means lesser tax burden for the end consumers, so you can hunt for cheaper cars and bikes in the coming days.
4. Impact on Real Estate:
This sector seems to be a beneficiary in terms of multiple taxes getting subsumed with a single tax called GST. The cost of building materials has undergone some minor changes. But, a greater transparency and accountability may initially be the major point of concern for the real estate people.
There may some relief to the final consumers and home buyers in the long run. Now, how the actual benefits shall be passed on to the home buyers is presently unsure as the real estate prices are market driven based on demand and supply.
5. Impact on Banking, Financial, Services and Insurance (BFSI):
The post-GST impact can be largely seen on the BFSI sector. The increase in the cost of services offered by this sector is likely to hit the common man’s pocket. The GST rate has been increased to 18% as compared to the earlier service tax rate of 15% only. This simply means an additional 3% cost that the final consumer has to bear to avail any of these services.
Increased transaction fee in banking, financial services, higher outgo of insurance premium shall impact one’s personal finances marginally.
A Final Note on GST Impact:
GST might have led to higher tax incidence on some sectors and lower on the others while some might have been left neutral. It may take considerable time to stabilise the whole GST system. This path-breaking reform is expected to boost competitiveness, increase Government revenue and thereby raise economic development.
However, this may not be the perfect time to gauge the exact implications of GST. This is a structural reform and a long run strategy for a developing nation like India. The actual impact is likely to be seen in the coming years, when all the bottlenecks get eliminated, proper accounting of GST and filing procedures followed and the businesses are fully accustomed to the GST regime thereby leading India into a unified market.
Further, business organisations across the different sectors of the country need to pass on the actual benefits they receive as input credits to the final consumers. If this is strictly adhered to by the key as well as the other sectors, this can surely have a positive impact on the Indian economy.
What do you feel about the recent GST rollout? What are your thoughts regarding this revolutionary tax reform implemented in the country? Are you satisfied or do you expect to see some big or small changes to the GST system and its procedures? Do share your valuable feedback on the same.
This is a guest post by Harleen Kaur, a Chartered Accountant, a Finance blogger by passion, running a personal finance blog @ Fintrakk.com , sharing knowledge and simplifying things in the field of finance and taxation.