analysis of impact of gst with reference to perspective of ... · keywords: gst, gst for fuel,...

Analysis of impact of GST with reference to Perspective of Small

Business Stakeholders

1Dr.V.R.Nedunchezhian,2Mr. Sridhar Babu, 3Dr. M. Bharathi,

1Professor, Department of Management, Kumaraguru College of Engineering,

Coimbatore,Tamil Nadu, India 2Placement officer, Firebird Institute, Coimbatore, Tamil Nadu, India

3Professor, Department of Electronics and Communication Engineering, Kumaraguru College of

Technology, Coimbatore, Tamil Nadu, India, [email protected]

Abstract

India has transitioned to GST implementation last year. Since the launch of the

uniform tax system, there are many gaps that are encountered in the implementation of the

system. This report is focused on the key issues both positive and negative that are discussed

among the public domain and the industrial circles. Pointing to the key issues that are

discussed vividly among the public, the impact survey is conducted with small and micro

business traders for response on the overall impact of GST on their business and some

significant factors that are impacting the actual outcome. It is imperative from the response

survey that the opinions of the respondent’s areneither too neither negative nor positive and

it’s in a balanced condition. If the government can ensure to address some of the teething

issues, the process could lead to sustainable economic development in the country.

Keywords: GST, GST for Fuel, GSTIN, GSTIN Network, GST impact

1. Introduction

One year of implementing the GST structure in India has amassed both positive and

negative responses from the individuals and the customers. GST (Goods and Services Tax) is

a significant step intended towards simplifying the giant tax structure to support stakeholder

benefits. Prior to GST implementation, there were more many indirect taxes and cess that

were applicable depending on the business segment. [1] There were mixed views and

opinions prevailing in the public domain about the pros and cons of GST implementation, the

gamut of how the solution is implemented and weighing the scales of implementation

efficacy.

The impact of GST has a direct weight on two key segments. One, to the businesses and

the other to the end customers those bearing the tax costs on the goods purchased and

International Journal of Pure and Applied MathematicsVolume 119 No. 17 2018, 2357-2367ISSN: 1314-3395 (on-line version)url: http://www.acadpubl.eu/hub/Special Issue http://www.acadpubl.eu/hub/

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services availed. It is imperative from the number of amendments that are taking place

regularly from the GSTN committee meetings that the process is still evolving and is yet to

settle. [2]

In the other dimension, in India, unorganized business sector also contributes

significantly to the growth of country’s GDP. Small and medium scale business, cottage

industries and the other such fragments has witnessed the transition to GSTIN network and

many of the non service tax registered companies too have under the ambit of GST and are

bound to collect taxes from the customers. [1]

While the GSTIN system has certainly brought in the transparency in to the taxing system

and has eased the complexities, the debates pertaining to GSTIN implementation is still on.

[3]This study explores the key factors that have become a debatable scenario in the GST

implementation and the perception of some of the small scale businesses about the GST

implementation scenario.

GST Implementation in India

Defining GST

GST is aimed at simplifying the indirect tax structure by evading many of the indirect

taxes and focusing on single indirect taxing policy. It is a comprehensive levy on

manufacturing, services, and sales at a national level. The GST bill is profoundly expected to

bring uniformity in to the system and focus on effective implementation of the system. [4]

Amalgamation of the central and state level taxes in to one single tax system is

targeted to enhance the position of India in both the domestic and also at the global markets.

It is believed in the industry circles that full-fledge implementation of GST shall reduce the

tax burden to the consumers to an extent of 25-30%. [3]

The facility of input tax credit system for GSTIN registered business is designed to

mitigate any cascading effects on inputs that go in to the production or offering services to

the customers. It is imperative that such a model should reduce the production or service

related taxes and hence the end consumers get benefited. [5] [6]

Some of the key factors related to GST implementation are

It is a one country one tax regime and shall subsume all the indirect taxes levied by

both state and centre.

