GST has been implemented from 1st July 2017. With the introduction of GST, most of the indirect taxes will be replaced by “one nation one tax” regime. GST council has proposed four different tax slab rate of 5%, 12%, 18% and 28% on the different category of goods and services. The full-fledged impact of goods and services tax in real terms should come out after the period of 2-3 years. One tax regime is designed for the ease of doing of business in India. Under the current regime, financial services and transactions attract 15% of service tax but with the introduction of GST financial services would attract 18% of tax. With the new GST regime, surely we are going to be impacted. Let us see how and in what manner it will impact your money.
Impact of GST on consumer products
Consumers good are expected to become cheaper under one tax regime. The present rate of taxation is around 25-30 percent on consumer goods and proposed goods and services tax rate is around 18 percent hence making it cheaper. GST is also supposed to address the challenge of tax leakage in the supply chain. GST is quite beneficial for the consumer goods and FMCG companies.
Impact of GST on real estate
The impact of goods and services tax on real estate sector will be positive as GST will help to remove the multiple taxations which are a pain for both the consumers and builders. Some of the clauses in model goods and services tax law restrict credits on goods and services acquired for the construction of immovable property which may lead to the rise in litigation. GST is supposed to benefits real estate sector by ensuring a uniform and easy compliance with the tax structure.
Impact of GST on Automobile sector
To see the impact on automobile industry we have to understand the current tax structure. Currently, automobile sector is paying taxes around 27 percent to 45 percent, though this tax structure ranges from a small car to SUVs. The proposed one tax regime rate for the automobile sector is 18 percent and for a luxury vehicle, proposed rate is only 28 percent hence this would result in the lower cost of purchase for the consumers.
Impact of GST on Mutual Funds
Investors have to pay more tax as compared to current tax regime but in reality, change is so minimal that it will not affect them. Mutual funds impose a Total Expense Ratio (TER) on investor which ranges from 1.25 percent to 2.75 percent. With the introduction of GST, it will rose to 4-7 basis points. 100 basis points accumulate to form 1 percent. Hence it is quite clear that 4-7 basis point increase in Total Expense Ratio (TER) will not affect investors.
Impact of GST on banking sector
Like every sector, banking sector is also getting impacted by the new goods and services tax regime. One tax regime effect on banking sector is twofold. Banking services like fund transfers, ATM withdrawal, and loan processing fee, which attracts service tax under current regime is 15 percent now will attract tax at the rate of 18 percent and services which do not attract service tax under current tax regime like opening bank account and fixed deposits, will not be impacted by the introduction of new goods and services tax regime.
Impact of GST on insurance policies
Under current tax regime premium on insurance policies is taxed at the rate of 15 percent but with the introduction of Goods and Service Tax (GST) it will increase up to 18 percent. But this increase in tax rate will be offset by input tax credit.
Impact of GST on cement industry
Looking to the current scenario cement industry is paying around 27 to 32 percent as tax and with the introduction of goods and services tax, it is supposed to come down around 28 percent. Cement industry does not have much relief from the proposed goods and services tax regime. One tax regime is likely to have a negative impact on cement industry and it is also supposed to bring the downfall in manufacturing and mixture sector as well.
Impact of GST on Chemical Industry
GST will have a positive impact on the chemical industry. Almost every predictable impact of the goods and services tax on any sector of Indian economy seems positive but for the chemical industry, it seems much positive. Chemical sector in India has long suffered the wrath of multiple additional taxes on their consumption capacity as well as their consumption demands but now this seems to end with the introduction of goods and services tax. The easing of CGST and SGST will result in the lower cascading effect of multiple taxations on the production capacity of chemical industries resulting in a reduction of production costs hence benefiting the chemical industries.
Impact of GST on telecom sector
The proposed goods and services tax will end the issues related to the classifications of software, sim card, and franchise fee, among others. Like all other sectors, the elimination of duality of taxes is expected to help the growth of telecom sector as well and ease the doing of business. However, proposed rate of telecom sector under the goods and services tax is 18 percent which is higher than the earlier rate of 15 percent.
Impact of GST on Pharmaceutical Industry
In terms of value, Indian pharmaceutical industry is world’s 14th largest pharmaceutical industry. goods and services tax will benefit the pharmaceutical industry by making the taxation process easier and replacing most of the indirect taxes and duties. The new one tax regime taxation rates have included pharmaceutical products into two tax slab one is of 5 percent and another one is 12 percent. Ayurvedic drugs and medicines would become more costly after the introduction of GST.