“IMPACT OF GST ON

DIFFERENT SECTORS OF
INDIAN ECONOMY”
Project submitted,
In partial fulfilment of the requirement
For the requirement for degree of
BACHELOR OF COMMERCE
(GENERAL)
For the academic year 2023-2024
By
Mohammed Imtiaz Ali (1167-21-401-012)
Mohammed Abdul Faheem (1167-21-401-011)
K. Lakshmi Gowri Shankar (1167-21-401-043)

Under the guidance of

Ms. V.R Kavitha

CGHG+9J4, Near ICMR - National Institute of Nutrition, Lalaguda, Tarnaka,

Secunderabad, Telangana 500017.

1
 DECLARTION
I declare that the work in this dissertation titled “IMPACT OF GST ON
DIFFERENT SECTORS OF INDIAN ECONOMY” has been carried out us in
the Railway degree college. The information derived from the literature has
been duly acknowledge in the text and a list of references has been
provided. This project report has not been copied, duplicated, or plagiarized
from any other paper, journal, document, or book and has been submitted
to Railway degree college for awarding of the degree Bachelor of
Commerce.

Date:

Place: Secunderabad

Name of the students:

Mohammed Imtiaz Ali (1167-21-401-012)

Mohammed Abdul Faheem (1167-21-401-011)
K. Lakshmi Gowri Shankar (1167-21-401-043)

2
 CERTIFICATE
This is to certify that the project work for the academic year 2023-2024
titled “IMPACT OF GST ON DIFFERENT SECTORS OF ECONOMY” is
submitted for degree of Bachelor of Commerce to Railway degree college.
It is a Bonafide research work carried out by
Mohammed Imtiaz Ali
Mohammed Faheem
Gowri Shankar

The assistance and help received during the investigation have been fully
acknowledged.

Date:
Place:

Ms. V.R Kavitha College Stamp:

EXTERNAL SIGNATURE :

3
 ACKNOWLEDGMENTS
I would like to express my deepest gratitude to Ms. Kavitha Mam, for her
unwavering support and invaluable guidance throughout the course of this
project. Their expertise, encouragement, and constructive feedback have
been instrumental in shaping this work and enhancing my understanding of
the subject matter.
I would also like to extend my appreciation to the various online sources
that have been instrumental in providing valuable information and
resources. The vast wealth of knowledge available on the internet has
played a crucial role in expanding the scope of this project and enriching its
content.
To all the authors, educators, and contributors whose work I have
referenced from online platforms, I extend my heartfelt thanks. Your
dedication to sharing knowledge has been an indispensable part of this
project's development.

Date:

Place:

Mohammed Imtiaz Ali (1167-21-401-012)

Mohammed Abdul Faheem (1167-21-401-011)

K. Lakshmi Gowri Shankar (1167-21-401-043)

4
 TABLE OF CONTEXT

S.NO PARTICULARS PAGE NO.

1 ABSTRACT 6
INTRODUCTION 8
• Benefits 11
• Features 12
• Importance 12
• Research Objectives 14
2 • Research Methodology 14
3 LITERATURE REVIEW 15
IMPACT ON DIFFERENT SECTORS:
• MANUFACTURING 19
• AGRICULTURE 24
• TEXTILE 28
• INFORMATION TECHNOLOGY(IT) 34
• BANKING 40
• HOTEL AND TOURISM 49
• AUTOMOBILE 58
• EXPORT-IMPORT 64
• REAL ESTATE 73
4 • MINING 79
5 SUMMARY AND CONCLUSION 86
6 BIBLOGRAPHY 88

5
 ABSTRACT
Goods and Services Tax (GST) was launched on 1st of July 2017. It is
an indirect tax applicable throughout India. Now single tax would be levied
on all goods and services. Around 160 countries have implemented GST.
GST will ensure a comprehensive tax base with minimum exemptions,
which will help the industry. GST will help the economy to grow in more
efficient manner by ameliorating the tax accumulation as it will disrupt all
the tax barriers between states and integrate country via single tax rate. It
will benefit the Indian economy in many ways- help in reducing the price for
consumers, rate of tax will be uniform, reduce multiple taxes. GST will
affect many sectors in positive or negative manner. GST, as per government
estimates, will boost India's GDP by around 2 per cent. Under GST, goods
and services are taxed at the following rates, 0%, 5%, 12% and 18%. After
GST implementation certain products prices will reduce like branded
goods, hotels, personal hair products, soap etc. Few products price will
increase like mobile bills, aerated drinks, internet, air tickets. Goods and
Services Taxes would be collected in three ways: CGST: where the revenue
will be collected by the central government, SGST: where the revenue will
be collected by the state governments for intra-state sales, IGST: where the
revenue will be collected by the central government for inter-state sales.
The GST is said to absolutely influence the economy all in all. However, when
it comes to sectoral wise preparation, the GST have two affirmative and
negative effect on each one of the areas. Here are an only some parts given,
and its GST is given underside Innovation. The GST agreement of roundabout

tax collection has made the obligation on the assembling merchandise from
14% to 18-20%. Therefore, the costs of the product items will be at high
which will give either an impartial or marginally negative effect on the
Technology Sector all in all. Be that as it may, they will be profited through
the diminishment of evaluation and reward of different ventures and can to
some degree improve it. GST is based on the dual tax concept which is
apportioned between central government and state government in

6
equivalent share. There is proper method of gathering of GST through
perspective legislation. The REPORT IS focused on impact of GST on
different sectors of Indian economy through available data on GST.

7
 INTRODUCTION
GST was first introduced during 2007-08 budget session. On 17th
December 2014, the ahead of its time Union Cabinet ministry approved
the proposal for inauguration of GST Constitutional Amendment Bill. On
19th of December 2014, the bill was presented on GST in Lok Sabha. The
Bill was absorbed for discussion far and wide for the coming Budget
session. The President of India canonical the Constitution Amendment Bill
for Goods and Services Tax (GST) on 8 September 2016, consequently the
bill’s article in the Indian chamber and its ratification by greater than 50%
of the size of its legislatures (President gives assent to GST Bill, 2016). GST
has replaced the current indirect taxes. The implementation of GST will
have a far-reaching strength on at the point of all the aspects of the
engagement in activity application operations in India. With greater than
140 countries soon adopting some comprise of GST, India has daydream
been a stand-out exception.

GST stands for Goods and Services Tax levied by the Government in a move
to replace all the indirect taxes. The Kelkar Committee was influenced that
a twofold GST system shall be able to tax practically all the goods and
services and the Indian economy shall be able to have broader market of tax
base, recover revenue collection through charging and collection of indirect
tax and more logical approach of efficient resource allocation. Under the
Goods and Service Tax mechanism, every person is to be responsible to pay
tax on output and shall be entitled to enjoy credit on input tax paid and tax
shall be only on the volume of value added. The primary aim of GST is to
abolish cascading effect i.e., tax on tax and it will lead to bringing about cost

8
attractiveness of the products and services both at the national and
international market. GST System is constructed on addition of different
taxes and is likely to give full credit for input taxes. GST is an inclusive model
of levying and collection of indirect tax in India, and it has replaced taxes
levied both by the Central and State Governments. GST be levied and
collected at each stage of sale or purchase of goods or services based on
input tax credit method. Under this system, GST-registered commercial
houses shall be allowed to claim credit of the tax they paid on purchase of
goods and services as a part of their day-to-day businesses. The historic GST
or goods and services tax has become a reality. For corporates, the
elimination of multiple taxes will improve the ease of doing business. And for
consumers, the biggest advantage would be in terms of a reduction in the
overall tax burden on goods. "Inflation will come down, tax avoidance will be
difficult, India's GDP will be benefitted, and extra resources will be used for
welfare of poor and weaker section," Finance Minister Arun Jaitley said at
GST launch event in Parliament. GST will be an indirect tax at all the stages
of production to bring about uniformity in the system. On bringing GST into
practice, there would be amalgamation of Central and State taxes into a
single tax payment. It would also enhance the position of India in both,
domestic as well as international market. At the consumer level, GST would
reduce the overall tax burden, which is currently estimated at 25-30%.
Under this system, the consumer pays the final tax, but an efficient input tax
credit system ensures that there is no cascading of taxes- tax on tax paid on
inputs that go into manufacture of goods. To avoid the payment of multiple
taxes such as excise duty and service tax at Central level and VAT at the

9
State level, GST would unify these taxes and create a uniform market
throughout the country. Integration of various taxes into a GST system will
bring about an effective cross-utilization of credits. The current system taxes
production, whereas the GST will aim to tax consumption. The GST is
governed by a GST Council. Under GST, goods and services are taxed at the
following rates, 0%, 5%, 12%,18% and 28% and there is a special rate of
0.25% on rough, precious, and semi-precious stones and 3% on gold.
Further in addition a Cess of 15% or other rates on top of 28% GST applies
on few items like aerated drinks, luxury cars and tobacco products. Expert
viewed it as biggest tax reform in India founded on the notion of “one nation,
one market, one tax”. The GST rollout has rehabilitated India into a unified
market of 1.3 billion citizens. The rollout has an optimistic hope of India’s
fiscal improvement program retrieval momentum and spreading the
economy of the nation. The idea behind applying GST in the country in 29
states and 7 Union Territories is that it would offer a win-win condition for
every citizen. The entire taxation base will be shared between the
assessment mechanism of the centre and the states who would get to
collect tax on the economic activities charming place in Indian territorial
waters. At the ninth GST council meeting the centre made important
concessions to bring states, including the disobedient ones. The
administrative choices will be as follows. The state will manage 90 percent
of the tax players, counting service providers with annual turnover up to
rupees 1.5 crore with inspection, and audit powers and the balanced 10
Percent will be measured by the Centre.

10
Benefits of GST

• It would present two-tiered One-Country-One-Tax government.

