Growth in the industrial sector is a vital player in the country’s GDP. The Industries in India can be classified based on 5 major factors like strength of labour, raw materials, ownership, source of raw material and finally miscellaneous. Click Out – https://www.businesstoday.in/current/slowdown-blues/demonetisation-gst-continued-to-impact-india-consumption-story-in-2019/story/392928.html
Salient Features of GST and How It Impacts The Industries
GST is a destination-based consumption tax levied at multiple stages of production and distribution of goods or services. It is a combination of several other taxes like the state and local tax, entertainment tax, excise duty, and others. This includes packaging, commission and other various expenses incurred during distribution and sales.
The very important feature of GST is that the goods and services are considered alike and they are taxed at a flat single rate. The tax reforms give equal footing to large enterprises and SMEs and the taxes are transferred uniformly. Another feature of GST is that t will be dual based, ie, both the center and state governments will levy GST separately. The center levies CGST and the state levies SGST respectively. GST will be levied on the import of goods into India too. The final salient feature of GST is that it eliminates the cascading effect of various state and central taxes. State taxes subsumed by GST are VAT, entertainment tax, luxury tax, betting, and gambling tax. Central taxes subsumed by GST are Central Excise Duty, Additional excise duty, service tax, additional customs duty, and central sales tax.
SMEs, Startups And The Impact of GST
As per experts the effect of GST will be more on SMEs and startups and the result will be favorable in more than one way.
- GST enables a centralized registration which makes starting a business easy and later on its expansion, later on, is an added advantage for SMEs
- Small dealers and traders have an exemption of GST up to 25lakhs.
- No entry fees will be charged for goods crossing state lines. This results in reduced logistics cost for bulk goods manufactures thereby increasing eCommerce across the country,
The challenges faced by SMEs is the neutrality of the GST bill. Initially, tax exemption for a manufacturer was slabbed under 1.5crores. Upon the introduction of the GST, the slab was fixed at 25lakhs. This will now bring a lot of industries into the taxable slot. Another flip side is that GST doesn’t differentiate between luxury and normal goods. This will make competing against large scale industries harder. This will also increase the cost of products for businesses that supply directly to the customer.
The Efforts Of the Government
For countrywide pervasive tax reform, like GST, mixed opinions will roll in. Also, the acceptance rate will vary between states. But the government pitches in and introduces new schemes and plans based on the feedback from the previous budget years to introduce new changes to it. As a result, both the business as the economy can grow in tandem. Slashing of tax percentage in order to entice manufacturing units to have an office and run the business in India and thereby regulate the flow of foreign money into the country.