IMPACT OF GST ON MANUFACTURING SECTOR

IMPACT OF GST ON MANUFACTURING SECTOR

●POSITIVE IMPACT

One Tax: GST will subsume around 17 indirect taxes viz. excise duty,service tax,VAT,CST,luxury tax,entertainment tax(unless levied by local bodies)etc. Thus,leading to elimination of multiplicity of taxes levied at the central and state level.
• *Benefits from tax rate in GST* :
 In current tax regime the consumer pays approximately 25-26% more than the cost of production due to excise duty (at 12.5%) and value added tax (almost 14.5%). Then there are other taxes like purchase tax,octroi,etc. However,In GST,the CGST and SGST rate is capped at 14% each thereby in totality to 28%.Further STANDARD RATE of 12% & 18% have been prescribed by GST Council.Ultimately goods may become cheaper marginally which a good sign for manufacture to compete with international market.
• *Reduction in manufacturing cost* :
Due to elimination of tax cascading and seamless flow of input tax credit to certain extent,there would be saving in taxes at various stages of mfg.,thereby leading to lower cost of production.
• *Restructuring of supply chain*:
Availability of input tax credit on inter state sale may lead to re-structuring of supply chain,which will remove an extra level of warehousing in the supply chain thereby leading to greater cost benefits to manufacturers.
• *Reduce gap between large and small manufacturers*:
GST would reduce the gap between large and small manufacturers to some extent as the tax planning done by backward and forward integrated giants lead to huge tax efficiencies. It would lead to more efficiency and equality for the small manufacturers.
• *Reduce logistic time* :
The objective of GST regime is to unify the Indian market and assist the smooth flow  of goods within the country.Although border checkpoint may not be done away immediately,GST would reduce the hindrances posed by border checkpoints. Therefore,GST regime would reduce transport hassles by minimizing compliance scrutiny at  these check points.
• *Valuation of Samples:* 
In Current law Goods removed on Sample basis, tax needs to paid by adopting the nearest aggregate value. However, In GST Regime, time up to six months is granted to decide whether the good sold on sample basis has been approved or not which beneficial thing for manufacturer. However, after 6 months tax needs to be paid if the same is still in process of approval.
• *State Wise Registration*: 
Generally it has been observed that many manufacturers have two premises of factory within same locality or in same state and they are liable to take separate registration for each factory. But in GST Regime, Registration has to be taken state wise and not factory wise. This will abolish the difficulties which have been faced due to separate registration.
• *No assessment by multiple tax authorities:*
Generally A manufacturers are facing many difficulties in handling the assessments done by the Separate authorities for VAT, Service Tax, Central Excise, CST, etc. In GST Regime it is expected that assessment will be done by State authorities for SGST, Central Authorities for CGST, and Interstate authorities for IGST.

• *Electronic Mode for Forms:*
 In current Regime of tax there is very much manual filing of documents such as initial declaration, Numbering of Invoices etc. But in GST Regime there will be less manual filing of documents and more through electronic mode. Further, the communication with department also could be through electronic mode.

● _Negative Impact_
• *Increase in Working Capital:*
 In GST Regime of tax, stock transfer has been made taxable, which requires the huge working capital because the realization of tax going to be on final supply tills that It may block the Capital.

• *No Credit of Petroleum Product:*
In Regime of GST, Petroleum Product has been kept out of GST hence; the tax paid on Petroleum Product is not eligible as credit and same became the cost. Each industry requires the Petroleum Product such as Fertilizer Industry, Power Sector, Logistic Sector etc.

• *Introduction of Reverse Charge on Goods:*
  In Current Regime Of tax structure there was reverse charge on specified services but in case of GST even the reverse charge will be applicable on goods.
• *Post supply Discount:*
 If the Discount has to be given post supply than it must be known to both the parties at the time of supply or pre-supply and the proof of being known is the clause of discount must be there either in contract or agreement or offer etc.
• *Matching Concept of Returns:*
In Current if the tax has been made the purchaser to supplier then he is eligible to take the Credit it is immaterial whether the same has been credited to Central Government by the Supplier or not. But in GST Regime, the matching concept if Tax Credit will be there, if Credits pertaining to Supplier does not match with Purchaser than it will not be accepted in return unless it is rectified by both the parties.

• *No Compliance of “C” and “F” Forms:*  As stock transfer has been made taxable in GST Regime hence Concept of “F” Forms is no more relevant and IGST has been levied on all inter-state purchases or sale and Credit will be allowed, hence No Concept of form “F” is relevant.

• *Denial of CENVAT credit on purchases from unorganized/unregistered Person :*
In GST Regime if the goods have been purchased from the register person then only Credit will be given otherwise the Credit will not be allowed.
• *Increase in Compliance-burden :* There is going to be huge Compliance burden in GST Regime which would be time consuming