Goods and Service Tax or GST is a mandate for taxing released by the government, which came to fruition on July 1st, 2017. It was launched as an indirect tax regime, whose objective was to achieve the “one nation, one tax” goal. This tax is applicable to the supply of all types of goods and services.
The major idea of GST registration was to eliminate all the indirect taxes paid by the businesses are consumers, except a few types of state taxes.
So, since its launch in 2017, how has GST impacted the Indian economy, and especially the big brands? Has it helped? Is there room for improvement in the mandates of GST filing? Let’s take a deep dive into how GST has impacted the big brands, and what the future looks like for these brands.
Retailers, Distributors, and Manufacturers - GST’s Impact on the Trinity of Goods Distribution
The competitiveness in the manufacturing sector has seen a huge bump after the implementation of GST. With the implementation of GST registration for manufacturers and distributors, they no longer have to pay the indirect taxes that they used to before, which has given them a much needed relaxation in this domain. Moreover, the burden of following many different types of compliances for indirect taxes has also been lifted off their shoulders, which has encouraged the sector to grow at a faster pace.
Another development that came with the implementation of GST is that businesses can no longer be exempted from the tax regime, and have to register for GST. This means that any business operating on Indian grounds will be registered and monitored under the GST tax regime.
This means that all the retailers and service providers are now exempted from any indirect taxes as well, and operate under just one tax regime - GST. Although, this also means that the distributors, retailers and service providers will have to register in all the states for GST filing from where they operate on.
Impact of GST on Big Brands in Various Sectors
Let’s take a look at the sector-wise impact of GST on big brands:
Agriculture holds 16% of the Indian GDP, which is the largest contribution to the Indian economy. Big brands in agriculture have had a huge sigh of relief after GST, as they no longer have to worry about the huge transportation costs across the states in India. GSTs tax relaxation has significantly helped big brands in saving their capital and investing it in more productive regions.
The benefits of GST for automobiles were best received by the customers. With all the different types of taxes like sales tax, road tax, VAT, excise duties, etc., adjusted into one tax, the sales for automobiles boomed like never before. This helped many of the big brands in the automobile industry in capturing record growths in the year 2018 and 2019! Customers with credit cards were especially engaging in this development in the automobile industry, where they could even save on the interest rates due to GST.
The Fast Moving Consumer Goods industry has had its fair share of benefits from GST as well. With a significant saving s reported in the logistics costs and even the distribution costs, the bog brands in FMCG industry have reaped the benefits of GST registration very well in the past few years. The primary reason for this has been that GST has helped in eliminating the costs for brands in building various sales depots.
The growth of the eCommerce sector was already on a sky-high before GST came into existence. However, with the help of GST, not only big brands have experienced an exponential growth, but have also captured long-term positive effect of this tax regime. This being said, many big brands are not too happy with the “Tax Collection at Source or TCS” mechanism that is introduced by GST. The TCS rate right now is at 1%, but is expected to go higher in the upcoming years based on the sales and revenue of the big brands in eCommerce.
The logistics industry, in some ways, is the backbone of the Indian economy. The “Make in India” initiative, coupled with GST, has proven to be a blessing for the big brands in this domain. With a significant boost because of the tax regime, big brands in logistics have dispersed all across the country and expanded their operations to reap the benefits of the potential success waiting for them for their customers and investors alike.
The real-estate sector has been playing an essential role in generating employment in India. Due to the GST implementation, accountability and transparency in this sector have seen a huge growth, which has been a key factor in the domain’s growth over the last years. Moreover, the industry is dependent on tax rates, and one tax for all mechanism has helped make the operations of the big brands more streamlined and efficient. However, since the brands are now in the public eye, they are being held accountable for any mistakes they make, which has boosted the growth of many up and coming brands in this sector to make a significant impact in the industry.
There are many impacts on the Indian economy brought in with the implementation of GST. However, it is the consumers who are the winners here, as they no longer have to pay elaborative additional amounts of money under the guise of indirect taxes. The GST tax regime may have its fair share of disadvantages, but holistically, it has impacted the Indian economy positively, and promoted the growth of all types of businesses. Moreover, it has also attracted a lot of attention from overseas businesses and provided a much-needed investment opportunity in the country for them.
Big brands have seen the majorly positive impact of GST registration, as it has helped them in saving a lot of capital and invest it in other relevant resources to grow their businesses.
Q. What is the impact of GST on credit cards?
A. If you are regular and on time with your credit card dues and payment, the GST tax regime won’t have any impact on credit cards. However, if you’re late on your payments, what used to be 15% service charge before will now be 18% GST for missing payment deadlines.
Q. Can I pay GST using credit cards?
Yes, using the payment portal, you can easily pay all your taxes, including GST, using a credit card, by entering the necessary chalaan details on the GST website after logging in.