GST impact on online shopping tax breaks

On July 1, India moved on to a new era of taxation with the squash of Goods and Services Tax (GST). It has now subsumed 17 middle and state indirect taxes and 23 cesses into a single tax regime. Such a big transition is bound to change the lives of many persons and businesses. Some of such changes are as follows:

Change in shopping online

Under the new regime, merchandise will be delivered to a customer much earlier than the previous regime due to removal of paperwork to be filed with state authorities. Though goods will reach on time, a pain point for consumers would be income and cancellations as e-commerce companies may make this a tad difficult since they would now have to bear the tax quantity on their own and only later be able to get a refund from the government in case of returns and cancellations. The companies will face a major cash-flow drawback due to returns and cancellations.Relief to consumers

A huge relief to customers has been the reduction in nominal tax rates for a majority of goods. Half of the items in the Consumer Price Index (CPI) basket will be excused from GST and another tenth will be taxed at the lowest rate of 5%. The balance CPI goods would come under either of the two standard rates of 12% or 18%, rather than the uppermost rate of 28%.

Anti-profiteering clause

The management has set up an anti-profiteering body to keep a watch on how businesses recalibrate the tax-inclusive price charged from consumers. Hence, companies and traders are expected to pass on the benefit to the patrons. This would result in further reduction of prices on an assortment of goods and services.

Getting tech savvy

In lines with Digital India, all filings in GST will have to be completed online. Hence, all businesses would not only have to update their systems but also train their workforce to become tech savvy. It will specifically effect smaller traders who earlier manage their tax filings manually.

Ease of process

GST will not only ease the progression of business but also bring in transparency in the whole process. All the invoices uploaded by sellers will also be visible to buyers. For the first time, customers will get to know the actual amount of taxes they are paying for goods and services in the form of single GST. The efficiency of GST is predictable to bring down the tax burden and look up transparency.

Tax breaks to end

There is no more excise duty exception for setting up production units in the north east or hill states. Businesses will have to make investment decisions based on resonance economics rather than tax arbitrage. Units that have already come up on the promise of excise immunity for a specified period will have to pay tax first and claim refund in the outstanding period.

Competitive business environment

It will shift the burden of taxes from the manufacturer in India where the tax system is unfairly skewed towards the consumers. Manufacturers will pay lower dues and there will be an environment of greater competitiveness and more autonomy in business.

Compliances

The amount of returns to be filed under GST has been a hot topic of debate. In the GST regime businesses have to file a total of 37 returns per state. However, the whole thing being online, it is expected to be easier. Also, now such businesses would have to deal with one tax authority rather than multiple powers that be as in the past regime.