• It would include altogether indirect taxes at the centre and the state
level. It would not only broaden the tax regime by cover goods and
services but also make it transparent.
• It would free the industrial sector from cascading effect of taxes, thus
by recover the cost keenness of goods and services.
• It would transport down the prices of goods and services and thus by,
increase ingesting.
• It would make business-friendly situation, thus by increase tax-GDP
ratio.
• 164 Inspira- Journal of Commerce, Economics & Computer Science:
Volume 06, No. 04, October-December 2020 Before the GST or
Goods and Services Tax supplanted a huge number of local and state
demands from July 1. Amid this, the Central Board of Excise and
Customs has indeed recorded some normal utilize things– and their
pre-GST assess rates- where the duty occurrence is lower or
equivalent as far back as GST happened. It has said a few "things of
regular utilize" contrasting GST rates and the prior roundabout
expenses. Additionally, things, for example, UTH (ultra-high
temperature) drain, tea, drain powder, sugar, vegetable eatable oils,
flavours, and footwear (evaluated up to Rs. 500) will pull in
assessments of 5 for every penny under GST, contrasted and the
prior duty frequency of 6-10 for each penny

11
Features of GST

• GST is based on the dual tax concept which is apportioned between

central government and state government in equal proportion.
• GST will cover up almost all items except petroleum, alcoholic
drinks, and electricity.
• GST is based on the destination based multi-imposition of tax
subject to the input tax credits at specific levels.
• GST is calculated based on invoice credit method so that the ITC
claim can be claimed properly, and tax is calculated on final
consumption of goods and services. There is proper procedure of
collection of GST through perspective legislation. All the taxable
entities above threshold limits are required to obtain GST registration
number.

Importance of GST

• Removing Cascading Effect: Before the application of GST, several

types of taxes were imposed by central and state government.
Around 17 types of taxes were imposed resulting in multiplier impact
on the tax and on cost of the product. This resulted in high cost of
goods due to the cascading effect. These taxes were replaced by GST
which caused in removing the cascading effect.
• Helps in removing the difference between sale and service: Several
items and services were difficult to divide in goods and services at
the point of sale. As a result, the suppliers were charges VAT as well

12
• as service tax on purchase of these items which results in double
taxation. Under GST, there is no alteration among goods and services.
This helps in eliminating the double tax on same item.
• Easiness in doing business: Earlier a businessman must maintain the
records as per the several different acts like VAT, Central Excise Duty
etc. There was different tax assessment under different acts which
makes the activities of business difficult and cumbersome. With
subsuming of all indirect taxes into GST, it is easy to maintain records
and results in easiness in business. It may be a reason of
improvement of Indian ranking from 130 to 100 in the year 2018 in
ease of doing business index.
• Uniformity of tax rates: Rates of taxes under different acts were not
same in all the states. For example, the VAT rates were different in
U.P., Delhi, Haryana for the same item of goods or services. It creates
a doubt among the purchaser regarding the purchase from a
particular state. Due to GST, the rates are uniform in whole country,
and it is easy to understand and implement.
• Reduced litigation: There were several pending cases in central
excise and service tax appellate tribunal, several were pending under
finance ministry and several cases under several acts for an ailment
of values, taxes, appeals etc. Conversion of all these taxes into GST
has helped in reducing the litigation process.
• Several other advantages like strengthening the tax base, removal of
road blockage, easiness in tax payment etc. are the benefits of GST.

13
Research Objectives

• To comprehend the concept of goods and service tax.

• To find out short effect of GST on Economy.
• To study the impact of GST on various sectors of Indian economy.

Research Methodology

The data for the research paper can be collected through several secondary
sources like magazines, articles and research papers published online and
offline, newspapers and websites. The study is based on exploratory
research and based on secondary data of journals, articles, newspapers,
and magazines. Secondary data was extensively used for the study.

14
 LITERATURE REVIEW
• In the Research Gate Publication, In November 2018, an article was
published regarding “Impact of GST on Indian Economy”. Namita
Mishra has studied that GST is a sole national unchanging tax charged
diagonally India on all goods and services. The Study is Exploratory in
countryside and Secondary Data has been used for the study. The data
will be collected from different Journals, Periodicals, Newspapers,
and Internets.

• In Business and Economics Journal, Volume 7, Issue 4, An article was

published regarding” A Research Paper on an Impact of Goods and
Service Tax (GST) on Indian Economy” Shefali Dani has identified that
GST also recognized as the Goods and Services Tax is distinct as the
enormous indirect tax construction designed to sustenance and
improve the economic development of a country. More than 150
countries have applied GST so far.

• In International Journal of Advance Research in Science and

Engineering, Volume No.7, Issue No.4, April 2018, the research paper
was published on “A Research Paper on Impact of GST on Indian
Economy” Amandeep Kaur have identified that In India, the idea of
GST was contemplated in 2004 by the Task Force on implementation
of the Fiscal Responsibility and Budget Management Act, 2003,
named Kelkar Committee.

15
• In International Journal of Pure and Applied Mathematics, Volume 120
No. 5 2018, 1371 1389, The research paper is published that “Effect
of GST on Indian Economy (Agricultural and Insurance)” M. Sankaran
& Dr. A. Sreelatha have studied that The Goods and Services Tax (GST)
is an esteem added duty to be executed in India, the decision on which
is pending’s is the main abnormal expense that frankly influences all
parts what's more, areas of our economy. The products and
enterprises charge (GST) remains gone for production a single, brought
composed market that will benefit both corporate and the economy.
Under the GST plot, no qualification is made between produce and
services for assembling of assessment. As such, merchandise, and
enterprises inducement in a similar rate of responsibility.

• In IOSR Journal of Business and Management, Volume 19, Issue 10.

Ver. VI. (October. 2017), PP 26-30, a research article was published on
“Goods and Services Tax and Its Impact on Indian Economy” Yogesh
Kailash Chandra Agrawal have studied that with the overview of GST
there is a disorder chaos and misperception among common man.
The aim this research paper is to explain the mechanism of GST and
its effects on Indian economy.

• In Research Review International Journal of Multidisciplinary, Volume-

04, Issue-03, March-2019, and the research paper was published on
“Impact of GST on Various Sectors of Indian Economy” Nidhi Garg has

16
 studied that GST is an indirect or consumption tax envied in India on
the supply of goods and services. It is considered as the biggest tax
reform in India since independence. Data has been composed from
the several secondary sources like research papers, books, journals,
and websites.

• IMR (Indira Management Review), Volume XIII, July 2019, An Article

was published regarding “Study of the Leading Sectors of Indian
Economy after GST Implementation- A Literature Review” Megha
Agrawal has studied and understand the concept of GST and discuss
the effect of GST on leading sectors of Indian Economy. This research
paper is based on literature review wherein secondary data is
collected from various websites, newspaper, journals, and different
publications. The paper brings to light the challenges, positive and
negative effects on different sectors in last one and half year (till Dec
2018) after implementation of GST. The aim of research paper is to
consolidate all the details at one place so if anyone want to study the
impact of GST on leading sectors, they will have all the relevant details
available at one place instead of searching different sources.

• In International Journal of Management Studies, Vol.–V, Issue–3(3),

July 2018 [92], The article was published regarding “GST-An
Implications to An Indian Economy” Natika Poddar & Reema Mishra
have studied that GST is one of the most essential tax reforms in India.

17
It is considered and even stated as Giant Indirect Tax. It was supposed
to be implemented from April 2010. However, it was long pending due
to some political issues and conflicting interests of various
stakeholders and hence the date for implementation of GST was
shifted to 1st July 2017.

18
 IMPACT ON
MANUFACTURING SECTOR
The manufacturing sector is currently with multiple taxable events central
excise, service tax, value added tax (VAT) and central sales tax (CST)

19
Manufacturing companies likely to gain under GST:

The manufacturing sector has been a major economic driver for many
developing economies across the world, however, unlike most others,
India’s manufacturing performance has been lacklustre. Even though India
enjoys a favourable demographic and geographical, it has not been able to
capitalise on this advantage.

Manufacturing in India has been plagued by:

• A complex tax structure,

• inadequate infrastructure, and bureaucracy, halving its ability to
perform well on a global scale.
• With only a 16% share in GDP, India’s manufacturing sector has been
close to stagnant for the last two decades.
• However, now manufacturing may be revived with the focused efforts
of the new government.
• India, traditionally an agrarian economy, could even experience a
paradigm shift from an agricultural economy to a manufacturing and
service-based economy.
• The new GST regime will have a far-reaching impact on business
avenues, compelling organisations to realign such as production cost,
supply chain, compliance, logistics, etc. with the changing indirect tax
structure.
• Furthermore, all major business dynamics will have to be thoroughly
analysed to assess the impact of GST on business.

20
Make the Manufacturing Industry More Competitive:

India had a very burdensome tax system which makes its manufacturing
sector very uncompetitive in both local and foreign markets. Currently a
product manufactured in one state, transformed in another state, and sold
in a third state is taxed at a higher level than an imported product. A 2 per
cent central sales tax is imposed on interstate shipments between two
different pares. Trucks must wait for hours or days at the tolls between
states, where they one must pay bribes, this has a heavy cost in terms of
money and me, and the deliveries are one delayed because of that. To
circumvent these hiccups, many manufacturing companies have adopted
strategies such as having small factories or self-owned warehouses across
different states. So that goods remain in their own company’s possession
when moving from one state to another. However, maintaining these sacred
warehouses or facilities add to the unnecessary operational costs.

Reduced Cost of Production:

Manufacturing is a very competitive industry and reducing the cost of

producing while create incremental value for customers remains a challenge
for every business. The new GST regime will be greatly beneficial as a
reducing in tax cascading may lead to a lower cost of production. Also, one
of the major defects of the current indirect tax regime – the non-availability
of tax credit of central/union taxes over state taxes and vice versa – could be
eliminated by allowing unrestricted tax credit under GST.

21
Manufacturing companies fear loss of input tax credit, GST on transfer
to self:

Supply to self & cash outflow problems the tax trigger under GST is the
'supply' of goods and services. The draft model GST law, which is in wide
circulation, has defined 'supply' to also include supply made without a
consideration. "This significantly widens the scope of the levy. Taxing stock
transfers and elimination of CST will do away with the need to declare
Form C and F, which (for most companies) is an area requiring high
compliance, manpower and litigation costs.

For example, transactions in goods and services between the head office
and a branch of the same company may be covered and subject to GST
levy.

Free supplies Under the present indirect tax regime free supply of goods
are not subject to VAT. The Model GST Law stipulates that specific
transactions without consideration would also be treated as supplies.

22
Accordingly, free samples may be subject to GST, leading to increase in
overall costs. Working capital may also be significantly impacted. Under
the new regime, stock transfers will be subject to GST to enable movement
of input credit across state boundaries. Though GST paid at this stage
would be available as a credit, realisation of this GST would only occur
when the final supply is concluded. This is likely to result in cash flow
blockages and therefore manufacturers would have to rethink their supply
chain management strategies to minimise this impact on their cash flows.