Increased transparency and layman understanding of the taxing process

A dedicated information network that supports in hassle free taxing system

Targeted to create business friendly environment [6]

GSTIN network in India is completing one year shortly, and still the process related

developments are being debated across by various stakeholders of the industry. As mentioned

in the afore sections, policy changes that are taking place during the GSTIN committee

meetings signify that there is more procedural changes are envisaged. [7] [9]

International Journal of Pure and Applied Mathematics Special Issue

2358

However, since implementation, some of the key issues in the implementation scenario that

has gained the attention of industry stakeholders and is bound to impact the business scenario

and the objective of implementing the GST system. [8]

Key Issues Debated for GST

GSTIN Network

GSTIN network is a specifically designed portal that is introduced by the Govt. of

India for enabling the businesses to register for GST and to file the returns regularly. [11]

From the day the system is launched for businesses, there were too many technical glitches

that were encountered in the system. [9] Millions of businesses were to sign up for the GST

registration number and the system has encountered the load factor and the issues were

encountered for many months, before the glitches were addressed. [2] [12]

Complexity in the Filing Process

Despite that the process of filing is moved to online platform and the process is eased,

still there were many complexities encountered by the small businesses. [13] As in the case of

many small businesses and cottage industry companies , the complexity of filing too many

returns in a monthly period and the extensive set of data that has to be fed to the system was

felt a challenging process. Multiple slabs of filing process like GSTR-1, GSTR-2, GSTR-3B

is turning out to be a complex factor for many of the small scale businesses and individual

traders, which is imperative as issue of concern for the businesses. [2]

The quantum of filings that has taken place in the first few months of GST

implementation has gradually started losing figures and the number of filings that were

happening was remarkably down. Such conditions could be attributed to the gaps in the

system and the process related issues. [6]

Tax Slabs

Current tab slabs for GST implementation has four different slabs (0%, 5%, 12, %,

18% and 28%). Post implementation of GST there were numerous changes to the number and

category of products that fall under respective categories. Issues pertaining to too many

products under different categories, confusions pertaining to the classification of finished

goods and non-finished goods category, some of the products classified initially under the

luxury products categories indicate the kind of challenges and limitations that are

encountered in the process of implementing GST. [9] [6]

Fuel under GST Ambit

The other majorly debated aspect post implementation of GST in India is about the

issues pertaining to bringing fuel under the GST scenario. Still, fuel prices in India are under

the old tax slabs. [1]There are many contravention issues between state and centre pertaining

to bringing fuel to the GST circuit. It is certain that if the fuel prices are brought under GST,

it will have impact on the exchequer revenues for the states and also for the centre. [2]


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GST taxes Payments

One of the common challenges discussed across the business verticals is the issue

pertaining to making monthly payments of taxes invoiced to the customers. In the current

schema, once the invoice is generated, irrespective of the receipts against the invoice,

businesses are imperative to make payments for the respective tax values. [15] In the case of

the pending invoices, and bad debts the load factor on the small businesses is being huge, and

it is leading to malpractices in the business models. [10] Despite that there are numerous

other issues too that are being debated issues in the case of GST implementation; the

aforesaid factors are major impact conditions. [9]

Impact Survey

Focusing on the small businesses that were in to GST registration, a survey is

conducted targeting the small and micro businesses. [17] The target segment is chosen from

the industrial and service sector. In the service sector the target groups were profoundly from

the unorganized sector and the ones that have come to GST ambit post the implementation.

The following statistics is the consolidation of the impact survey conducted and the process

related inputs pertaining to the same. [10]

The figure below reflects on the impact inputs gathered from various respondents on

how they have felt the key aspects of GST implementation are impacting their business and

the overall business impact.

Figure 1 Respondents to Survey

The key factors that are considered in the survey conducted are about the overall

impact of GST, the rating for implementation process,[20] GSTIN system rating, impact on

the business and operations, issues pertaining to the monthly filing conditions. The key inputs

that are gathered from the process are consolidated for all the 75 respondents from which the

inputs are gathered.


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Overall

Impact

Filing

Process

Proce

ss

Imple

menta

tion

Impact

on

Business

Operatio

ns

Impact on

Business

Flow

Inpu

t Tax

Bene

ficial

Negative

Impact of

Monthly

Filings

Overall

Impact 1

Filing

Process 0.68 1

Process

Implementati

on

0.82 0.51 1

Impact on

Business

Operations

0.01 0.05 0.02 1

Impact on

Business

Flow

-0.05 -0.16 0.01 -0.13 1

Input Tax

Beneficial -0.11 -0.21 -0.18 0.13 0.11 1

Negative

Impact of

Monthly

Filings

-0.05 -0.10 -0.07 0.02 -0.03 0.17 1

Table 1 Correlation Analysis

From the correlation analysis, it is imperative that there is strong correlation among

the process implementation impact and its impression on the overall ratings that are provided

by the respondents of the survey.

