GST or Goods & Services Tax was presented in the Indian Constitution through the 101st Constitutional Amendment Act, 2016. After the introduction of GST, numerous sectors received some negative as well as positive effects.
The implementation of the tax was for the long-term advantage. There were very few sectors to benefit from GST in the short term. The long-term advantage requires the patience. Where one area in the nation faces a positive impact, the other area receives a different impact. It is vital to know how and to whom is the impact of GST on various sectors in India.
What is GST in India?
In short, GST is known as the Goods & Services Tax. It is an indirect tax that has supplanted numerous taxes in India like the Service Tax, Luxury Tax, Value-Added Tax, Excise Duty and so on. The GST Act, 2017 was passed on 29th March 2017 in Parliament and from 1st July 2017, it came into effect.
As such, GST is levied on the supply of goods and supply of services. GST Law in India is a destination-based tax, multi-stage tax, and comprehensive tax charged for each value addition. Goods & Service Tax is a unified indirect tax system for the whole country.
The Impact of GST on Different Sectors of The Economy
The impact of GST on various sectors that we will cover in this article are:
- Impact of GST on Retailers, Distributor, and Manufacturing Sector
- Impact of GST on Agricultural Sector
- Impact of GST on Textile Sector
- Impact of GST on IT Sector
- Impact of GST on Banking Sector
- Impact of GST on Hotel and Tourism
- Impact of GST on Entertainment Industry
- Impact of GST on Automobile Sector
- Impact of GST on Export-Import Sector
- Impact of GST on Education Sector
- Impact of GST on Real Estate
- Impact of GST on Energy Sector
- Impact of GST on Iron and Steel
- Impact of GST on Service Sector
1. Impact of GST on Retailers, Distributor, and Manufacturing Sector
Goods & Services Tax has boosted performance and competitiveness in India’s retailers, distributors and manufacturing sectors. Declining exports and high expenses are only a portion of the worries of this sector. Various Indirect Taxes in place earlier increased expenses for distributors and manufacturers. With Goods & Services Tax system set up, the troubles of the older indirect tax system has vanished and this sector will develop much better.
2. Impact of GST on Agricultural Sector
The impact of GST on the agricultural sector or the effect of GST on agriculture is positive. The agricultural sector is a significant sector to the overall Indian Gross Domestic Product. It covers around 16% of the Indian Gross Domestic Product.
The introduction of the Goods & Services Tax has affected different sectors of society. One of the significant issues looked at by the agricultural sector is the transportation of agricultural items across states all over India.
Transportation may be the most likely issue for the agricultural sector with regard to Goods & Services Tax. Goods & Services Tax may help India in forming its first National Market for agricultural items.
3. Impact of GST on Textile Sector
GST has shown a positive effect upon readymade and textile pieces of garments, as one of the GST benefit sectors. This new system is beneficial to them. Some of the advantages which GST gave to the textile sector are:
- The Input Tax Credit or ITC framework or chain.
- Input Tax Credit or ITC is currently available on the capital goods.
- The cost for the transporting is currently lower in contrast with the past tax system.
4. Impact of GST on the IT Sector
Although the Goods & Services Tax rate for services has increased to 18%, compared with the older system the Information Technology Sector is one of the GST benefit sectors. Different factors like the accessibility of Input Tax Credit or ITC will cut down the operating expenses and, consequently, expand the Information Technology sector’s general productivity.
The main areas of the GST impact on IT sector are below:
- The simpler Tax Rate Administration
- Removal of Cascading(double tax) Effect of Taxes
- Business Restructuring
- Opportunities in creating software for GST
5. Impact of GST on Banking Sector
With the introduction of GST, the banking sector has turned out to be more costly. Before, the tax rate of the services for the banking sector was 15%. However, after the implementation of GST, the tax rate has been increased on all the banking areas to 18%. These are a few effects of GST on the banking sector:
- Each separate part of Banks should have separate registration
- Place of supply identification
- Reliance upon CGST and SGST
- The transactions between banks aren’t free
- Input Tax Credit or ITC in GST
6. Impact of GST on Hotel and Tourism
Income generated from the tourism and hotel industry forms an important part of the Indian economy. They help in expanding the GDP of India. This is the reason each State Government continues advancing the travel industry of their state by different schemes. The rate of GST varies for the inns as a result of the tariffs.
Goods & Services Tax rates for hotels are dependent on room tariff with impact from 1st October 2019.
- If the tariffs range below Rs. 1,000, then there will be no GST.
- If the tariff ranges between Rs. 1,000 to Rs. 7,500, then 12% GST will be levied.
- If the tariff is more than Rs. 7,500, then 18% GST will be levied.
GST brought a single tax rate compared to the multiple taxes under the previous system. This has made it easier for the industry and provides clarity to customer as well. So say that the hotel and tourism industry is one of the sectors to benefit from GST
7. Impact of GST on the Entertainment Industry
The entertainment industry is one of the GST benefit sectors.Before the implementation of GST, the entertainment sector had many taxes. They are not restricted to one tax or duty. They included the state tax, central tax and tax by the local authorities. However, when GST came into motion, they moved into just one tax.