GST compensation to Manufacturing states proposed at up to 1%:

The Cabinet is claimed to have cleared changes in the GST Constitutional

Amendment Bill, dropping one-per cent manufacturing tax and
guaranteeing states a compensation for any revenue loss in the first five
years of rollout of the proposed indirect tax regime. Head by prime minister
Narendra Modi, the Cabinet, claim industry sources, have decided to
include a clause in the Constructional Amendment Bill that any dispute
between states and the Centre will be adjudicated by the GST Council,
which will have representation from both the Centre and states. With
states on board and the Cabinet approving the amendments, the
government is hopeful of the passage of long-pending Goods and Services
Tax (GST) Bill in the current monsoon session of the parliament Overall, the
introduction of GST is a welcome change for the manufacturing sector. As a
way forward, industry will need to identify the specific provisions of the
Model GST Law that requires a new strategy from an ‘ease of doing
business’ perspective and represent before the Empowered Community
and the GST Council.

23
 IMPACT ON
AGRICULTURAL SECTOR
After implementation of GST influence the entire sector in India but
agricultural sector more influence than other because about 52 percent
population employed in this sector. The average cost of fertilizers, irrigation
pumps and tractors has been declined by 2, 5.5 and 5.5% respectively,
while the average cost of insecticide has inflated by 5.5% (Singh N P, 2018).
Some agricultural inputs price decline due to GST like Chemical, Irrigation
equipment, Tractor & power tiller, Solar panel/module etc. but most of the
inputs price rises due to GST like plant protection chemicals, plant growth
regulators, fertilizer, plant protection equipment and harvesting and
threshing equipment etc.

Table Shows Tax rate on important agricultural inputs.

Agricultural inputs Pre-GST rates (%) After

GST
Uttar Maharashtra Madhya Punjab Central Central
Pradesh Pradesh (%)
Seeds Unbranded Exempted Exempted 0 0 Exempted Exempted

Branded Not defined Not defined - - Not defined Not defined

Organic manure Unbranded Exempted Exempted 0 0 NIL 0

Branded Not defined Not defined - - Not defined 5

Chemical NPK Exempted 6 5 0 12.5 5

Fertilizers Bio- 4 6 0 0 Not defined Not defined

fertilizers
Micronutrie 4 6 5 0 Not defined 12
nt

Plant protection chemicals 4 6 5 0 12.5 18

Plant regulators growth 4 6 5 0 12.5 18

24
 Table Shows tax rate on important equipment and machines.

Equipment and machinery Pre-GST rates (%) After

GST

UP Maharashtra MP Punjab Central Central

(%)

Irrigation 4 6 5 4 12.5 12
(Electrical pumps and oil
engines)

Land Manually Exempted 6 0 0 NIL 12

preparation operated

Power- Exempted 6 5.5 5 NIL 12

driven

Plant protection equipment Exempted - 0 0 - 12

Harvesting and threshing 4 6 0 0 NIL 12

equipment

Tractor & power tiller 4 6 5 4 12.5 12

Solar panel/module - - - - 12.5 5

25
Impact on cost of cultivation

After the GST implication, most of the agricultural input becomes chiefly
because decrease tax by GST system on the variable inputs. Singh N P, et al
(2018) studies in “GST in India.

Reflections from food and agriculture” and concluded that cost of

cultivation of the entire crops are decreasing. The highest cost decreasing
of soybean crop followed by sunflower, sugarcane, and mustard. The
lowest impact on pulses crops which decreasing lowest cost of Arha has
followed by gram. The profit of farmers is increasing by implementation of
GST system in India.

Crop groups Major crops Operational cost

Without GST With GST % Change
Cereals Paddy 40124 40055 -0.170
Wheat 28084 28012 -0.254
Maize 35400 35310 -0.254
Pulses Arhar 24569 24113 -0.007
Moong 16612 16591 -0.129
Gram 20113 20096 -0.083
Oilseeds Soybean 24943 24843 -0.404
Sesame 18971 18951 -0.103
Groundnut 42815 42734 -0.190
Sunflower 21625 21558 -0.308
Rape and Mustard 23755 23694 -0.258
Cash crops Jute 45682 45638 -0.096
Cotton 50953 50899 -0.107
Sugarcane 90553 90320 -0.258

26
Conclusion

It will boost the economic growth. International and domestic trade would
be encouraged. Overall tax burden will be less on the consumers as far as
agricultural sector is concerned. After GST the cost of cultivation of crops
like paddy, wheat maize, gram, soybean, groundnut, sunflower, rapeseed
and mustard, cotton and sugarcane would have been less. The average
cost of fertilizers, irrigation pumps and tractors has been declined by 2, 5.5
and 5.5% respectively, while the average cost of insecticide has inflated by
5.5% (Singh N P, 2018). These changes in tax rates are likely to influence
prices of inputs and their usage; adoption of technologies and prices of
agricultural commodities and thereby farm profits. Post-GST, the tax
burden on the tractors has declined by 4.5 to 6.5% but harvesting and
threshing equipment have been taxed at 12% post GST, hence we expect
an increase in their prices. Plant protection equipment such as sprayers,
dusters and sprayers were exempted from tax earlier. However, the GST of
12% on these would increase the fixed cost for the farmers.

The reduces in the taxation on micro-nutrient fertilizers and liquid fertilizers

to promote commercial farming in India. Reconsideration of tax rates on
important agricultural machineries to promote mechanization of small and
marginal farms. Create awareness among the producers about the tax
rates on different agricultural inputs to break the information asymmetry.

27
 IMPACT ON
TEXTILE SECTOR
Various supply chains in Textile Sector

1. Fibres- Cotton to Yarn

S. No Supply type Levy of GST

1 Unprocessed Cotton supplied to Ginning GST Exempted

mill

2 Ginning Mill to Spinning Mill- GST Exempted

3 Spinning Mill to yarn trader/ Weavers etc., Attract GST as supply of

Goods

4 Spinning Mill to Job work (Cop stage to Attract GST as supply of

Reeling, Cone winding, Doubling Etc.,) Service

28
2. Yarn to Grey /Processed Fabric (Woven/Knitted etc)

S.No Supply type Levy of GST

1 Yarn from Weavers/ Mills to Sizing Attract GST as supply of Service

Mill on Job work basis

2 Yarn Weavers/ Mills on to Weaving Attract GST as supply of Service

/ Knitting on Job work basis

3 Sale of Gray fabric to Attract GST as supply of Good.

Manufacturers/Trader

29
3.Grey Fabrics to Processed Fabric/ Garment

Sl No Supply type Levy of GST

1 Unprocessed sent for various processing Attract GST as supply of

such as Bleaching, Dying, Printing,
Services
Calendaring, etc., on Job work basis

2 Sale of processed / Knitted fabrics Attract GST as goods

30
4. Garment to Consumer

Sl No Supply type Levy of GST

1 Processed fabrics/ Knitted sent for Attract GST as supply of

Tailoring Units and other stitching related
Services
process etc., on Job work basis

2 Sale of garments to Attract GST as goods

Distributor/Retailers/Consumers

31
RATE OF GST

After GST, the average tax rate for Textile Sector is around 5 %. Minimum is
Zero and maximum rate is 18%. The rate for various chapter is given.

Sl.No Goods / Service GST Rate

1 Cotton yarn, cotton fabrics, Knitted or 5% (2.5%+2.5%)

crocheted fabrics

2 Articles of apparel and clothing accessories 5% (2.5%+2.5%)

knitted or crocheted, of sale value not
exceeding Rs. 1000 per piece

3 Articles of apparel and clothing accessories 12% (6 %+6%)

knitted or crocheted, of sale value exceeding
Rs. 1000 per piece

4 Yarn of manmade staple fibres 18% (9%+9%)

5 Job work 5% (2.5%+2.5%)

Composition levy under GST

The composition levy is an alternative method of levy of tax designed for

small taxpayers whose turnover is up to Rs. 75 lakhs (Rs. 50 lakhs in
case of few States) The objective of composition scheme is to bring
simplicity and to reduce the compliance cost for the small taxpayers.
Moreover, it is optional and the eligible person opting to pay tax under this

32
scheme can pay tax at a prescribed percentage of his turnover every
quarter, instead of paying tax at normal rate.

S. No. Category of Registered person Rate of Tax

1 Manufacturers, other than 2% (1% Central tax Plus 1%

manufacturers of such goods as may State tax) of the turnover
be notified by the Government (Ice
cream, Pan Masala,

Tobacco products etc.)

2 Restaurant Services 5% (2.5% Central tax plus

2.5%

SGST) of the turnover

3 Traders or any other supplier eligible for 1% (0.5% Central tax plus
composition levy 0.50%

State tax) of the turnover

33
 IMPACT ON
I.T SECTOR

GST has, as expected, affected almost every major and minor business
industry in the country. This also includes the well-reputed Information
Technology (IT) sector of India which is the source of the various IT
revolutions and developments that take place here. The association of
Indian economy with Information technology is very aware of all the
changes upcoming along with the GST and has also issued a warning that
serves not to take the information technology in an easy way as it
contributes to the economy in a very heavy proportion. While the National
Association of Software and Services Companies (NASSCOM) president R.
Chandrashekhar mentioned that upcoming GST regime can create a
difficult scenario for the industry as with GST, there are lot many complex
invoicing and billing coming ahead which can further strangle the taxation
of IT industry making a tough growth.

The earlier VAT/service tax regime in India was complicated due to multiple
taxes, innumerable compliance obligations, and tax cascading. GST on IT
sector will attract 18% on software services provided by software
companies. For purely software services, the cost of such services will
increase under GST. Under the GST regime, it will result in a simpler tax
regime, especially for the IT sector.

34
Tax Rates under Excise/VAT/Service Tax

Under the old tax regime, the sale of packaged software attracts both VAT
and service tax. VAT rate is around 5% in most states and service tax rate is
15%. Excise duty is also applicable in the case of manufacturing of IT

products. Example: If a software comes on a CD, DVD, or hard disk, then

there are 3 taxes that apply to it i.e. Excise duty for manufacturing of
product, VAT for sale and Service tax for providing service as software can
be downloadable for multiple times. All such complications and double
taxation will be removed under GST.

