India has been grappling with multiple indirect taxes for a long time; the introduction of GST is, therefore, a landmark in the country’s taxation regime. GST is touted to simplify doing business in India, allowing supply chains to be integrated and aligned, as well as allowing for greater transparency.

Impact on Traders

 

Positive Impact on Traders

1. No dispute good Versus Service:

In present regime of tax structure, the big issue is whether the transaction amount to sale of good or service. Though this dispute still may arise from view of time/place of supply from good or time/place of supply of services as both are separately given. However, net impact is neutral, on either of them needs to pay GST.

2. Composition levy Increased

In current regime of taxation the limit under Composition Scheme is 40 lakhs where as under GST it is increased up to  50 Lakhs. It is beneficial as 10 lakhs in turnover is a big thing from trader point of view.

3. Credit of Excise Duty and Service tax:

In current regime of taxation then a trader is not eligible to take credit of input service as well as the Excise duty. However, in GST regime he will be eligible to take all credits and it will make positive impact on trader.

4. No Margin to Disclose

Currently a trader who wants to pass on the CENVAT Credit of excise duty needs to obtain dealer registration and have to disclose the margin. But now this is no more relevant as trader is eligible to take credit as well as no requirement of separate dealer registration.

5. No Reversal of Credit on goods sent for stock transfer

Currently as stock transfer is not liable to Vat as well as CST hence, credit pertains to goods sent to stock transfer needs to be reversed. However, in GST Regime stock transfer got made taxable, hence No reversal of credit is required.

6. Credit of CST

In current regime of tax, on inter- state purchases CST paid became the cost to the trader as the Credit was not available where as under GST regime it will be available as IGST Credit.

Negative Impact on Traders

1. Stock transfer made taxable

In current regime of tax, stock transfer are not taxable on being made available “Form F” where as in current regime stock transfer made taxable. Due to this Warehouse decision to be taken more appropriately.

2. No Form “C”

In current regime of tax, on being made available the Form C, CST rates charged at the rate of 2% instead of 14.5% which is local tax rate, however in GST regime interstate will be taxed at standard rate i.e IGST.

3. Goods sent to job work are taxable

In current regime of tax, the goods sent for job work are not liable to CST on being made available of Form “H” whereas in Current GST regime it became taxable.

4. Increased burden of Compliances

Instead of  4/12 Returns (state wise vary), now a trader needs to file 37 returns in year and much more compliances.

Impact on Manufacturers

Positive Impact on Manufacturers

1. One Tax

In present structure of tax, there is various kind of taxes such as excise duty, Service tax, VAT, Entry tax, Central Sales Tax etc. But in GST regime there is only one tax i.e GST however, there will be three parts such CGST, SGST, IGST. This is measure relief for the manufacturer.

2. Rate of tax

In current tax regime the consumer pays approximately 25-26% more than the cost of production due to excise duty (at 12.5%) and value added tax (almost 14.5%).In GST, goods may become cheaper marginally which a good sign for manufacture to compete with international market. The Impact of rate of tax depends on industry wise, but mostly it is beneficial.

3. No Concept of Manufacture

In Non-GST regime the biggest litigation and issues are whether the transaction amount to manufacture or not. The interpretation related to term “Manufacture” will no more be relevant. It may result in ease of doing business without having litigation about the process.

4. Reduction In Cost

In GST regime there will be reduction in cost of production as credit will be eligible of tax on purchases made from interstate purchases and no cascading effect. Hence, a manufacturer need not take the decision regarding purchase from point of view of tax implication as credit is eligible on all purchases.    

5. Minimization of Classification issues

In current regime of tax there are numerous issues on classification of goods due to separate rates on different goods and exemptions on certain goods. But in regime of GST there shall be minimization of classification issues due to uniform rate and less expected exemptions.

6. Speedy Movement of Goods

In GST Regime of tax structure there will be minimization of trade barriers, such as filing of way bills/entry permits. Compliance under entry tax will be abolished. There is much compliance in current regime on interstate movements or locally such as way bills, statutory forms etc which lead to slow movements of goods where as this concept is going to be abolished though check points will still be eligible.

