The Constitution of India’s 122nd Amendment Bill was put forth in the 16th Lok Sabha on 19th of December 2014, in order to address widespread issues in taxation. GST is also called as the Goods and Service Tax and it is regarded as an indirect tax that has replaced many indirect taxes in India like VAT, Service tax, excise duty etc. The GST was passed on 29th March 2017, in the Parliament but came into effect on 1st July 2017.
In keeping the federal structure of India, it is proposed that the GST will be issued both by the Central Government (CGST) and the State Government (SGST). Prime Minister Narendra Modi introduced GST in India on the midnight of 1st July 2017.The development of GST took many negotiations as well as revisions before getting launched in India in its final form in the year 2017.
The Goods and Service Tax (GST) is a new type of indirect tax which will remove all other types of taxes like sales tax, octroi tax, service tax, central and state sales tax imposed under the current multi-tax system.
The positive impact of GST on small business manufacturers in India are discussed below:
- It helps in the reduction of tax burden on new business.
- GST bill has improved logistics as well as faster services of delivery.
- It has eliminated distinction between services and goods.
- GST bill has made easier of starting a business.
- Small manufacturing businesses can now opt for composition scheme.
- Introduction of GST bill in India has reduced cost of production.
- There will be no assessment by multiple tax authorities after the introduction of GST Bill in India.
Some of the disadvantages of GST on small business manufacturers in India are as follows:
- Since many businesses still now was unable to understand new rules and regulations introduced by the GST the operational as well as structural confusion is expected to last a while.
- Tax paid on petroleum products should not be available as credit, as these products are kept out of GST in India.
- Branch transfer and stock transfer are now taxable under GST in India.
- As GST Bill has implemented in the middle of the financial year many businesses may find it difficult in getting adjust to the current tax system, which results in compliance issues and confusion.
- Prices has increased due to purchase of software.
- Smaller scale businesses in India specially in the manufacturing sector may face hardships under the GST in India.