Welcome to a new era of taxation in India. The new tax regime of GST would have an impact across all the sectors.
The new taxation system is being welcomed by the business community, looking at the taxation simplicity, nation wide uniformity and long term benefits, or should we say “the easy flow of business”. We appreciate and respect the efforts that have gone in over the years to get all the stakeholders into a common platform / consensus.
Let’s look at the impact of GST some of the sectors, with a little more focus on the e-commerce space. The information below is collated from various sources and sites.
- Agriculture: GST is very important to enhance the timeline of the supply chain mechanism. If the supply chain enhances, then there will be reduction in wastage and the cost for the farmers would also come down. In the long term, GST would be help the farmers a lot as it will pave the way for a single national agriculture market.
- FMCG: Under the present tax structure, different states impose different VAT rates on the same goods. With GST in place, the standard uniform taxes will lead to standard pricing across the nation.
- Automobiles: Different GST rates have been formulated based on the type of vehicles. Automobiles are kept in the 28% GST bracket with different cess for different type of vehicles. Cess can be in the range 1 to 15%. The initial impact on automobiles may seem downbeat.
- BFSI: GST for the BFSI sector is seemingly the most complicated – The process of business transaction and service matrix is complex. IT solutions would need to solve the BFSI’s complexity of transactions, operations, and GST compliance.
- E-commerce: Online marketplaces will need to deduct 2% tax per transaction (Tax Collected at Source – TCS) while making payments to sellers listed on their portal. This rule however does not apply to offline retailers. With TCS, capital will be blocked for about 3 to 7 weeks depending on the transaction date. TCS will deter sellers from listing themselves on e-commerce marketplaces and may hit the e-commerce industry.
- Unregistered merchants in e-commerce space: GST registration for regular offline trading is mandatory for merchants having turnover of Rs. 20 lakh or more. However, if a trader wishes to sell through online portals he needs to get GST registration irrespective of his turnover. So, smaller merchants or those without proper GST registration will be forced to move out of the e-commerce space.
- Handling returns and refunds in e-commerce space: Many products sold online carry a return policy of 30 days, and the total number of such transactions per month is quite huge. Any returns and refunds for these will have to be done with care to handle the compliance issue, because the returns now need to be filed monthly by both parties and refund adjustment will need special attention and would affect the tax liability.
The whole industry spectrum would have an impact owing to the GST. Looking at the taxation simplicity, nation wide uniformity and long term benefits, or should we say “the easy flow of business”, the impact of GST is envisaged to be positive for the business growth. The GST taxation simplicity would also attract foreign investments across various sectors.