GST Bill has been passed in the Rajya Sabha, further ratified by the requisite number of states.Even the President has given his assent to the GST Bill. So,the implementation of GST is nearing reality.
All the necessary steps are being taken for the effective implementation of GST or Goods and Services Tax from April 2017 in India.
GST has been a hot topic of discussion everywhere these days.So,you need to be aware of different aspects of GST.
How it will impact our lives,once GST is introduced ? How the common man will benefit from GST ? What are the advantages and disadvantages of GST ?
Keep reading further, to have a deeper insight of the positive as well as the negative Impact of GST on common man.
Presently,there are around 160 countries that have implemented GST/VAT in some form or other. In some countries,VAT is the substitute for GST,but conceptually it is a destination based tax levied on consumption of goods and services.
- France was the first to introduce GST or Goods and Services tax.
- Presently,only Canada has a dual GST model (somewhat similar to the Dual GST Model that India is going to implement).
- The rate of GST normally ranges in between 15–20% .However,it may differ to a higher/lower side in some of the countries.
The rate of GST plays a crucial role, that is yet to be decided.Various countries have been struggling to rationalize the rate structure.
India is all set to introduce GST or Goods and services tax after crossing the various hurdles in its way.
Let us hope it is introduced at a nominal rate that proves beneficial not only for the common man but for the country as a whole.
What is GST or Goods & Services tax and What is its Impact on the Common Man ?
GST or Goods and Services Tax as the name implies,it is an indirect tax applied both on goods and services at a uniform rate.This means goods and services will be subject to a uniform tax rate and both will be treated at par.A single form of tax known as GST or Goods and services tax will be applied throughout the country,replacing a number of other indirect taxes like VAT,Service tax,CST,CAD etc.
GST or Goods and Services Tax – A new law,a new tax will bring with it new challenges to face that need to be tackled with utmost care.
So,GST bill covers the Goods and Services Tax and shall be the biggest indirect tax reform providing a uniform and simplified way of Indirect taxation in India.Once introduced GST will replace a number of other indirect taxes like VAT,CST,Service tax,CAD,SAD, Excise,Entry tax,purchase tax etc.
So,a bundle of indirect taxes will get replaced by a new tax in India known as GST or Goods and Services Tax.Hence,leading to a much simplified tax regime as compared to the earlier complicated tax structure comprising of numerous taxes.
As and when a new reform or bill comes and a new law is imposed,it surely leaves its impact especially on the common man.It is ultimately the common man who is directly or indirectly affected by the implementation of any new tax.
Same applies in case of GST wherein the common man being the final consumer of goods shall be directly affected after introduction of GST.
Here,we have tried to cover up the major points related to Impact of GST on the common man or the final consumer.
Simply stated,we have highlighted the main advantages and disadvantages of GST and how GST will affect the 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 : Foodgrains 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 finalised 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%.
The tax rate on Gold is yet to be decided.
It is infact too early to predict the actual impact of GST on different sectors.
The final classification of goods in each of the above category shall be released very soon by the GST Council.
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,CAD,SAD,Excise etc.
- Less tax compliance and a simplified tax policy as compared to earlier tax structure.
- 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.
- Most importantly,GST will help to boost the Indian economy in the long run.
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.
Negative Impact of GST on the Common man or Disadvantages of GST :
- Service tax rate @ 15% is presently charged on the services. So,if GST is introduced at a higher rate which is likely to be seen in the near future,the cost of services will rise. In simple words,all the serviceslike telecom,banking,airline etc. will become more expensive.
- Increased cost of services means, an add on to your monthly expenses.
- You will have to reschedule your budgets to bear the additional services cost.
- An increase in inflation might be seen initially.
- Being a new tax,it will take some time for the people to understand it completely.Its actual implications can be seen only when the rate of tax is determined.
- It is easier said than done.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.
- A strict check on profiteering activities will have to be done, so that the final consumer can enjoy the real benefits of GST.
- Although,a large number of officers are being trained and a systematic IT software is being developed for the successful implementation of GST. But,it will take some time for the people including the manufacturers,the wholesalers,the retailers or the final consumers to understand the whole process and apply it correctly.
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.Also,this can happen if GST is introduced at a nominal rate (hope so)to reduce the overall tax burden of the final consumers.
The rate of GST and how effectively GST is introduced in all the States and at the Centre also plays a crucial role in deciding the actual impact of GST on the common man.
A well designed GST Policy can bring a qualitative change in the tax system of India.
A massive IT Software is being developed for the successful implementation of GST and bring things online.Revenue officials are also being trained for turning GST into a reality.But,the actual performance and results can be visualised once GST is implemented.
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.
Have a look at the Infographic below, that will give you an overview of GST or Goods and Services tax :
Let us hope GST or Goods and services tax leaves a positive impact and helps to boost up the Indian economy and convert India into a unified national market with simplified tax regime.
A rising Indian economy will anyways help in the financial growth of the common man !
Let us hope this “One nation,one tax” proves to be a game changer in a positive way and proves to be beneficial not only to the common man but to the country as a whole.
What are your views regarding GST ? Do you feel it will help the common man ? Will it lower the tax burden ? How positively it will impact the life of a common man ?
Feel free to give your opinion on the same to help our readers learn more about GST !