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Impact of GST On Large Businesses

Nitesh Goswami -

Goods and Services Tax (GST), the allegedly controversial tax reform has been amplifying India's Large Business sector. GST was rolled out three years ago and was expected to unify the Indian economy under a single tax bracket.

The comprehensive “One Nation One Tax” system of GST was successful in subsuming all the indirect taxes.

However, the impact of the Goods and Service Tax (GST) had slightly different outcomes across the industries. The primary differentiators would be whether the industry is in service-based products or manufacturing, distributing and retailing.

A large business having a GST registration is likely to experience the business-friendly and conducive aspects of GST.

Some of the advantages of GST being:

  • GST has under its wing the service tax, luxury tax, sales tax, central excise, etc., simplifying tax calculation and the overall process.
  • As opposed to VATs (Value Added Tax), GST is anticipated to cut down the cost of goods and services without inflation.
  • GST seeks out a corrective measure to regulate and hold unorganised sectors accountable that generates large-scale revenue
  • GST eliminates segregated transaction value of services and goods respectively for the tax liability.
  • GST Network is at the core of GST, which simplifies the process of GST operation.
  • GST removes any instances of double taxation, eradicating instances of economic distortions.

GST has three types of services and goods taxes:

  • IGST: Revenue of the inner-state sales is collected by the central government.
  • SGST: Revenue of the intra-state sales is collected by the state governments.
  • CGST: The central government collects Revenue.

GST’s role in impacting Businesses:

  • Compliance: GST registration and statutory compliances with the tax credit, return reporting etc.
  • Program Management: Driving project delivery, delivering communications, ensuring quality assurance, streamlined budget management etc.
  • Indirect Tax Impact Assessment: Availability of a revenue stream, credit of GST, procurement stream etc.
  • Technology Refresh: ERP tools compliance with GSTN with the ready-made auditing system
  • Supply Chain: Revamped operating model, sourcing, in house vs outsource, supply chain process and working capital.
  • Accounting & Reporting: Change in accounting entries.
  • Change Management & Training: Enabling business engagement which facilitated business readiness.

Impact of GST across various sectors of business

  • Logistics sector in the context of India can be seen as the backbone of the economy. If maintained, this sector has the potential to amplify the governmental initiatives, for them to be in a more desirable position.
  • The GSTN augurs perfectly with the Indian startup pool. GST’s pan-India model offers DIY compliance, a free flow of services and goods, and tax credit on purchases, enhancing the startup scene.
  • The GST subsumes a series of different taxes levied on the automobile industry that produces a large quotient of cars annually.
  • Freelancing, a fairly new industry has taken hits due to a lack of regulations and rules. However, GST makes these service providers, as recognised, has brought accountability in this nascent sector.
  • Agricultural sector is the largest contributing one in India, covering 16% of the Indian GDP. They have faced transportation issues concerning the supply of agricultural products which GST tries to resolve.
  • Textile Industry contributes a total annual export of 10%, and GST anticipates an increase of that value.
  • Telecom sector will tentatively receive a price cut down with GST, saving manufacturing costs via increased efficiency inventory and warehouse management.
  • The Pharma and the Healthcare sector will also benefit from GST, which will affect the pricing structure, establishing an equilibrium for drugmakers and medical tourism. Tax respite is also one of the biggest changes initiated to make healthcare more accessible and affordable.

Impact of GST on Large Business

We are no stranger to Statical Reports released by the government. Likewise, the report released on GST on completion of 3 years highlights some key statistics.

Public listed companies in the country contributed the highest amount of 35.29 per cent revenue of GST where these companies comprise 0.62 per cent of the taxpayer base.

Most of the revenues were generated by businesses with a turnover of Rs 5 crore or above annually. They comprised 7 per cent of the taxpayer base with an overall contribution of 80.7 percent GST revenue.

The GSTN have been quite proactive with GITA (GST Interactive Technical Assistant), a chatbot with pre-drafted messages on topics like GSTr 7, GSTr 4, GSTr 2, GSTr 9, GSTIN registration, GST registration online, GST filing online, GST on real estate etc.

Since its adoption, GST had teething troubles which, however, has made a positive impact on large businesses. Here are some advantages pertaining to GST’s impact on large businesses.

  • Businesses claiming for ITC (Input Tax Credit) under the Furtherance of business feature of GST is a benevolent feature where claims can be made on services like advertising and marketing despite paying taxes for the same.
  • Manufacturers used to pay 2% of the value of the goods at each state border adding on to the 1% octroi paid towards consumption of the good, the GST, however, subsumed all this under a single tax regime and there seems to be no requirement of having warehouses at every state.
  • E-Way has helped in free-flow movement of goods, both inter and intrastate. The portal is easy to use, and dealers can generate bills without having to deal with extra hassles.
  • An Annual Survey conducted by Deloitte unveiled that 77 percent of their participants believed in GST’s positive ramifications on businesses. They are also likely to take greater risks because of GST’s revamped business parameters.

Also read:
GST: Invoice, rules & formats
GST impact on Real Estate

FAQs

Q. What is a GST Return?

A. GST return is a record of financial activity of a taxable person over a prescribed period of time. This also allows the taxable person to assess the tax they owe over that specific period.

Q. Who needs to file GST returns?

A. Every taxable person registered under the GST regime and crosses the threshold for paying taxes is eligible to file GST returns.

Q. I have a grocery shop, what type of GSTR should I go for?

A. If your business is small scale, you can opt for the GSTR 9 form on the GST portal, but if you are a large scale business, GSTR 7  would be a suitable GST return form for your business, as it comes pre-determined with the deductions.

Q. What are the documents required to register for GST?

A. For registering for GST, you must have the following documents:

  • PAN Card
  • Business proof
  • Registration Deed (in case your business is a partnership or LLP)
  • Return File for the fiscal year

Q. What are the types of GST returns?

  • GSTR-1: Filed for monthly returns as a part of outward supplies
  • GSTR-2: Filed monthly returns as a part of inward supplies.
  • GSTR-3: Filed by taxpayers as a part of their monthly returns with details of returns from other months.
  • GSTR-4: Filed for quarterly returns
  • GSTR-5: Filed by non-resident taxpayers
  • GSTR-6: Monthly returns filed by input service distributors
  • GSTR-7: Filed for Tax Deducted at Source or TDS
  • GSTR-8: Filed by e-commerce operators as a part of their accumulated monthly returns
  • GSTR-9: Filed as annual returns
  • GSTR-10: Filed when business activity is terminated permanently
  • GSTR-11: Filed by taxpayers who have a UIN or a Unique Identity Number