The Goods and Services Tax, or GST, was introduced by Prime Minister Narendra Modi and implemented across the country on 1st of July 2017. Dubbed the ‘Good and Simple Tax’ by the Prime Minister and his Cabinet, the implementation came after long deliberation and amidst much opposition from various sectors of the population, including political personalities from the various states. Pushing all opposition aside, however, the GST was rolled out for the general public, bringing about a massive change in the day to day economy for the people. Three months on, the GST has become pretty much part and parcel of our lives. Economists and financial experts have variously called the GST great and senseless, with many calling India unprepared for such a drastic step. In this essay, we will weight these comments and assess the ways in which the GST has impacted the country.
What is GST?
First of all, we need to know what the GST is. It is an indirect tax that has been levied to replace the different taxes imposed by the central and state governments. All goods and services fall under this taxation system, with different values of GST imposed on each category, namely, 0%, 5%, 12%, 18%, and 28%. Apart from this, some goods like gold and precious stones, and luxury items like tobacco and alcohol, have additional taxes and cess levied on them.
Positive effects of GST:
Clearer taxation system
First of all, the GST makes the process of taxation much clearer and transparent for the general public. Instead of having to pay different prices for the same goods in different parts of the country, people now pay a uniform price. It has also effectively curbed the chances of the corrupt practice among institutions of charging extra in the garb of a variety of taxes.
Reduction in real estate prices
Real estate in India has recently seen an immense increase in prices, thanks to the reduction of buildable land and an increase in workforce wages. Besides, this sector is notorious for its association with antisocial, criminal activities, and corrupt government officials. As a result, transparency in prices was almost unheard of, and different real estate companies and individual builders levied arbitrary surcharges, hiking the price much above its base rate. The introduction of the GST is expected to bring down real estate prices by 1-3%, leading to a much more affordable buyer’s market.
Helps cottage industries
The highest GST has been implemented on luxury goods, which includes harmful products like tobacco, increasing the prices and forcing people to purchase less. On the other hand, small businesses and cottage industries have lower GST implemented on them, thus effectively lowering their prices and increasing their sales, and also leaving more capital and profits for the owners.
New courses and higher employment
In a separate but equally important way, the introduction of the new taxation regime, along with the introduction of a new system of tax file returns (taxes now have to be filed on a monthly, quarterly, and annual basis) have translated into a lot more work for the CA firms and independent Chartered Accountants. Due to this increased demand of CAs, the CA firms have starred to hire fresh graduates in higher numbers than before in order to undertake the hugely increased bulk of data compilation and accounting. This has also led to the introduction of new courses on GST in some colleges.
The GST has also brought about some hassles, especially for the accounting firms and businesses.
Negative effects of GST:
Implementation of new software
The implementation of the GST has forced the accounting firms to change the software that they have used so far to calculate taxes. These software already have VAT, excise and service tax incorporated in them, and the implementation of GST forces the firms to upgrade their systems to comply with the GST parameters, or purchase whole new software. Naturally, this has led to a whole lot of hassle and increased expenses.
Speaking of expenses, the GST has also considerably increased expenses for accounting firms and small businesses alike in terms of employees. Some small businesses filed their own taxes, and that has become problematic since a lot of people are still not well conversant with the GST, and accounting firms have to employ new people who have been coached in the GST. Apart from that, the implementation of the new GST-complaint software also translates to additional expenses involved in the training of the existing employees.
It is really too early yet to actually pass a verdict on the GST. It has faced much flak and admiration; the imposition of a luxury tax on sanitary napkins has drawn much criticism, whereas the removal of taxes on condoms has been applauded. It remains to be seen whether the controversial taxation system actually pays off in the end and turns into the revolutionary step it was meant to be.Labels:positive and negative effects of gst on real estate business,