IMPACT OF GOODS AND SERVICE TAX (GST) ON SELECT SERVICES IN INDIA

Abstract

The biggest tax reform in Indian history – GST – was implemented on the midnight of 30 th June 2017. The biggest benefit of GST will be on removal of a significant uncertainty that has been on the horizon for Indian businesses in terms of indirect tax regime for several years. GST over the medium-to –long-term will lead to higher revenues to centre and states while also increasing the size of the economy and having positive impact on gross domestic product. From a services standpoint, the service tax rate currently applicable is 15% (inclusive of cesses). Under the GST regime, this rate may go up to 18%. For a business customer, GST would be (generally) creditable and hence would not result in increase in cost. However, for an end customer, there prima facie appears to be an increase in indirect tax costs. In this context, it is worthwhile to note that there are several non-creditable taxes such as VAT/ CST on procurements made to render the output services. Under GST, although the output taxes would increase from the current rate of 15% to an effective rate of 18%, it is expected that all non-creditable taxes forming part of the procurement costs today should become creditable and this is expected to marginally offset the increased rate of taxes on the output side, specifically for those service sectors that are capital goods/ inputs intensive. The present study is an attempt to study the overall impact of GST on goods and services, it is now pertinent to briefly examine the key sectors and the manner in which GST might impact them