GST BENEFITS TO IMPACTED SECTORS

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GST Benefits to Impacted Sectors

Cost reduction for manufacturers: Once GST is rolled out, there will be a common tax structure and thus, the burden of paying tax over tax will reduce.

Cost reduction for logistics players: Logistics players create a stock transfer between inventory stocking points within states to avoid this multi-tax scenario. They have a large number of smaller warehouses at various locations amounting to more than 50 small warehouses in some cases, which increases the overall cost of logistics.

Merger of smaller warehouses: Many of the smaller warehouses lack proper infrastructure and facilities. With a new tax structure, the focus would shift on efficiency rather than tax saving

Development of new technologies: The current scenario prevented use of new technologies as the cost structures in place resulted in margins of less than 5% on a turnover of few million rupees.With implementation of GST, smaller warehouses will re-align/ merge into more productive and logical locations.

Increase in transportation lot size:With the development of bigger warehouses, the transportation lot size will increase. This will reduce the cost and time taken in transportation of goods.

Hub & spoke system: Organizers will now be able to explore a different distribution model such as setting up mother warehouse and regional distribution hubs, which will be away from the traditional carrying and forwarding (C&F) distributor-based models currently adopted.

Increase in cash flow: The new regime could increase the profit after tax of logistics players, thus giving them a better cash flow.

Reduction in transit time: The introduction of GST will reduce transit time taken for border crossings and paper work.

Increase in organized warehousing sector: As a result of the GST, there will a reduction in unorganized warehousing. Price charged by the organized sector will reduce the price advantage that unorganized sector presently enjoys.

Also read :  GST Impact on Import and Export 

GST impact on business

  • GST is a national standardization of indirect taxation, resulting in the subsument of several previous state and federal tax regulations. Goods and services are taxed in one of four main slabs: 5%, 12%, 18%, or 28%, establishing a new standard in indirect taxation.
  • Indirect taxes have historically had a large impact on firms, particularly on their working capital. Several taxes, including as VAT, Service Tax, Excise Tax, and others, have resulted in large government payments and, as a result, a large expense for enterprises.
  • Indirect taxes have been a significant drain on working capital due to their hidden character, which can span over various stages of the product cycle.
  • In most cases, the proportion of indirect taxes in tax collections in developing countries is much larger than in developed ones, where the share of direct taxes is significantly higher.
  • The GST has changed tax buckets, as well as the way businesses operate, as cash outflow and deadlines have been dramatically impacted. Working capital is a company’s lifeblood, the fuel that keeps it going. It aids day-to-day operations, which are critical to business continuity and success, particularly for SMEs.

Also Read : GST Impact on Real Estate 

Top 3 Benefits due to GST for Indian Economy

Applicability of GST

Goods and Services Tax (GST) is applicable to all businesses with Revenue/Turnover > 20 lakhs

Is it a new Tax or does it replace existing ones?

GST replaces a bunch of taxes. It subsumes a majority of indirect taxes like excise, sales, VAT services levies.

Key Benefits of GST

  1. GST will eliminate the cascading effect of taxes, hence improving the competitiveness of enterprises’ exports. As a result, the GDP should benefit as a result of this.
  2. GST should make intra-India trade easier by lowering logistics costs. According to estimates from logistic businesses, their trucks spend up to 60% of their time dealing with checkpoints and excise at India’s numerous state borders. For example, transportation vehicles in India travel 30% less per day than their counterparts in the United States. As a result, transportation would become more cost, time, and utilization efficient.
  3. Tax avoidance would be less prevalent. Let’s have a look at an example. GST would allow a toy manufacturer to claim tax credits for the raw materials he purchased from toy raw material suppliers along the supply chain. The unique GSTIN of each corporate entity and the unique Invoice number bind the tax chain together. The Manufacturer must confirm / tie-up with the same GSTIN and Invoice number in order to claim the tax credit. Now imagine the Manufacturer selling the manufactured toys to a Shop Seller. If a Shop Seller tries to evade tax, he may be caught by an audit conducted by others (Manufacturer) along the tax chain using the unique GSTIN and Invoice numbers.

Also read : Effect of GST on Advertisement and Cinema Industry

Overall, because GST is a single tax that encompasses numerous existing taxes such as excise, VAT, service taxes, state taxes and levies, and so on, it would simplify tax processes and make doing business easier.

Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

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