The government decided to introduce the Goods and Services Tax (GST) to replace the consumption tax ie the sales tax and service tax. It was a momentous moment in the history of the country because it did away with taxes that varied dramatically from state to state. When GST was introduced a year ago, the promised scenario was wholesome but compliance became the largest hurdle for small businesses.
But how has the business landscape changed since the implementation of GST. Has life gotten easier or more complicated? Is there an effect on business, has there been an increase in sales or a decrease? Businesses in Goa had to learn to adjust to the new regime.
Kirit Maganlal, founder and CEO, Magsons Group was quite candid in his views about the GST regime. He said “When GST was introduced a year ago, the promised scenario was wholesome but compliance became the largest hurdle for small businesses.Multiple tax slabs also complicated the compliance process. And so did the filing of different returns through the month. Technology also did not support the Governments thrust and enthusiasm for a smooth roll-out. The fact that the technology portal was ill-equipped to handle the load, government had to regularly extend compliance deadlines. Through the months, to the credit of the Govt, they moved gear pretty fast to ensure that teething issues were attended to and remedial measures initiated. The intent was clear and trade and industry too responded in good measure.”
Maganlal however believes the consumer has benefited to a large extent with overall price reduction on most consumer grocery goods. This benefit from GST, he said came from the implementation of anti-profiteering provisions which ensured passing of tax benefits to the consumers. The trader has got seamless input credit on goods coming into his warehouse through interstate movement with intra-state movement being monitored through the introduction of the e-way bill and finally the retailer benefitted through input tax credits on items which he could not claim earlier in the service tax regime. Some retail businesses also got notices to explain how they had officially claimed nearly 95% input tax credit in their filing of GST.
He commended the government saying that unlike high inflation as in other countries which have rolled out GST, India had succeeded in containing inflation to a large extent during the launch phase, thanks to in part, the much-criticized multiple tax slab structure, which kept the tax as close to the existing tax rates as possible. He admitted that some businesses were unhappy and the hospitality and the real estate industries have a number of unresolved issues still. Petroleum and Liquor still falls outside the ambit of GST. He however believed that while the overall scenario seems encouraging, maybe the real benefit will be seen only after these excluded categories are brought in within the GST.
Anand Chatterjee, GM, Planet Hollywood said that it had not affected his business. Chatterjee said “There is no dearth of business. There has also not been any reduction in business. We are doing better than last year and now with hotels having to pay tax on transaction value instead of the earlier rack rates it has gotten even better for us. This new regime has been good for us, we are not facing any problems.”
An executive at a hotel who was not authorised to speak to media said business was ok but parties still wanted to pay in cash which was very difficult to deal with because the implications of such actions would have to be faced by the hotelier usually.
There is the businessman and then there are the people who help count the money and file them under the proper heading. Sandip Bhandare, President, GCCI and who is also a chartered accountant said the new regime had stabilised to a great extent. He said “There was apprehension earlier but both the government and business have adapted better. Taxes have merged and the government and the local administration were very responsive. The issue of higher rates was addressed and government collection has stabilised. The chamber is also very happy since it is making life simpler for business.”
The introduction of GST was expected to drop prices dramatically in certain categories. The automobile sector was expected to witness a dramatic change with prices expected to drop due to a change in the tax being levied. Reality however proved to be far different. Gaurang Kunkolienkar of Priority Skoda said nothing had really changed. Kunkolienkar said “There was a perception that the price would reduce but that was not the case. The GST plus the cess being charged equals to the old rate. There has not been an increase or decrease in sales. People who have to buy a car are buying it”
Overall, the GST regime had a positive impact on overall businesses, however, more has to be done to simplify the rate structure.
According to a CII report on the transition to GST, its implementation led to increased efficiency for businesses by reducing their transportation time, on account of the absence of state barriers. The survey was based on the responses from over 200 businesses.According to Deloitte India’s annual CFO Survey, 77 per cent CFOs believe that GST has had a positive impact on the overall business. The GST impact reflected better on revenue and supply chain and 58 per cent CFOs saw an improvement in ease of doing business, the survey added.According to experts, the sectors which suffered a setback due to GST implementation are also showing some signs of recovery, owing to progressive government policies. Even when the property rates haven’t come down, developers feel that GST has brought in transparency and accountability in the realty sector. A recent survey by realty consultant JLL has claimed that GST will result in a 20 per cent CAGR growth in the Indian warehousing sector between 2018 and 2020.
In the first year of GST in 2017-18, the government earned Rs 7.41 lakh crore from the tax since its rollout in July. The average monthly collection was Rs 89,885 crore. In the current fiscal, the collections in April touched a record Rs 1.03 lakh crore, followed by Rs 94,016 crore in May and Rs 95,610 crore in June.
The government is now focussing on further simplifying and rationalising the rate structure and bringing more products into GST. It is quite obvious the last word has not been written as yet on this subject or for that matter the last modification to the regime has not been affected as yet. In fact one could safely say it will be an ongoing affair.