Businesses

All businesses, large or small are rushing to get their accounting systems
and ERPs in sync with GST. This will mean an increase in infrastructure
costs and changes in business systems. Most large companies have set up
teams consisting of their own technical experts, finance experts, and an
expert from their GST software vendor.

Avail ITC

While there is a significant increase in infrastructure and overhead costs for

businesses, there is good news too in the form of ITC. Traders selling goods
(paying output VAT) earlier could not claim service tax paid on AMCs for
their computers and software. Under GST, this ITC is available. For
example, Ajay sells fruit-based drinks worth Rs. 1,00,000. He also must
pay an AMC of Rs. 10,000 per month on the computers used in his offices
as shown in table 2.

35
 Table 2: Example Depicting Impact of GST on IT Sector

Redesigning Business Software

Redesigning business software IT service providers can also adjust all their
input taxes against the service provided. For example, now they can adjust
VAT paid on office supplies against the service provided by them. Also, IT
companies maintaining servers incur huge capital expenditure on buying
the hardware and revenue expenditure on repair and maintenance. Now the
tax paid on hardware can be adjusted against the tax paid on services and
small parts of repairs.

36
Taxability of Installing New ERP

The biggest hurdle is in changing the IT systems which require coordination

between tax experts and technology teams. In many cases, some of the
ERP software that were provided by the IT majors must be redesigned and
updated with the new GST rules. Companies are mainly upgrading their
enterprise resource planning (ERP) and accounting software to
accommodate the complexities of calculating GST. Either they need to

upgrade their existing software to the new version or use specific GST
software like the Clear Tax GST. Businesses install their accounting
systems and ERP in batches. For example, ERP implementation is done in
batches. It is a long-term contract which spreads over years. ERP
professionals understand the requirements of the business, design the
software, accordingly, train the company employees and regularly maintain
and update the software. Payment for this contract will be spread over the
years and service tax was also charged accordingly. Under GST, this will be
a continuous/periodic supply and will be taxed accordingly. Please read our
article on continuous supply under GST.

Export of Services

Export of information technology is an important source of foreign

exchange, with India being the biggest exporter of IT services. Exports are
zero-rated and input taxes paid will be allowed as a refund. The default rule
for place of supply (export of service) is the location of the service recipient
if the address of the recipient is available. So, exporters must ensure that
the address of service recipient can be presented before the authorities on

37
request. The typical IT/ ITES services which come under the default rule
will be software development, BPO operations, software consultancy, etc.
Apart from these, this rule will also apply to other services like software
support/ maintenance and intermediary services as there are no
exceptions under GST.

Here is the list of four ways GST implementation will impact the IT
sector:

Tax Rate

The prevailing service tax rate on IT services is 15%. However, the

recommended revenue neutral rate is at 15– 15.5% and the standard rate is
expected to be around 17–18%. Therefore, the cost of IT services will
elevate, especially for end customers who do not usually claim the tax
input credit. Under our current tax structure, the sale of packaged software
is entitled to both VAT (approximately 5%) and service tax (15%). The VAT
on sales is directed to the state government whereas the service tax on
service follows the central government. There are also cases where along
with the VAT and service tax, excise duty is also applied due to lack of
clarity from the government. However, it is expected that once the GST is
implemented, the current average tax rate of around 25– 35% shall come
down to around 18–25%.

Cascading Effect of Taxes

The cascading effect of taxes will be effectively addressed under the GST
regime. Traders, under GST, will be eligible to avail the credit of services
such as in the case of AMC (Annual Maintenance Service) contracts.

38
Currently, IT service providers can ‘t claim credits of quality including the
assessment or deal charge spent on setting the IT infrastructure. Also,
services charged by an IT service provider to a client who is a broker is an

expense incurred for the IT service provider. Under GST, both the IT service
providers and their clients will be eligible to claim full credit of GST. This is
expected to eliminate the cascading effects of the present tax structure.

Business Process Change

Under GST, which is a destination-based tax, tax is collected by the state

where the goods or services will be consumed. Most IT companies are
registered only with the Central Service Tax authorities and usually all
billing and accounting tasks are carried out from a central location. Under
the GST regime, service providers are required to obtain registration for all
the states that they are catering to, i.e. all states that they have customers
in. This is to be done so that the SGST (State Goods and Service Tax)
component of IGST (Integrated Goods and Services Tax) is rendered for
respective states. IT service providers will therefore have to bifurcate their
services and bill their customers based on location of consumption.

e-Commerce Sphere

For e-Commerce traders, the GST is expected to increase administrative

costs. Also, since e-tailers have hundreds of sellers on their platforms, it
significantly increases compliance burden. Small sellers will face cash-
flow issues and will claim for refunds on the tax paid on inputs, which the
e-Commerce platform may not support.

39
 IMPACT ON
BANKING SECTOR
GST: TODAY'S BANKING
Banking sector is one of the oldest sectors which contributes a huge
amount of wealth to the country. Now the earning of the sector has been
increasing day by day. The banking system in India is divided into different
sectors as shown in table 1.
Table 1: The number of banks in the country as of 2018

Banks Number of Banks

Public sectors 27

Private 22

Foreign Banks 44

Regional rural banks 56

Urban Cooperative banks 1,589

Rural Cooperative banks 93,550

The above table shows the number of banks operates in the country in the
year 2018. all the banks are registered under GST at each state and each
branch they run in.
BANK WHICH ARE AUTHORISED IN CENTRE AND STATES FOR GST
PAYMENT
There are 26 public sector banks in the list (table 2) which are registered
under GST for the for central and state level payment in India. All these
banks which are mentioned above are registered under the GST for the
smooth running of the business, transactions, and tax filing.

40
Table 2: It shows the name of banks which are registered under GST for any
payment at central and state level.

Name of the Banks

Allahabad Bank Dena Bank United Bank of State Bank of

India Travancore

Andhra Bank Indian Bank UCO Bank IDBI Bank Ltd

Bank of India Indian Overseas Vijaya Bank

Bank

Bank of Baroda Oriental Bank of State Bank of

Commerce India

Bank of Punjab National State Bank of

Maharashtra Bank Bikaner & Jaipur

Canara Bank Punjab & Sind State Bank of

Bank Hyderabad

Central Bank of Syndicate Bank State Bank of

India Mysore

Corporation Bank Union Bank of State Bank of

India Patiala

41
 1715
1603
1456 1476
1317 1298 1332
1190

970
856
802

576
474

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fig. 1: Data on the growth of the deposits in the banking sector during past
12 years.

In the above figure 1, there is a huge increase in deposits from the past 12
years. The x-axis of the figure shows the amount in the US $ billion and the
y-axis shows the year-wise growth of the banking sector. As per the RBI,
banking sector of India is effectively capitalized and well-regulated. The
economic and financial conditions in the nation are far advanced to any
other countries in the world. Market, credit, and liquidity risk studies advise
that banks in India are generally flexible and have strongly faced the global
economic crises. Indian banking industry has lately witnessed the roll-out
of innovative banking models, implementation of GST and the new tax rates
which contributes more revenue to the sector.

42
The impact of GST to the banking sector had made an impression that GST
is doing an excellent job in the sector due to high rates compared to
previous tax rates (service tax), but it has become a costly affair for
customers. Most of the employees in the sector agree that GST is a good
initiative taken by the government for sustainable banking but there is a high
number of the problem arising about the new tax system and feels that GST
to the banking sector is proved to be a cumbersome or complicated due to
many transactions. The banks were not allowed for a centralized
registration under GST. They are required to do separate registration in each
state they operate in.

GST IS CHARGED ON ALL BANKING ACTIVITIES

Banks have charged GST on various products and services carried on by

the banks except for deposits, which can be classified like this:

1. TRANSACTION CHARGES:

Transaction charge is something which we pay when we need a quick cash,

and it is a tendency to run to the nearest ATMs available. The changes in the
ATM's transaction charges, making multiple trips to withdraw cash or check
balance will cost you more under the tax system GST. Transaction charges
have been increased to 18% which was 15% earlier. The shocking news is
that the ATM transactions are restricted to a certain point i.e., first 5
withdrawals are free after 5 withdrawals Rs.20 per withdrawal is charged to
reduce the withdrawal of money through ATM's which will automatically
increase the usage of internet banking. Also, the usage of chequebooks will
be expensive if any customer uses more than 50 cheques a year and it is

43
charged less than Rs.100. The individuals must pay Rs.3 more for every
Rs.100 paid for banking transactions.

2. LOANS:

As per information, it is said that all the loans are taxable under GST for
18% and there is no chance of tax percentage to go beyond the tax slab of
18%. But there is a big concern about the home loans which was availed to
the borrowers for a VAT of 5% for construction materials and 3.5% service
tax, overall, of 8.5 which is now available only as per the GST rate 18%
which will be little more expensive for the borrowers [18]. And there is a
chance of an increase in the interest rate added on home loans by the
banks and lenders too.

3. INVESTMENTS:

Investments like mutual funds are affected negatively due to the

introduction of GST. GST bang on the income of mutual funds will certainly
influence the consumers. For an investment company, an expense ratio is a
cost incurred by them to operate their mutual funds. The Goods and
Service tax will be on the Total Expense Ratio of the mutual funds and has
been increased by 3%. In case of the policyholders, they must pay high
premiums amount on their insurance assuming, a family spend a sum of Rs
50,000 per annum on insurance exclusive of service tax, their expenses will
be increased by 3%, i.e., Rs 1500. Earning up to Rs 20 lakh will stay
exempted from GST for mutual fund distributors.

44
 Debit/Credit

Pension

Fig. 2: The figure represents various products and services provided by

banks which charge 18% GST replacing the 15% tax.

4. INSURANCE:

GST has a severe effect on insurance as there is a rise in the premium,

especially for life, health, and car insurance policies. The tax rate has
increased from 15% to 18% under GST. For example, if the complete
premium is for life insurance, a tax rate of 18% will affect the entire
premium.

5. INPUT TAX CREDIT:

Under GST, 50% of the CENVAT credit availed against inputs, input
services, and capital goods is to reverse which leaves them a position of
reduced credit of 50% on capital goods thereby increasing the cost of

45
capital. Input tax credit is covered under GST only when your supplier has
deposited the tax he collected from you. It is to be matched and validate
before claiming it. So, it is compulsory that all supplier must is registered
under GST.

