The purpose of GST was to bring in the 'one nation one tax' system, but the impact it has created has been different based on the industry; manufacturing, distributing, retailing or a service providing industry.
At present GST is implemented in four tax slabs; 5%, 12%, 18%, and 28% and most of the industries are still in doubt on how these will impact their future growth. Customers are concerned on how much they will need to shed for the purchase of their preferred goods or services. Let's have a look at the changes in effect post implementation of GST.
Changes after GST implementation
- Banking Sector: With the implementation of GST, transaction and service charges of banks have increased. Tax rate has changed from 15% to 18% with the GST coming into effect. Increased tax has also reflected in transactions like ATM transactions, credit card payments etc.. Most of the banks including Vijaya Bank, had notified customers about the revised service charges that would come into effect on account of GST, in their respective websites.
- No more hidden taxes: As mentioned, both the taxpayer and the consumers are equally concerned about the impact GST would create. But the truth is consumers need not worry as the hidden taxes are now unified under the GST and this will be reflected in the invoice handed over to the buyer.
Earlier, consumers had to do the guess work on the breakdown of tax between the centre and the state, but with GST; people can be assured about the single tax bracket split between the state & the centre.
- Check on price rise: Before the GST era, producers/manufacturers had to pay tax at every stage, which led to the cascading of taxes which in turn added to the inflation rate. The result was that the price rise was borne by the consumer. With the implementation of GST, more people paid taxes and the burden has reduced considerably from the consumer point of view.
- Traders go digital: With the advent of GST, traders will have to go digital and they will have to update their IT division to accommodate the changes brought by the same, in order to ensure high compliance with the new procedural changes of GST like;
○ Self-invoicing - if the purchase is made from unregistered supplier
○ Tax credit reversal in case of failure to pay consideration for goods.
These changes in tax regime makes it a necessity for businesses to incorporate changes in the entire process. People will have to train their workers, vendors and all others involved about the changes involved with the implementation of the GST.
- Check-posts removed: As GST is a destination-based tax, border check-posts at the state-boundaries have become obsolete and hence the long line of trucks stranded at these check posts is done away with. With no toll booths, goods get transported much faster which could save crores of rupees caused by the delay in delivery of the goods. The process will be further simplified with the introduction of the E-way bill system.
- Price change of essential commodities: Since the essential commodities were kept in the zero percent tax bracket, there has been no change in the price of the same. On the other hand, motorcycles with engines bigger than 350cc and hybrid cars have attracted more taxes under the GST. Gold rate and telecom services have shown a marginal increase in taxes with the new tax regime.
In real estate sector, there has been a significant impact post the GST implementation. Before GST, a buyer who had to pay 4.5 percent service tax & 4 percent VAT will now have to pay 12 percent GST along with the additional burden of the 5-7 percent Stamp Duty. This is a significant hike when we consider the present condition of the realty market.
These are few of the effects of the GST that we have seen so far and we can hope the Government will bring in more policies for the effective growth of the nation. Click here to stay updated with all the news about the banking industry.