A RESARCH PAPER ON GST AND ITS IMPACT ON SERVICE SECTOR.

NAME- Jain Disha Mukesh

COLLEGE kandivali education society of arts and commerce
ABSTRACT
GST is one of the most crucial tax reforms in India. It is a comprehensive tax system
that will subsume all indirect taxes of states and central governments and unified
economy into a seamless national market. It is expected to iron out wrinkles of
existing indirect tax system and play a vital role in growth of India. This paper
presents an overview of GST concept, explains its impact on service sector.

KEYWORDS: GST (Goods and Services Tax), Indian Tax Scenario

INTRODUCTION
The Goods and Services Tax Bill or GST Bill is a national Value added Tax to be implemented in
India from 1 April 2017. "Goods and Services Tax" would be a comprehensive indirect tax on
manufacture, sale and consumption of goods and services throughout India, to replace taxes
levied by the central and state governments. Goods and Services Tax would be levied and
collected at each stage of sale or purchase of goods or services based on the input tax credit
method. This method allows GST-registered businesses to claim tax credit to the value of GST
they paid on purchase of goods or services as part of their normal commercial activity. Taxable
goods and services are not distinguished from one another and are taxed at a single rate in a
supply chain till the goods or services reach the consumer. Administrative responsibility would
generally rest with a single authority to levy tax on goods and services. Exports would be zerorated and imports would be levied the same taxes as domestic goods and services adhering to the
destination principle.
A dual GST system is planned to be implemented in India as proposed by the Empowered
Committee under which the GST will be divided into two parts:

State Goods and Services Tax (SGST)

Central Goods and Services Tax (CGST)

Both SGST and CGST will be levied on the taxable value of a transaction. All goods and
services, leaving aside a few, will be brought into the GST and there will be no difference
between goods and services. The GST system will combine Central excise duty, additional excise
duty, services tax, State VAT entertainment tax etc. under one banner. The GST rate is expected
to be around 14-16 per cent. After the combined GST rate is fixed, the States and the Centre will
decide on the SGST and CGST rates. At present, 10 per cent is levied on services and the indirect
taxes on most goods are around 20 per cent.
OBJECTIVE
1. To study about GST and its impact on service sector with respect to hotels and
restaurants, pharmacy industry, and airlines.
HYPOTHESIS
1. Impact of GST on pharmacy will be negative.
RESARCH METHODOLOGY
The study focuses on extensive study of secondary data collected from various books, journals,
government reports, publications from various websites which focused on various aspects of
goods and service tax.
SIGNIFICANCE OF STUDY
This research paper can actually benefit all of them who want to know about GST its impact and
its benefits.
LIMITATIONS
1. Data was collected through secondary sources hence may not be fully accurate.
2. As the study was to be completed in a short time, the time factor acted as a significant
limit on the scope and extensiveness of the study.

FUTURE STUDY SCOPE

A research report on comparison of GDP before and after applying GST.
IMPACT ON HOTELS AND RESTAURANTS
The GST, once implemented, is expected to rationalize indirect tax structure and usher in
seamless tax credit. However, the impact for the hotel sector is more likely to be neutral
depending on the final GST rate. Since hotels/restaurants are mainly subject to service tax, VAT
(state subject), luxury tax (state subject), the impact of GST would depend on the tax levied by
various states.

HOTELS

PRESENT TAX
Service tax 8.7 %
Luxury tax 8-12%
TOTAL- 16% -20%

AFTER GST
1. If GST will be

IMPACT
POSITIVE

around 1015%
2. If GST will be
around 15-

NEUTRAL
NEGATIVE

20%
3. If GST will be
more than
RESTURANTS

Service tax 5.6 %

VAT 12-14.5%
TOTAL- 17% -20%

20%
4. If GST will be
around 1015%
5. If GST will be
around 1520%
6. If GST will be
more than
20%