6. OTHER SERVICES:

Banking facilities like locker facilities, tax payment, billing, and shopping
etc. which are offered by the banking sector are taxable for 18% under GST
which is 3% higher than the early tax rates. In case of forex 1 % of the gross
amount of the Indian rupee is charged under GST i.e., the dissimilarity in the
selling rate and buying rate of rupee which is multiplied with the total units
of currency. The pension is charged under salary even if it is service
provided by the bank [13], [23].

7. REVIEW OF BANKING TAX RATE IMPLIED ON THE PRODUCTS AND

SERVICES UNDER GST:

The table 3 shows a brief description of the products and services provided
by bank and which help us to have a quick understanding of various tax
rates imposed on various products and services.

46
Table 3: The various tax rates imposed on various products and services.

Items Taxable Not Taxable Tax %

Deposits - NT -

Debit Card T - 18%

Credit Card T - 18%

Loan T - 18%

Forex T - 1% of gross
rupee

Investments T - 18%

Banking facilities T - 18%

Pension - NT -

Remittance (NEFT, T - 18%

RTGS)

Insurance T - 18%

ATM T - 18%

Input Credit Tax T - 18%

47
48
 IMPACT ON
HOTEL AND TOURSIM SECTOR

India’s Goods and Services Tax (GST) has a big impact on the hospitality
industry. Whether you run a tiny guesthouse or a large luxury hotel, the law
changes how you handle monthly accounting. By staying up to date about
current tax rates and possible available credits, you can reduce your tax
liability and keep customers happy with lower prices.

Before the Indian government instituted GST in July 2017, the hotel industry
had to deal with extremely high taxes. In many states, you had to pay a
range of different taxes, including VAT, luxury tax, and service tax. For some
hotels, that pushed the tax as high as 30%. These high taxes caused many
problems for hotels, such as higher prices, lower profits, and difficulty
making upgrades, just to name a few. With multiple taxes, hotel owners
also faced complicated paperwork when it came time to file tax returns

Table 1: the rate under current taxes and GST.

S. Particulars GST Service Tax Rates VAT Rates

No. Rates
1 Supply of Food/drinks in 12% Exempted
restaurant not having With
facility of air-conditioning
Full
or central heating at any
time during the year and ITC
not having license to serve
liquor.
2 Renting of hotels for 12% Abatement 40% CC on input
lodging purposes having With
services
room tariff of Rs. 1ooo/-
Full only, exemption below Rs. 1ooo
and above but less than
2500/- per room per day ITC

49
3 Supply of Food/drinks in 18% If AC 40% OF above value &
restaurant having license With otherwise exempted
to serve liquor
Full
ITC
4 Supply of Food/drinks in 18% 40% of Value Taxable
restaurant having facility ofWith
air conditioning or central
Full
heating.
ITC
at a time during the year
5 Supply of Food/drinks 18% 60% of value Taxable
5.5% on pizza, burgers,
in outdoor catering With
sandwich, on cooked food
Full
except in hotels categorized
ITC
6 Renting of hotels for 12% 60% of Value Taxable as 3 star and above 14% on
lodging purposes having With beverages, 3 and above,
room tariff of Rs. 2500/- Full under brand name brand
and above but less than ITC chain cooked food.
5000/- per room per
Day
8 Supply of Food/drinks in 28% 60% of value CC allowed on
air- conditioner restaurant With input services only
in 5- star or above rated
Full
Hotel
ITC
9 Accommodation in hotels 28% 60% of value
With
Full
ITC

Analysis of above Table –

The hospitality industry, like every other sector in the Indian economy, pays
multiple taxes (VAT, Luxury tax, and Service tax) in the existing indirect tax

regime. A hotel where the room tariff exceeds Rs 1,000 is liable for service
tax at 15 percent. An abatement of 40% allowed on the tariff value bringing

50
the effective rate of service tax down to 9%. The Value Added Tax 5.5% to
14.5% and luxury tax will still apply. For restaurants, there is 60% abatement
which means that the service tax is charged at an effective rate of 6% on the
F&B bills, apart from VAT (5.5 percent to 14.5%). Bills for bundled services
like social functions (seminars, marriage, etc.), taxed with an abatement of
30%. The cascading effect of the existing indirect tax regime where the end
consumer pays a tax on tax increases the end cost. Hoteliers and hospitality
businesses do not get any input tax credit on the taxes they pay currently, as
central taxes cannot be set off against state taxes (VAT) and vice-versa and
due to availability of abatement no input credit is available.

PRE AND POST GST TAX RATES

Pre GST

• VAT has 12% tax on room tariff below 5000.

• 18% above 5000.

Post GST (After 1 July 2017): GST council of India has imposed.

• 28% GST on hotel room tariff over Rs.7,500 and

• 18% tax on rooms with tariffs between Rs. 2,500 and Rs. 7,500.

After New Union Budget (From 5 JULY 2019)

• The GST rate for room tariffs of Rs 7,500 and above was reduced to
18%.
• 28%, Rate between Rs 1,000 and Rs 7,500 would have to pay 12%.

51
 Table 2: After New Union Budget

After PRE PRE POST POST

Application of GST<5000 GST>5000 GST< GST>7500
GST 7500
Bill total before tax 4000 10000 4000 10000
Luxury charge @10% NA 1000 NA NA
Service tax @2.5% 100 250 NA NA
Swachh Bharat cess 8 20 NA NA
@0.2%
Krishi Kalyan cess @.2% 8 20 NA NA
VAT @ 8.40% & 14.50% 336 1450 NA NA
GST @ 18% & 28% NA NA 720 2800
Total after tax 4452 12740 4720 12800

Table 3: After New Union Budget

BILL PRE PRE POST POST

GST<5000 GST>5000 GST<7500 GST>7500

Bill total before tax 4000 10000 4000 10000

Luxury charge @10% NA 1000 NA NA
Service tax @2.5% 100 250 NA NA
Swachh Bharat cess 8 20 NA NA
@0.2%
Krishi kalian cess @ 8 20 NA NA
0.2%
VAT @ 8.40% & 14.50% 336 1450 NA NA
GST @ 12% & 18% NA NA 480 1800

52
TOURISM SECTOR

The tourism is one of the sectors in the economy that is deliberately over the
new regime. Hospitality is one of the most competitive and steadily growing
industries in the country. Hospitality and Tourism are also among the highest
employment generating sector and among the top ten sectors in the country
with the highest volume of foreign direct investment. In addition to being one
of the top sources of foreign exchange, tourism is also among the higher tax
generating sectors in the country. One such service which is extensively
used is one of the booming sectors of the Indian economy is travel industry.
GST on Travel and Tourism industry is Disappointing. The industry believes
that the higher tax slabs will impact and higher growth, putting pressure on
the bottom line and squeezing the margins of the players.

In India, the travel and tourism industry are one of the major contributors in
country’s economic growth and is expected to reach Rs. 2796.9 thousand
crores by 2022. To reach this amount by 2022 hospitality industry’s
expectation from the government was more because 28% GST on hotels
over Rs.5000 or above is a matter of concern for the industry, it should not
be more than 18% to survive in the international market. In Pre GST era, there
was a composite levy of both service tax 6%, as well as, Value Added Tax
14.5%, which inflate the bills by 30-35%. It is expected that GST to result in
savings of 10-15% on the overall bill.

53
 Table No.: 01

GST on Airfares

Economy class Fare Under Economy class Fare Under GST Regime
Service

Fare /Charge Amount Fare /Charge Amount

Base Fare 2000 Base Fare 2000

Airline Fuel Charge 700 Airline Fuel Charge 700

Cute Charge 50 Cute Charge 50

Tax and other charge - Tax and other charge -

Passenger service charge 239 Passenger service charge 239

Ser Development fee 150 Ser Development fee 150

Airline Service tax @5.6% 154 Airline Service tax @5% 137.5

Other surcharge 12 Other surcharge 12

Total fare 3305 Total fare 3228.5

The cost of travel for economy class passengers is likely to be remaining

same. Economy class air travel will become cheaper with the tax rate 5%
against the existing 6% under the GST regime. But the travelling business
class ticket will become dearer as the tax will go up from 9% to 12%, which
will affect the airline industry. Due to competitive scenario, the airlines are

54
not expected to implement the tax burden to passenger as it might affect the
airlines occupancy rate.

The positive impact of GST is that the multiple taxes would be replaced by
one single tax, the rate of which is likely to be between 16%-18%. The sector
may benefit in the form of lower tax rates which should help in attracting
more tourist in India. In the case of passenger travelling, the state with the
maximum outbound journey shall earn the highest revenue so the station or
the port having highest outbound flights, train journey or local cab journey
shall earn substantial revenue. Under GST, goods and services fall under five
tax categories very difficult to understand for the common man. GST positive
aspect is one indirect tax for the whole nation, which will make India into a
unified common market.

On the other hand, the negative impact of GST is that inflation rate has
increased from 1.79% to 5.11% during the period July 2017 to January 2018.
The negative impact of GST on price levels in India, it has largely affected
consumption and demand of poor people in India. India’s economic growth
was 8.4% in March 2015 which fell to 5.7% in July 2017, bottoming out from
the impact of demonetization and GST, the negative impact of GST is
evidently visible on the Indian Economy. The proposed GST may lead to
increase the price of essential products leading to low consumption. The
implementation of GST (July 2017) increased the unemployment rate (3.39
to 6.06%) during period July 2017 to February 2018 in India. It means
negative impact of GST in rampant on employment rate.

55
Pre and Post GST: How the Situation Has Changed

The Travel, Tourism and Hospitality industry, like every other sector in the
Indian economy, was liable to pay multiple taxes (VAT, luxury tax and
service tax) under the previous VAT regime. A hotel where the room tariff
exceeded INR 1000 was liable for service tax at 15 percent. An abatement
of 40% was allowed on the tariff value, thus bringing the effective rate of
service tax down 9%. The Value Added Tax (ranging between 12% to
14.5%) and luxury tax would apply on top of this. However, for restaurants,
there was 60% abatement which meant that the service tax was charged at
an effective rate of 60% on the bills, apart from VAT. Bills for bundled
service like social functions (seminars, marriage etc.), were taxed with an
abatement of 30%. The effect of the VAT regime where the end consumer
paid a tax on tax, increase the end cost. Hoteliers and hospitality business
did not get any input tax credit on the taxes they paid, as central taxes like
service tax, could not be set off against state taxes (VAT).

