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European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 328
Impact of Gst on Micro, Small and Medium Enterprises
NISHA GUPTA
Assistant Professor, Faculty of Commerce,
S.D. (PG) College, Panipat
ABSTRACT
It’s true that GST means ‘Great Step towards Transformation’, ‘Great Step towards
Transparency’ in India. It has been long pending problem to streamline all the specific types
of oblique taxes and put into effect a “single taxation” system. This machine is referred to as
GST (GST is the abbreviated form of goods & service Tax).A comprehensive dual Goods and
Service Tax (GST) has replaced the complex multiple indirect tax structure from 1 July
2017.It is the biggest tax reform ever happened in India. Now were witnessing, how this tax
reform reshapes our economy and business dynamics for Micro, Small and Medium
Enterprises. The Micro Small and Medium Enterprises sector is a major constituent of our
economy and contributes significantly to manufacturing output, employment and exports of
our country. This paper look into how GST impact and what are its implications on the Micro,
Small and Medium enterprises of the country.
Keywords: GST, Single Taxation System, Indirect Tax, Economic Reforms
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European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 329
INTRODUCTION
India has witnessed substantial reforms in indirect taxes over the past two decades. Even after
these reforms indirect tax was a highly fragmented and distortionary tax structure
characterized by multiple tax rates, barriers to interstate trade and cascading of taxes.
However VAT reforms have succeeded in preparing the ground for the introduction of a
comprehensive Goods and Service Tax [GST]. Goods and Services Tax [GST] is a system of
indirect taxation in India merging most of the taxes into single system of taxation.
The pioneering Goods and Services tax is now on its way to be implemented from 1st July. It
is important to understand that GST is not a tax concession scheme where the government has
reduced the tax rates and hence all the goods and services would become cheaper once GST is
implemented.
Government was attempting to fix a single Revenue Neutral Rate (RNR) on the goods and
services so that the total tax revenue of the State and the Central Government remain same.
The GST Council has finalized a four-tier GST tax structure of 5 per cent, 12 per cent, 18 per
cent and 28 per cent, with lower rates for essential items and the highest for luxury and de- merits goods, including luxury cars, SUVs and tobacco products, that would also attract an
additional cess. There is also a special rate for precious metals. The rate of 18% would
however be applicable for most goods and services.
Most goods would become more expensive since the GST rate of 18% or 24% is much more
than the present VAT rates which are around 12-15 %. Some goods would become cheaper
due to lower rates levied on such items. The dealers and retailers are not likely to pass on this
extra rate immediately to the consumer and they would profit from the increase Input Credit
Tax (ICT). However, soon the consumer would reap the benefit and the prices would come
down. All the services would become more expensive immediately since the present Service
Tax rate is only 15% which is now raised to 18% in GST.
Most analysts forecast the economy to grow close to 7.4% in 2017-18, the first year of GST
rollout, which is slightly higher than 7.1% in 2016-17, but lower than 7.9% of 2015-16. While
GST is unlikely to be a “positive” for economic growth in the short term, Crisil’s Joshi said
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Page 3 of 10
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 330
the reform will improve the ease of doing business, bolster investor sentiment and lure more
foreign investment in coming years.
GST (GOODS AND SERVICES TAX)
GST known as Goods and Services Tax applicable to both goods and services, will be levied
at all the stages of supply. Tax will be charged on all taxable goods and services in India.
There are two components included in GST: CGST and SGST charged by Central and State
government respectively. In the interstate transaction central government will collect GST and
distribute it to the imported states.
MODELS OF GST
Very First County to adopt GST is France, adopted GST in the year 1960. Different models of
GST are as under:
1. STATE GST: In this model tax is charged by respective states of the nation, it is
applicable in USA.
2. NATIONAL GST: In this system Central government collects the taxes and
distributes it among the states with certain provisions. It is followed by China and
Australia.
3. NON CONCURRENT DUAL GST: in this model states collect GST on goods
where as GST on the services would be charged by Central Government.
4. CONCURRENT DUAL GST: Tax in this model is levied by central and state
government on both goods and services.
5. QUEBEC MODEL: In this system different provisions prevail for States and central
government for collecting tax.
Concurrent Dual GST model comprises three terms which are:
1. CGST: Central Goods and Services Tax
2. SGST: State Goods and Services Tax
3. IGST: Integrated Goods and Services Tax
CGST is going to be charged by Central Government for the transactions related to intra state
which will be paid to the account of central government. SGST is proposed to be collected by
