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Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 09
August 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 41
GSTAnd ITS Impact on Various Sectors
Kulwant Kaur
Assistant Professor in Commerce,Govind National College, Narangwal,Ludhiana,Punjab
(Email id –dimple.kulwant@gmail.com)
ABSTRACT
The idea of GST in India, where centre and
state taxes to be amalgamated into one, was
mooted by Vajpayee government in 2000
and was passed by the Loksabha on 6th May
2015. Despite huge criticism such structure
seems to have mixed effect upon various
sectors. The VAT payable varies across states
ranging from 1-15% and is applicable on the
supply of goods portion of the contract. But
GST is a wider term and the present paper
examines its implementation impact on various
sectors by comparing GST and earlier rates.
KEYWORDS: GST, construction works,
automobiles, insurance policies
INTRODUCTION:
The Goods and Services Tax (GST) is a vast
concept that simplifies the giant tax structure
by supporting and enhancing the economic
growth of a country. GST is a
comprehensive tax levy on manufacturing,
sale and consumption of goods and services
at a national level . The Goods and
Services Tax Bill or GST Bill, also referred
to as The Constitution (One Hundred and
Twenty-Second Amendment) Bill, 2014,
initiates a Value added Tax to be
implemented on a national level in India.
GST will be an indirect tax at all the stages
of production to bring about uniformity in
the system. The present study seeks to
examine impact of GST on four sectors- construction works, automobiles, corporate
world and insurance premiums.
OBJECTIVE OF STUDY
The present study seeks to achieve following
objectives :
To compare rates of taxation on raw
materials of construction industry
To evaluate the impact of GST on
various insurance policies
To study impact of GST on
corporate world
RESEARCH METHODOLOGY
In order to achieve the objectives of the
study, the data regarding GST is collected
from secondary data consisting of journals,
articles, newspapers and magazines. To have
more accuracy, descriptive type research
design has been used. The tabular and
functional analytical dots were used to
achieve aim of study. The graphic
representation of the study has also been
done.
.[A] GST and CONSTRUCTION
WORKS
The much-awaited Goods and Services Tax
(GST) rates have been finalised for various
sectors including the Construction. The
composite supply of works contract in this
sector will fall under the 18% GST rate
with full input tax credit (ITC). However,
many construction activities (like
construction of roads, dams, irrigation) are
Page 2 of 5
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 09
August 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 42
under service tax exemption list and do not
have to pay service tax. The VAT payable
varies across states ranging from 1-15%
and is applicable on the supply of goods
portion of the contract. Thus, the effective
tax incidence for an average construction
contract in the pre-GST era is typically in
the range of 11-18%, which is lower in
comparison to the announced GST rate of
18%.
fig 1 GST rates and earlier rates
Fig 1 shows new GST rates and earlier rates.
Cement will be taxed at the rate of 28%
under GST. It is higher than the current
average rate of tax by 23-24% Iron rods and
pillars used in the construction of buildings
are charged at the rate of 18% which is
similar to the current average rate of 19.5%.
Bricks used in the construction of buildings
and houses are taxed under GST at the rate
of 28% except for the rate of ceramic
building bricks which is kept under 5%.
Currently, all kinds of bricks except the
ceramic ones are charged an average tax rate
of 25-26% including all the state as well as
central level taxes. Also, the logistics cost of
construction materials will experience a
reduction through subsuming of taxes.
Despite higher rates, the sector is likely to
benefit from the availability of input tax
credit.
[B] GST and CORPORATES
India’s new Goods and Services Tax (GST)
will significantly improve the country’s
business environment. If GST is
implemented effectively, it will have large- scale benefits for multinational companies at
all stages of the supply chain, including
procurement and sourcing, manufacturing,
distribution, and pricing.
Benefits of Imports
1. Imports as an interstate trade: The
GST will streamline the import
framework in India as additional
customs duties will be consolidated
into the GST. Imports will be taxed
as interstate trade within the country
at the IGST rate. Importers will also
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10
15
20
25
30
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cement wall paper paints and
varnishes
putty, wall
fittings
plaster ceramic tiles sand lime
bricks
GST rates Earlier Rates
Page 3 of 5
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 09
August 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 43
be able to claim input tax credit on
IGST, reducing costs even further.
2. Inventory management: To avoid
the tax earlier, multinationals open
small warehouses in the states where
they supply and transfer stock to the
warehouses instead . Under GST,
these tax boundaries between states
will disappear, and the focus will
shift to service times and operational
efficiency rather than tax efficiency.
This will allow companies to open
large, central warehouses to
maximize efficiency and reduce
costs. Multinationals will also be less
dependent on smaller state
distributors and will be free to work
with more cost-effective larger
national distributors.
Benefits To Indian Manufacturers
Lower costs: GST will reduce the
cost of goods for firms
manufacturing in India. The firms
will be able to source materials from
across borders without paying
additional taxes and will also be able
to claim tax credit on supplies
sourced across state borders.
Factory locations: Under the current
system GST will allow companies to
decide on factory locations in a tax- neutral environment, based on
commercial and productivity factors.
Availability of economies of
scale: GST will encourage
companies to make factory location
decisions based on productivity
criteria, which will result in
consolidation of the manufacturing
sector. Natural clusters will thus
emerge, allowing multinationals to
benefit from economies of scale.
Distribution networks: The
manufacturers will also benefit from
improved distribution networks and
more efficient inventory
management systems.
Common benefits for all multinationals:
Consolidation: All multinationals
will benefit from GST. FSG’s one- stop portal will make filing easier,
reduce compliance costs and
minimize the cascading effects of
multiple taxes.
Level playing field: GST will also
level the playing field between
multinationals and local competitors,
as a larger share of the informal
sector will be subject to the new
GST system. As tax avoidance
becomes increasingly difficult, local
competitors will find it harder to
undercut prices, reducing the price
differential between local companies
and multinationals.
[C] GST and INSURANCE
The premium paid towards your life
insurance policies has two major
components.The first one is the premium
component for getting risk coverage, that is,
the cost of providing the death benefit and
another is the investment part, that is, cost of
getting the maturity benefit which is your
invested amount plus returns on investment,
if any. The tax applicable under life
insurance policies is levied only on the
component of the premium offering risk
coverage.
For non-life policies, the tax is levied on the
entire premium amount, which is 18 per cent
GST on the premium amount.