Under the GST Regime:

Under the Goods and Services Tax, the hospitality sector stands to reap
the benefits of standardized and uniform tax rates and easy and better
utilization of input tax credit. As the final cost to end user decreases, we
can expect the industry to attract more overseas tourists than before. This
would ideally result in improved revenues for the government and there are
many pros to this new tax regime which could help the industry’s growth in
the long run. For instance, complementary food (like breakfast) was taxed

56
separately under VAT, but now it will be taxed under GST as a bundled
service. Let’s have a look at the rates for this industry in detail:

Table No.: 02

GST Rates for Hotels based on Room Tariff

Tariff per Night GST Rate

< INR 1000 No Tax

INR 1000 - 2499.99 12%

INR 2500 – 7499.99 18%

= or > 7500 28%

GST will abolish several other taxes, leading to a reduction in procedural

steps and more chances to streamline the taxation process.

57
 IMPACT ON
AUTOMOBILE SECTOR

Data analysis and Interpretation Table 1. Production, Sales, and

GST/VAT of automobiles of top 10 manufacturing countries

Production in 2019 Sales in 2019 Tax

Sl.
Countries Commercial Commercial rate
No Cars % % Cars % %
Vehicles Vehicles (%)

1 China 2,13,60,193 41.19 43,60,472 22.34 21,444,180 47.59 43,24,497 20.25 1-56

2 USA 25,12,780 4.85 83,67,239 42.87 4,715,005 10.46 1,27,64,999 59.79 0-10

3 Japan 83,28,756 16.06 13,55,542 6.95 4,301,091 9.54 8,94,125 4.19 10

4 Germany 46,61,328 8.99 - - 3,607,258 8.00 4,09,801 1.92 19

5 India 36,23,335 6.99 8,92,682 4.57 2,962,052 6.57 8,54,839 4.00 28+
Cess

6 Mexico 13,82,714 2.67 26,04,080 13.34 761,720 1.69 5,97,951 2.80 16

7 South Korea 36,12,587 6.97 3,38,030 1.73 1,539,060 3.42 2,56,074 1.20 10

8 Brazil 24,48,490 4.72 4,96,498 2.54 2,262,069 5.02 5,25,781 2.46 17

9 Spain 22,48,109 4.34 5,74,336 2.94 1,258,260 2.79 2,43,000 1.14 21

10 France 16,75,198 3.23 5,27,262 2.70 2,214,279 4.91 4,79,698 2.25 20

% is percent to total of respective column

Glimpse of production and sales of cars and commercial vehicles by 10

manufacturing countries is presented in Table 1. It also depicts the tax
rates applicable on automobiles. It to be noticed that China is levying the
tax rate in the range of 1 to 56% depending on the engine capacity and

58
passenger capacity. In some states of USA tax on cars is exempted and
some states are taxing up to 10 percent. There is a standard rate on all
other counties, but the tax rates are less as compared to Indian tax rates. In
India GST is applicable at the rate of 28% plus cess. The implementation of
GST and coupled with other policy initiatives of governments and strong
demand from consumers led to increase in production, sale of
automobiles. In the year 2019-20 the production, sales decreased because
lack of demand and slowdown in the economy.

2010 - 11 2011 - 12 2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 - 17 2017 - 18 2018 - 19 2019 - 20
Production Sales Exports

Chat 1. Production, Sales, and Exports of automobiles in India shows the

production and sale of automobiles in India for a period of 10 years it can
be noticed that the production, sales, and exports increased continuously
from 2010-11 to 2018-19. The implementation of GST and coupled with
other policy initiatives of governments and strong demand from consumers
led to increase in production, sale of automobiles. In the year 19-20 the
production, sales decreased because lack of demand.

59
 Table 2. Growth of Automobile industry in India

After
Before GST
GST
Year
201213
2010-11 2011-12 2013-14 2014-15 2015-16 2016-17 2017-18

220 200 255 188 182 182 238 210

Factories
(-) (-9%) (28%) (-26%) (-3%) (0%) (31%) (-12%)
128,135 152,731 148,497 (- 176,510 187,346 (6%) 185,779 (- 206,946 207,213
Employees
(-) (19%) 3%) (19%) 1%) (11%) (0%)
91,470 111,191 110,273 (- 120,786 135,282 135,837 147,204 (8%) 147,586
Workers
(-) (22%) 1%) (10%) (12%) (0%) (0%)
Fixed capital* 421,159 482,561 578,828 708,802 703,050 (-1%) 775,543 980,804 907,831 (-
(-) (15%) (20%) (22%) (10%) (26%) 7%)
Invested 573,125 694,000 790,311 895,239 900,842 (1%) 1,029,464 1,228,429 1,146,269
capital* (-) (21%) (14%) (13%) (14%) (19%) (-7%)
Working -252,570 -29,496 (-21,046 -143,846 (- -234,347 -61,406 (- 90,156 125,384
capital* (-) 88%) (-171%) 783%) (63%) 74%) (-247%) (39%)
2,140,47
Gross value of 1,526,593 1,900,460 6 2,158,586 2,508,956 2,759,543 3,039,291 3,160,785
output* (-) (24%) (13%) (1%) (16%) (10%) (10%) (4%)

Net income* 129,461 105,025 (- 207,454 157,915 (- 332,606 374,125 354,769 (- 276,252 (-
(-) 19%) (98%) 24%) (111%) (12%) 5%) 22%)

70,434 33,784 121,207 62,507 229,528 248,965 161,121 (- 125,403 (-

Profit*
(-) (-52%) (259%) (-48%) (267%) (8%) 35%) 22%)

Table 2 shows the growth of automobile industry from 2010-2011 to 2017-

18. It is found that there is negative growth in number of factories, fixed
capital, invested capital, net income, and profitability. It can be noticed that
there is no significant growth in employees and workers. In the case of
working capital and gross value of output, growth is found. The automobile
industry witnessed more fluctuations during the study period due to
internal and external factors. Major policy implications of government have
also impacted the automobile industry's performance. Especially,
demonetization and implementation of Goods and Services Tax (GST),

60
impacted the automobile sector's growth. There is a negative growth in
working capital in the year 2016-17 which may be an effect of
demonetization. During 2017-18 there is a surge in working capital; this
may be because of GST. The reason behind it is that the companies must
have more working capital to comply with GST provisions and decline in net
income and profit of automobile companies. Other indicators are also
depicting the slow growth of automobile industry.

Table 3. Production and Sale of automobiles (Values in Numbers)

Before GST After GST

Year Year
Production Sales Production Sales
2014-2015 23358047 23297717 2017-2018 29092734 29022548
2015-2016 24106068 24112465 2018-2019 30909486 30890201
2016-2017 25329383 29022548 2019-2020 26356187 26306017
Mean 24264499.33 25477576.67 Mean 28786135.67 28739588.67
S.D. 995171.7298 3096945.252 S.D. 2292080.899 2305154.057
Paired t-Test values for production Paired t-Test values for sales
N 3 N 3
Correlation ‘r’ -0.7018 Correlation ‘r’ -0.8530
Paired Sample t-test 2.5482 Paired Sample t-test 1.0856
P value of Paired Sample t-test 0.1256 P value of Paired Sample t-test 0.3910

Table 3 shows the results of paired t-test and correlation and coefficient of
the changes in automobile production for pre- and post-GST periods. It is
found that there is a high degree of negative correlation, i.e., -70%, between
pre- and post-GST automobile production. Similarly, there is a high degree
of negative correlation, i.e., -85%, that can be seen in the sale of
automobiles before and after the rollout of GST in India. It implies that there

61
 is no correlation between the production and sales of automobiles before
and after GST. It is interesting to note that the mean values of production
increased from 24264499 units to 28786135 units and sales increased
from 25477576 units to 28739588 units after GST implementation.
However, Paired sample t-test results indicate that there is no statistically
significant difference between production and sale of automobiles at the
significance level of 5%. Thus, the null hypothesis is accepted, and it can
be concluded that after implementation of GST, there is no significant
difference in production and sales made during pre-and post-GST.

Table 4. Wholesale Price Index of commercial, passenger,

two and three-wheeler vehicles

2011-12
Year
(Base 2012-13 201314 2014-15 201516 201617 2017-18 2018-19 2019-20
Year)
Motor
vehicles, 100.1 99.1 102.6 101.1 101.7 114.5 122.7 100.2
100
trailers, and (0%) (-1%) (4%) (-1%) (1%) (13%) (7%) (-18%)
semi-trailers
Passenger 95.9 111.6 119.8 119.1 117.2 111.1 110.9 111.8
Vehicles 100 (-4%) (16%) (7%) (-1%) (-2%) (-5%) (0%) (1%)
Light medium
107.4 113.0 114.1 113.6 114.1 113.9 114.1 114.2
& heavy 100
(7%) (5%) (1%) (0%) (0%) (0%) (0%) (0%)
vehicles
105.9 108.1 109.7 111.0 111.6 115.0 116.5 120.0
Minibus/bus 100
(6%) (2%) (1%) (1%) (1%) (3%) (1%) (3%)
100.7 98.8 101.6 101.4 103.2 105.6 106.9 115.1
Motorcycles 100
(1%) (-2%) (3%) (0%) (2%) (2%) (1%) (8%)
101.3 97.1 98.0 97.2 97.3 99.6 101.4 103.9
Scooters 100
(1%) (-4%) (1%) (-1%) (0%) (2%) (2%) (2%)
Three 107.0 113.0 115.8 116.0 122.5 128.4 133.3 137.1
100
wheelers (7%) (6%) (2%) (0%) (6%) (5%) (4%) (3%)

62
Table 4 shows growth of wholesale price index for a period of nine years
(2011-12 to 2019-20) with 2011-12 as base year. It is found that there are
drastic changes in wholesale prices for light, medium, and heavy vehicles,
minibuses, motorcycles, scooters, and three-wheelers segments. It is to be
noticed that the WPI increased drastically during the year 2017-18 for
motor vehicles, trailers, and semi-trailers, indicating the increase in the
prices of vehicles. Passenger vehicles witnessed negative growth in
wholesale prices from before GST implementation period to after GST. It
shows that motor vehicles' wholesale prices increased, and passenger
vehicle prices reduced after GST implementation. Furthermore, similar
trend continued in the year 2018-19; there is not much change in the prices
of automobiles in the year 2019-20 and there is a reduction in the WPI
index for motor vehicles which resulted in reduced prices and led to
increase in demand for motor vehicles. There are not much price
fluctuations in various segments of automobiles except for motor vehicles
and passenger vehicles for before and after GST periods.