IMPACT ON PHARMACY

POSITIVE
NEUTRAL
NEGATIVE

CURRENT TAX STRUCTURE IN PHARMACY

Currently, the pharmaceutical sector in India faces a multistage taxation system. Different taxes
such as import customs duty, central excise duty on manufacture, CST/VAT on sale, and
service tax on provision of servicesadds burden to operating margins of pharma industry.
Further, the loss of tax credit on services (currently credit claims are available for raw materials)
such as logistics impart insufficiencies to the complete pharma supply chain. Further, multistage
taxation increases compliance cost for the pharmaceuticals as the company is liable to file
multiple returns on monthly basis to different authorities.
AFTER GST
GST implementation will lead to re-distribution of taxes across different business functions,
thereby, leading to low taxation cost for drug makers. The most direct impact is likely to come
from elimination of CST. This will lead to reduction in transaction cost.
CHALLENGE
Currently, the pharma sector enjoys tax holidays in a few regions provisioned by the government
on the backdrop of regional development. The access and logistic cost to these regions is high,
but is overridden by the tax benefits. However, with GST, these tax benefits will also be
eliminated. It will be up to the government on how it plans to lure manufacturers to stay in these
regions and ensure their development.
Concluding, we assume that the foremost benefits to pharma from GST will come from unified
taxation (leading to low processing cost) and optimized logistic process. However, given the
pricing controls by government on drug prices, the key question to be answered is who will
avail this benefit, the patient, the government or the pharma?
HYPOTHESIS TESTING there are many challenges in pharmacy industries but then to it is
assume that after GST it will have a POSITIVE impact on pharmacy industry hence, our
hypothesis is been proved wrong.

IMPACT ON AIRLINES

Flying to become expensive, as service tax will be replaced by GST. Service tax on fares
currently ranges between 6% and 9% (depending on the class of travel). With GST, the rate will
surpass 15%, if not 18%, effectively doubling the tax rate. The other impact may be on aviation
turbine fuel. Currently, airlines can claim what is called a cenvat credit on the central excise duty
for fuel. They will lose that in the GST regime as petroleum products, including ATF, are outside
the purview of GST. This will have a NEGATIVE Impact on airline industry and thus the prices
of air ticket will go up.
ADVANTAGES OF GST BILL
Introduction of a GST is very much essential in the emerging environment of the Indian
economy.

There is no doubt that in production and distribution of goods, services are increasingly
used or consumed and vice versa. Separate taxes for goods and services, which is the
present taxation system, requires division of transaction values into value of goods and
services for taxation, leading to greater complications, administration, including
compliances costs. In the GST system, when all the taxes are integrated, it would make

possible the taxation burden to be split equitably between manufacturing and services.
GST will be levied only at the final destination of consumption based on VAT principle
and not at various points (from manufacturing to retail outlets). This will help in
removing economic distortions and bring about development of a common national

market.
It will also help to build a transparent and corruption-free tax administration. Presently, a
tax is levied on when a finished product moves out from a factory, which is paid by the
manufacturer, and it is again levied at the retail outlet when sold.

CONCLUSION

Tax policies play an important role on the economy through their impact on both efficiency
and equity. A good tax system should keep in view issues of income distribution and, at the
same time, also endeavor to generate tax revenues to support government expenditure on
public services and infrastructure development. Cascading tax revenues have differential
impacts on firms in the economy with relatively high burden on those not getting full offsets.
This results in loss of income and welfare of the affected economy. The ongoing tax reforms
on moving to a goods and services tax (GST) would impact the national economy,
International trade, firms and the consumers There has been a good deal of criticism as well
as appraisal of the proposed Goods and Services Tax regime. It is considered to be a major
improvement over the pre-existing central excise duty at the national level and the sales tax
system at the state level, the new tax will be a further significant breakthrough and the next
logical step towards a comprehensive indirect tax reform in the country. GST is not simply
VAT plus service tax, but a major improvement over the previous system of VAT and
disjointed services tax a justified step forward. India is a federal republic, and the GST will
thus be implemented concurrently by the central and state governments as the Central GST
and the State GST respectively and it appears that there will be different rates of taxes.
However a single rate of GST would help maintain simplicity and transparency by treating
all the services equal. And though there are some negative as well as positive impact on
various service sectors but with the proper planning and implementation it can be a great
boost to our country.
REFERENCES
http://www.careratings.com/upload/NewsFiles/SplAnalysis/Impact%20of%20proposed%20GST
%20on%20select%20industries.pdf
https://www.academia.edu/6661188/GOODS_AND_SERVICE_TAX_ITS_IMPACT_ON_INDI
AN_ECONOMY
http://icmai.in/icmai/Taxation/upload/GST-In-India-vol1.pdf
http://www.ey.com/IN/en/Services/EY-goods-and-services-tax-gst