7. CENVAT Credit

In regime of present tax, the manufacturer is unable to utilize the credit of Central Sales tax and VAT provided output is charged under Composition Scheme, which becomes the cost for him. But in Regime of GST, a manufacturer will be eligible to take Credit of SGST (VAT) as well as IGST (CST) on the purchases. There will be seamless flow of Credit in GST.  

8. Valuation of Samples

In current law goods removed on sample basis, tax needs to paid by adopting the nearest aggregate value. However, in GST regime, time up to six months is granted to decide whether the good sold on sample basis has been approved or not which beneficial thing for manufacturer. However, after 6 months tax needs to be paid if the same is still in process of approval.

9. State Wise Registration

Generally it has been observed that many manufacturers have two premises of factory within same locality or in same state and they are liable to take separate registration for each factory. But in GST Regime, registration has to be taken state wise and not factory wise. This will abolish the difficulties which have been faced due to separate registration.

10. No assessment by multiple tax authorities

Generally, manufacturers are facing many difficulties in handling the assessments done by the Separate authorities for VAT, Service Tax, Central Excise, CST, etc. In GST regime it is expected that assessment will be done by State authorities for SGST, Central Authorities for CGST, and Interstate authorities for IGST.

11. Electronic Mode for Forms

In current regime of tax there is very much manual filing of documents such as initial declaration, Numbering of Invoices etc. But in GST regime there will be less manual filing of documents and more through electronic mode. Further, the communication with department also could be through electronic mode.

Negative Impact on Manufacturers

1. Time of Supply

In current regime of tax the time of duty on manufacture attracts at the time of removal where as in GST regime it will earliest of the four such as (Date of Issue of Invoice, Date of Payment, Date of Removal, Debit in the books of Receiver).

2. Increase in Working Capital

In GST regime of tax, stock transfer has been made taxable, which requires the huge working capital because the realization of tax going to be on final supply tills that It may block the capital.

3. No Credit of Petroleum Product

Petroleum Product has been kept out of GST hence; the tax paid on Petroleum Product is not eligible as credit and same became the cost. Each industry requires the Petroleum Product such as Fertilizer Industry, Power Sector, Logistic Sector etc.

4. Introduction of Reverse Charge on Goods

 In current regime Of tax structure there was reverse charge on specified services but in case of GST even the reverse charge will be applicable on goods.

5. Post supply Discount

If the discount has to be given post supply than it must be known to both the parties at the time of supply or pre-supply and the proof of being known is the clause of discount must be there either in contract or agreement or offer etc.

6. Matching Concept of Returns

In current regime, if the tax has been made the purchaser to supplier then he is eligible to take the Credit it is immaterial whether the same has been credited to Central Government by the supplier or not. But in GST Regime, the matching concept if tax credit will be there, if credits pertaining to supplier does not match with purchaser than it will not be accepted in return unless it is rectified by both the parties.

7. Denial of CENVAT Credit on purchases made from unorganized/unregistered Person

In GST regime if the goods have been purchased from the register person then only credit will be given otherwise the credit will not be allowed.

8. No Compliance of “C” and “F” Forms

As stock transfer has been made taxable in GST Regime hence Concept of “F” Forms is no more relevant and IGST has been levied on all inter-state purchases or sale and credit will be allowed, hence No Concept of form “F” is relevant.

9. Increase in Compliance-burden

There is going to be huge compliance burden in GST Regime such as 37 returns for one office in a year.

To Conclude:

The introduction of the Goods and Services Tax will be a very noteworthy step in the field of indirect tax reforms in India. By merging a large number of Central and State taxes into a single tax, GST is expected to significantly ease double taxation and make taxation overall easy for the industries. For the end customer, the most beneficial will be in terms of reduction in the overall tax burden on goods and services. Introduction of GST will also make Indian products competitive in the domestic and international markets. Last but not least, the GST, because of its transparent character, will be easier to administer. Once implemented, the proposed taxation system holds great promise in terms of sustaining growth for the Indian economy.

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