63
 IMPACT ON
EXPORT AND IMPORT SECTOR

Impact on India’s Export:

Under GST, exports are treated as zero rated supply means GST rate is fixed
to zero. An exporter can make a claim if GST is paid at any point of supply
against exports from India. A trader may either export without the payment
of IGST under bond or letter or may made a payment of the IGST and claim
the refund later.

In each case it the responsibility of the exporter to provide the details of the
GST invoice in the shipping bill like name, GSTIN, address invoice number,
HSN code of the goods along with description, total value, and quantity of
goods.

Impact on India’s Import:

Import under GST are treated as inter sate supply means supply of goods
from one state to another. Since GST is destination-based tax, Integrated
Goods and Services Tax (IGST) will be levied in the state where the
imported goods are consumed and imported services are received. Hence
the provision of IGST act shall be applicable to supply of goods and
services during import and export.

64
 Tax structure and Input tax credit in case of Export and Import under
GST

Export Import

Tax Structure Zero rated supply. No IGST and Basic Custom

tax shall be charged
Duty (BCD) shall be
levied.

Input Tax Credit ITC allowed. Refund ITC and GST allowed.
shall also be allowed. ITC of BCD not allowed

The input tax credit is the credit that dealers can avail for taxes paid on their
purchases, at the time of paying final tax on their sales. IGST can be paid
using input tax credit of central goods and services tax (CGST), state goods
and services tax (SGST), and IGST.

In the case of CGST and SGST, no cross utilization of input tax credit is
allowed. This means that input tax credit of CGST can only be utilized for
CGST and IGST, and an input tax credit of SGST can only be utilized to pay
for SGST and IGST.

65
Overall Trade

The broad trends in overall Exports, Imports and Trade Balance in the last
four years are indicated in the figure1 and table-1 below:

Overall export in 2017-18 were US$498.62 billion which increase to US$

538.11 billion in 2018-19. India’s overall exports (merchandise and
services combined) passed the half trillion-dollar mark during 2019-20 but
remained lower than 2018-19. India’s overall exports in 2019-20 were US$
526.55 billion as against US$ 538.08 billion in 2018-19, registering a
negative growth of (-) 2.1 percent.

Overall imports in 2017-18 were US$583.11billion which increase to US$

640.14 billion in 2018-19. In 201920 the overall import was US$ 603
billion, exhibiting a negative growth of (-) 5.8 percent over the same period
last year. For the period April- January 2020-21 imports were estimated at
US$ 398.47 billion as against US$ 602.98 billion during 2019-20,
registering a negative growth of (-) 25.9 percent.

Overall trade deficit in 2017-18 were US$ 84.89 billion. In 2019-20 the
overall trade deficit was US$ 76.43 billion, which was lower than the deficit
of US$ 102.02 billion in 2018-19. Overall trade surplus for the period

April-January2020-21 is estimated at US$ 1.87 billion as against the deficit

of US$ 76.43 billion during 2019-2020.

66
 Table-1

Trade
Year Export Import
Balance

2017-18 498.62 583.11 -84.89

2018-19 538.08 640.14 -102.02

2019-20 526.55 602.98 -76.43

2020-21(April January 2020-21) 396.6 398.47 1.87

Figure-1

Overall Trade - ( Merchandise and Services together) in last four years.

in US $ billion

800

600

400

200

0
2017-18 2018-19 2019-20 2020-21(April January
-200
2020-21)

Export Import Trade Balance

67
India’s Merchandise Trade:

Financial year 2019-20 saw global economic slowdown, which was

aggravated in the last two months of the financial year due to the onset of
the COVID pandemic, which saw exports declining by (-) 5.1 percent from
the peak of US$ 330.08 billion in 2018-19 to US$ 313.36 billion in 2019-20.
The broad trends of Merchandise Exports, Imports and Trade Balance in the
last four years are given in fig-2 and table-2 below.

April-January 2020-21 (QE) exports were US$ 62.84 billion as against US$
313.36 billion during the period 2019-20, registering a negative growth.
Imports during 2019-20 also registered a decline of (-) 7.66% from US$
514.08 billion in 2018-19 to US$ 474.71 billion in 2019-20.

Merchandise Trade Table-2 (Value in US $ billions)

Year Exports Growth (%) Import Growth (%) Trade Balance

2017-18 303.53 10.03 465.58 21.13 -162.05

2018-19 330.08 8.75 514.08 10.42 -184

2019-20 313.36 -5.06 474.71 -7.66 -161.35

2020-21( 62.84 112.29 84.25 110.73 -21.41

April- May)

68
 Merchandise Trade
( Value in US $ billions )

600
400
200
0
Exports Growth (%) Import Growth (%) Trade Balance
-200
-400

2017-18 2018-19 2019-20 2020-21( April- May)

Figure-2

Import during April-January (QE) 2020-21 stood at US$ 84.25 billion,

recording a decline of (-) 29.1 percent compared to US$ 474.71 billion
during 2019-20. The trade deficit in 2019-20 was estimated at US$ 161.35
billion as against the deficit of US$ 184 billion in 2018-19. In April-May
2020-21(QE), trade deficit narrowed down to US$ 21.41 billion from US$
161.35 billion in 2019-20.

India’s services Trade:

After 1 July 2017, services of import are chargeable under IGST. The
provision to charge IGST on services either the services is located outside
the India territory or services receive from within the territory. India’s
services export and import is clearly mentioned in fig-3 and table-3 below.

Instead of global slowdown in 2019-20, and the result of Covid-19 crisis,

services sector has continued to record a growth in 2019-20. Services
sector export was US$195.09 billion in 2017-18 which increase to US$ 208
billion in 2018-19. In 2019-20 service sector stood at US$ 213.2 billion as

69
compared to US$ 208 billion recorded in 2018-19, which is a growth of 2.5
percent. India’s services exports (estimated) stood at US$ 168.35 billion in
April-January 2020-21 (E) as compared to US$ 213.19 billion in 2019-20
record a growth of 6.62 percent.

As far as imports of services sector is concerned it were US$ 117.53 billion

in 2017-18 which increase to US$ 126.06 billion in 2018-19 registered a
growth rate of 7.26 percent. Services imports in 2019-20 increased by 1.75
percent to US$ 128.27 billion, compared to US$ 126.1 billion in 2018-19.
The cumulative value of imports during April- January 2020-21 (E) was US$
98.21 billion, registering a negative growth of () 11.4 percent vis-à-vis 2019-
20. A surplus of US$ 84.92 billion and US$ 70.14 billion was recorded
during this period.

Services Trade Table-3 (Value in US $ billions)

Year Exports Growth Import Growth Trade

(%) (%) Balance

2017-18 195.09 18.81 117.53 22.61 77.56

2018-19 208 6.62 126.06 7.26 81.94
2019-20 213.19 2.5 128.27 1.75 84.92
2020- 168.35 -6.29 98.21 -11.4 70.14
21(
April-
Jan)

70
 Services Trade
(Value in US $ billions)

250
200
150
100
50
0
-50 Exports Growth (%) Import Growth (%) Trade Balance

2017-18 2018-19 2019-20 2020-21( April- jan)

Figure-3

Major Commodities of Export and Import of India:

Export of Top 10 Commodities by India:

(Value in US $ billions)
Rank Commodities 2018-19 2019-20 Growth (%) Share (%)
1 Petroleum Products 46.55 41.29 -11.31 13.18
2 Pearls, Precious and Semi-Precious Stone 25.97 20.69 -20.33 6.6
3 Drug Formulation, biologicals 14.39 15.94 10.78 5.09
4 Gold and other precious metal jewellery 12.95 13.75 6.15 4.39
5 Iron and steel 9.74 9.28 -4.77 2.96
6 Electric Machinery and equipment 8.42 8.97 6.45 2.86
7 RMG Cotton and accessories 8.69 8.64 -0.6 2.76
8 Organic Chemicals 9.33 8.35 -10.47 2.66
9 Motor vehicle/cars 8.50 7.80 -8.26 2.49
10 Products of Iron and steel 7.26 7.01 -3.49 2.24

India’s major export item is petroleum product which contribute 13.18

percent in 2019-20 of total export. The value of Petroleum products in the
total Indian export is around US$ 46.55 billion in 2018-19 and 41.29 US $ in
2019-20 respectively. Second most important export item of India is Pearls,
Precious and Semi-Precious Stone which accounted 6.6 percent of total
export item followed by drug formulation and biological products.

71
Import of Top 10 Commodities by India-
(Value in US $ billions)
Rank Commodities 2018-19 2019-20 Growth (%) Share (%)
1 Petroleum Crude 114.04 102.75 -9.90 21.61
2 Gold 32.91 28.23 -14.22 5.95
3 Petroleum Products 26.88 27.80 3.34 5.86
4 Pearls, Precious and Semi-Precious 27.08 22.46 -17.05 4.73
Stone
5 Coal, Coke, and Briquettes etc. 26.18 22.46 -14.22 4.73
6 Electrical Component 15.75 16.32 3.64 3.44
7 Telcom Instruments 17.92 14.22 -20.61 3.00
8 Organic Chemicals 14.25 12.22 -14.23 2.57
9 Industrial Machinery for diary 12.47 11.98 -3.93 2.52
10 Electric Machinery and equipment 9.86 11.28 14.37 2.38

As far as India’s top ten important import item is concerned, crude

petroleum was the top import item during 2019-20 which contributed 21.61
percent of total import. The value of crude Petroleum in the total Indian
import is around US$ 114.04 billion in 2018-19 and 102.75 US $ in 2019-20
respectively. After crude petroleum the second most important item of
India’s import is gold which account 5.95 percent of total India’s import in
2019-20. India imported 160 tonnes of gold worth $ 8.4 billion in March
2021.Apart from crude petroleum, India imports a large variety and volume
of finished petroleum products, Pearls, Precious and Semi-Precious Stone,
Coal, Coke, and briquettes etc, electrical component, Telcom instruments,
organic chemicals were the most important item of India’s import.

72
 IMPACT ON
REAL ESTATE SECTOR

The pre-GST taxability of Real Estate Transactions

When was tax

Nature of Duty Rate of Tax required to be
paid?