GST was running between 18% to 28%. The tax rate depended upon the sort of Entertainment services provided.
Things inside the 18% GST:
- Movie Tickets
- Television and DTH services
Things inside the 28% GST:
- Sporting event
- Movie events and festivals
- Amusement parks
8. Impact of GST on Automobile Sector
Following Goods & Services Tax implementation, a wide range of taxes like Excise Duties, VAT, Sales Tax, and Road Tax cleared a path for a unified Goods & Services Tax. This brought an increase in automobile deals. Numerous huge automobile brands experienced record growth in the year 2018 and 2019. Customers believed it to be the ideal chance to buy vehicles. Thus, the automobile is another of the GST benefit sectors.
9. Impact of GST on Export-Import Sector
Before implementing the GST, Import and Export were administered by the Customs Duty, Excise Duty, Value Added Tax, and Service Tax. All these taxes were put together as one at the point when GST was presented. Yet, the BCD or Basic Customs Duty keeps on eating away at the import bills.
IGST includes all the taxes which were administering the imports of goods and services before the Goods & Services Tax. Those taxes were:
- CVD or Countervailing Duty
- SAD or Special Additional Duty
At the point when IGST was applied, then:
- The exports became zero-rated as per section 16 of the Integrated Goods and Services Tax Act or IGST Act, 2017.
- The State Government and the Central Government share the duty.
10. Impact of GST on the Education Sector
Whenever there is a conversation over the development and growth of a country, the main thing thought about is the strength of that country’s education sector. The education sector is one of the GST benefit sectors. The education of people has a significant part in the strength of a nation.
The government has therefore tried to keep education-related institutions excluded from the duties or taxes, in the new Goods & Services Tax system. These include the services given by any educational association to its staff, faculty and students.
11. Impact of GST on Real Estate
This sector has seen a good growth in recent years and has been a vast business area. It is an industry that is generally reliant on tax rates. Goods & Services Tax on real estate has brought more productive activities, and numerous new brands have come up. Subsequently, these brands have been able to help the economy of the nation enormously. Therefore this too, has been one of the sectors to benefit from GST.
Also Read: What was the impact of GST on Real Estate?
12. Impact of GST on Energy Sector
The energy sector is one of the essential enterprises in any economy since power is critical for each business activity. However leaving this sector being outside the scope of Goods & Services Tax will affect the remaining economy. It disallows a sector of the benefits hoped to be accomplished by the introduction of Goods & Services Tax.
Eventually, the Goods & Services Tax impact is likely going to be levelled out by falling costs. We needn’t waste time with the assistance of lowering taxes to enable economic growth. Therefore currently the energy sector isn’t one of the sectors to benefit from GST.
13. Impact of GST on Iron and Steel
Three sorts of taxes were applied on the manufacturing of iron & steel. Those duties were: –
- 2% CST or Central Sales Tax
- 5% VAT or Value Added Tax
- 12.5% Excise Duty
When we see, there is an aggregate of 19.5% net duty that is forced upon iron & steel in the older system. Under GST most of the items manufactured fall in the 12% and 18% category, while a few items fall under the 28% category. So we can see that the iron and steel industry is one of the sectors to benefit from GST.
14. Impact of GST on Service Sector
It is no news that the introduction of the GST will represent some significant benefits and a couple of weaknesses to the service sector.
Many service sectors had a lot of changes as they adjusted to the presentation of this new tax system. We can be sure that a considerable lot of them are glad given the changes. You can believe that this new tax collection framework will likewise influence individuals all in all and not just businesses. All things considered, there has been a positive GST impact on the service sector .
The positive GST impact on the service sector are:
- No double taxation
- Easier taxation for repairs and maintenance
- Access to inputs held in stock
- Fewer costs to service providers
- It will bring equality in all states
- The cost of inputs is likely to drop
The Goods & Services Tax is a milestone in India’s Indirect Tax system that addresses multiple issues together. It has brought a smoother structure to prevent double taxation. The Goods & Services Tax is destination-based tax charged at the point of consumption. Introduction of GST may have helped only some sectors to benefit from GST in the short term. But the long term advantages are many for all the sectors.
What is GST?
Goods & Services Tax is one indirect tax for the entire country applied to the supply of goods and services.
What are the advantages of GST?
The advantages of Goods & Services Tax can be summed up as under:
- Easy compliance
- Removal of cascading(double tax)
- Uniformity of tax rates and structures
- Simple and easy to administer
- Relief in overall tax burden
How has Goods & Services Tax helped the economy of the country?
The Indian economy has encountered a critical lift since the Goods & Services Tax has been executed. It is relied upon to expand the Gross Domestic Product by 1% to 3%.
How has Goods & Services Tax achieved a brought together unified tax system?
Goods & Services Tax is carried out to coordinate the country’s economy by dispensing with backhanded duties and presenting a uniform duty rate. This would break the financial hindrances of winning in the nation and change it into a national market.