VAT* 1 to 4%
On Sale of
Service Tax 4.50%
Under
Registration
0.5 to 1%
Charges Construction

Stamp Duty Properties

5 to 7%
Charges*

* VAT, Registration Charges, Stamp Duty Charges vary from state to state.
VAT was not applicable on completed or ready to sale properties. Under the
erstwhile indirect tax regime, Cenvat Credit on inputs used for the
construction of a building or a civil structure or any part thereof was
restricted too.

73
Taxability of Real Estate Transactions under GST (Before 1st
April,2019)

Rate Input
Particulars Applicability of Tax
Tax Credit
On Under Construction
Properties
Applicable as supply of
(For Homes
services as per Schedule I of 8%* Available
Purchased Under
CGST Act, 2017
Credit Linked Subsidy
Scheme)
On Under Construction Applicable as supply of
Properties (Other than services as per Schedule I of 12% Available
above) CGST Act, 2017
Not
On resale properties Not applicable
available
Not applicable. As per
On Land purchase and Schedule III, sale of land is Not
sale neither supply of goods nor available
services.
Works contract Applicable 18% Available
Composite supply of
works Applicable 18% Available
contract
Composite supply of Applicable 12% Available
works

* NOTE: The homes purchased under the Credit-Linked Subsidy

Scheme (CLSS) attracts 12% GST rate. The applicable rate will be 8%
after cutting the 1/3rd amount towards the cost of land.

74
CBIC has Notified Rules & Procedures for builders intended to take benefits
of reduced rates (1 to 5 % on sale of under construction flats commencing
on or after 1st April 2019:

On or before On or After 01/04/2019

31/03/2019

Residential Residential Residential Residential

Buyers Buyers
PARTICULARS Buyers Buyers
(Other than (Other
(Affordable (Affordable
Affordable than
Housing Affordable Housing
Housing
Scheme) Housing Scheme)
Scheme)
Scheme)

Effective rate of 12% 8% 5% 1%

GST

Whether ITC is
available?

Whether ITC Yes Yes No No

available

Cost of Land (A) 25.00 25.00 25.00 25.00

Cost of 14.40 14.40 14.40 14.40

Construction (B)

75
 GST on Inputs (at 2.60 2.60 2.60 2.60
the rate of 18%) (C
)

ITC Available(D) (2.60) (2.60) Nil Nil

Total cost to the 39.40 39.40 42.00 42.00

Builder(E)

Profit Margin (F) 0.79 0.79 0.84 0.84

Sale Price of 40.19 40.19 42.83 42.83

Flat(G=E+F)

GST on Sale Price 4.82 3.22 2.14 0.43

of Flat
(H=G*Effective
Rate)

NET Cost to the 45.01 43.41 44.97 43.27

Buyer(G+H)

Impact of GST on Buyers

Under the earlier tax regime, buyers had to pay VAT, Service tax, Registration
charges & Stamp duty on purchase of properties under construction. Also,
since VAT, Registration charges & Stamp duty were state levies, prices of
properties varied from state to state. Moreover, developers had to pay
various duties like sales tax (CST), custom duty, OCTROI etc. for which credit

76
was not available. Under GST, a single tax rate of 12% is applicable on
properties under construction while GST is not applicable on completed or
ready to sale properties which was the case in previous law. Hence buyers
will benefit from reduction of prices under GST.

Impact of GST on Developers / Builders / Contractors

Under the previous tax regime, developers had to bear Excise duty, VAT,
Customs duty, Entry taxes etc. on raw materials / inputs and Service tax on
various input services like approval charges, architect professional fees,
labour charges, legal charges etc. ITC was not available for duties like CST,
Customs duty, Entry Tax etc. This would impact the pricing and subsequently
the burden was transferred to the buyer. Under GST, developers’
construction costs are significantly reduced as multiple taxes are subsumed
and due to the availability of input tax credit. Also, reduction in cost of
logistics will be an added benefit. Hence developers may see improvement
in margins.

On the downside, developers must do multiple calculations to arrive at ITC

in order to pass it on to the buyers. Hence, in most cases, they can pass on
the ITC only during the final stages. This lack of transparency on ITC, may
affect the developers since buyers may resort to “wait and watch” approach
and defer buying decision.

77
Impact of GST on other Stakeholders

The impact on the allied services like labour, material suppliers, service
suppliers etc. depends on the increase or decrease in the tax levied on these
goods and services. This will have a consequential impact on real estate
industry.

78
 IMPACT ON
MINING SECTOR

Mining sector is an integral component of industrial development and

economic growth in India. Current annual contribution of mining sector to
Indian economy is around 3920 billion INR which is equal to 3.92 Lac Crore.
The mining industry’s share in India was estimated at 2.6% of the GDP in
2018-19, down from 3% in 2011-12. Small quarries and traditional mineral
acquiring and processing activities in India are mostly part of the informal
sector, contributing up to 88 % of the total mining output and employing
many people living at low levels of income.

79
India currently produces around 89 minerals under different groups, with
fuel minerals, metallic minerals, non-metallic minerals, atomic minerals,
and minor minerals. The country has immense potential for mining
resources and reserves and is currently among the top 10 global producers
of many minerals. An estimate of volume of mineral production in India may
be had from the graph below:

80
During 2021-22, mineral production in India was reported from 21
States/Union Territories of which the bulk of value of mineral production
(excluding fuel and atomic minerals, and minor minerals) of about 88.7%
was confined to 4 States. Odisha is in leading position, in terms of estimated
value of mineral production in the country and had the share of 47.2% in the
national output. Next in order was Chhattisgarh with a share of 16.2%
followed by Karnataka (14.31%), Rajasthan (11%) and Jharkhand (4.5%) in
the total value of mineral production. The contribution of States/ UTs in the
value of mineral production (excluding fuel and atomic minerals, and minor
minerals) during 2021-22 estimated is pictorially shown:

81
In mining too, there is a large chunk that is contributed by informal sector,
which is close to 22%. The following table illustrates the proportion of
informal sector in various areas of the economy:

82
Activities in the mining sector

In general, mining sector involves the following activities :

• Survey and Exploration of minerals.

• Excavation of mines
• Demolition of mines
• Earth moving services.
• Mining of minerals
• Handling of minerals extracted Transportation of minerals.

Before GST:

In the pre-GST regime, the mining sector incurred service tax and royalty as
the procurement costs .The mining companies attracted service tax for the
services relevant to the mining industry such as exploring ion, mineral
product ion, handling, transportation etc. A manufacturer and/or service
provider paying service tax on procurement of services was allowed to take
credit of same and allowed to set it off against his Service tax or Excise
liability. However, no credits were available to primary producers or miners,
who were neither service providers nor manufacturers but simply traders.
Exporters were allowed to claim a refund of tax paid on procurement in
various forms. With effect from 01.04.2016, the negative list contained in
section 66D was amended to exclude all services provided by Government
from negative list and to bring them under levy. Further, these services were
subjected to reverse charge requiring the recipient to pay tax. Since then,
applicability of service tax over royalty paid by mining companies to State

83
Governments towards mineral rights has been a subject matter of debate.
The industry was of the view that royalty payable on mineral rights itself is
tax and service tax could not be levied on such tax amount.

In addition to the above, VAT was leviable on the ore/mineral so sold or

traded. In case of miners, it was often collected at the nearest check-posts
and in case of traders, at the time of sale of the respective ores/minerals. ITC
was accordingly available.

After GST:-

The 101st Constitutional Amendment has deleted only the VAT, Entry Tax and
Entertainment Tax from the state lists and Excise duty and Service Tax from
the union list. As per Section 3, of the CGST Act, 2017 the Goods and Service
Tax is levied on the supply of goods and services. Government continued the
same tax policy as before for mining sector even under GST regime requiring
the recipients to pay tax on royalty paid over mineral rights. Various supplies
of services such as exploration, mineral production, handling,
transportation, and the supply of the minerals to consumers attract GST.
Under GST, output tax is leviable at the time of supply of output of the mines,
but at the same time the input tax cost incurred by the miners is allowed as
credit. The same can be shown it the help of the following table under the
GST regime:-

84
As per Central Tax (Rate) notification no. 27/2018 read with 11/2017, GST
at18% is payable on royalties paid to State governments for the grant of
mining leases, by the lessee under a reverse charge mechanism. GST paid
under the reverse charge mechanism is eligible as an input tax credit (ITC) in
the hands of the lessee. There are also ITCs for other expenses incurred
during business. Refunds of unused ITCs are available in respect of zero-
rated supply (exports) or where ITC is accumulated due to a rate of tax on
inputs that is higher than the tax on the output supply.

85
 SUMMARY AND CONCLUSION
The implementation of the Goods and Services Tax (GST) in India has
brought about significant transformations across various sectors of the
economy. The impact of GST can be summarized as follows:

1. Simplification of Tax Structure: GST has replaced multiple indirect

taxes, creating a more streamlined and simplified tax structure. This
has led to increased ease of doing business and compliance for
businesses across sectors.

2. Boost to Manufacturing and Supply Chain: With the removal of

cascading taxes and a unified tax system, the manufacturing sector
has experienced a boost. The streamlined supply chain has facilitated
the movement of goods across states, reducing logistical challenges.

3. Increased Compliance and Formalization: GST has incentivized

businesses to formalize their operations and comply with tax
regulations. This formalization has contributed to a broader tax base
and a reduction in the informal sector.

4. Impact on Small and Medium Enterprises (SMEs): While larger

businesses have adapted well to GST, SMEs initially faced challenges
in understanding and complying with the new system. However, over
time, GST has paved the way for a more level playing field and
increased competitiveness.

5. Consumer Benefits and Price Stabilization: GST aims to eliminate

tax-on-tax and reduce the overall tax burden on consumers. The
rationalization of tax rates has contributed to price stabilization,
benefiting end consumers

86
 6. Challenges and Adjustments: The transition to GST has not been
without challenges. Businesses have had to adapt their accounting
systems, and some sectors have faced initial disruptions. However,
the government has continuously worked towards addressing these
issues.

7. International Comparisons: The adoption of GST aligns India with

global tax practices. With more than 140 countries adopting some
form of GST, India has integrated into the international tax framework.

In conclusion, the impact of GST on different sectors of the Indian economy

has been multifaceted. While there have been challenges during the
transition, the long-term benefits include a more efficient tax system,
increased compliance, and a positive impact on economic growth. The
continuous evaluation and refinement of GST policies remain crucial for
sustaining and enhancing its positive effects on the Indian economy.

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