The descriptive statistics depicted below for the overall impact process indicates that

the mean rating of the respondent survey is 3.09 reflecting that the impact is marginally tilted

to positive response in terms of overall GST implementation. [22]From the mean analysis of

the various factors that are considered significant, only the filing process is considered and

the negative impact of filing process ( delay in receivables and paying GST, high penalty

conditions) etc. are some of the key observations in the process.

Overa

ll

Impac

t

Filing

Proce

ss

Process

Implemen

tation

Business

Operation

Impact

Business

Flow

Impact

Input Tax

Credit

Benefit

Negative

Impact of

Filing process

Mean 3.09 2.72 2.87 3.59 3.33 3.93 3.77

Standar

d Error 0.17 0.16 0.13 0.15 0.15 0.15 0.16

Median 3.00 3.00 3.00 4.00 4.00 4.00 4.00

Mode 5.00 1.00 3.00 5.00 4.00 5.00 5.00

Standar 1.43 1.42 1.17 1.30 1.28 1.30 1.36


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d

Deviati

on

Sample

Varianc

e 2.06 2.02 1.36 1.68 1.63 1.68 1.85

Kurtosi

s -1.33 -1.40 -0.94 -0.71 -0.82 -0.12 -0.52

Skewne

ss -0.03 0.05 -0.31 -0.60 -0.42 -1.02 -0.83

Range 4.00 4.00 4.00 4.00 4.00 4.00 4.00

Minimu

m 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Maxim

um 5.00 5.00 5.00 5.00 5.00 5.00 5.00

Sum

232.0

0

204.0

0 215.00 269.00 250.00 295.00 283.00

Count 75.00 75.00 75.00 75.00 75.00 75.00 75.00

Table 2 Descriptive Analysis

Regression Statistics

Multiple R 0.874016142

R Square 0.763904217

Adjusted R Square 0.743072236

Standard Error 0.727287523

Observations 75

ANOVA

df SS MS F

Signific

ance F

Regression 6

116.3782

611

19.39

638

36.6697

8295

1.8117

E-19

Residual 68

35.96840

558

0.528

947

Total 74

152.3466

667

Coeffici

ents

Standard

Error t Stat P-value

Lower

95%

Uppe

r 95%

Lowe

r

95.0

%

Upper

95.0%

Intercept

-

0.45019

6397

0.540287

025

-

0.833

25

0.40761

8685

-

1.52832

237

0.627

93

-

1.528

32

0.62792

9574

Filing

Process

0.37043

426

0.071248

517

5.199

186

1.99734

E-06

0.22826

006

0.512

608

0.228

26

0.51260

8462

Process

Implementati

on

0.79307

7234

0.085054

369

9.324

356

8.79481

E-14

0.62335

388

0.962

801

0.623

354

0.96280

0584


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Impact on

Business

Operations

-

0.02886

8639

0.066620

657

-

0.433

33

0.66614

7548

-

0.16180

809

0.104

071

-

0.161

81

0.10407

0813

Impact on

Business

Flow

-

0.01502

5424

0.068572

218

-

0.219

12

0.82721

4308

-

0.15185

915

0.121

808

-

0.151

86

0.12180

8306

Input Tax

Beneficial

0.08675

7785

0.068712

761

1.262

615

0.21104

026

-

0.05035

639

0.223

872

-

0.050

36

0.22387

1965

Negative

Impact of

Monthly

Filings

0.01983

3953

0.063252

635

0.313

567

0.75480

9607

-

0.10638

471

0.146

053

-

0.106

38

0.14605

2621

Table 3 Regression Analysis

In terms of the impact of the other factors upon the overall impact that is carried out

on the implementation of GST, it is imperative that the overall impact factor is significantly

influenced by the outcome envisaged in the process is positively impacted by the input tax

credit benefits that are available and is highly influenced in a negative scenario by the

negative factors combination like clearing taxes[23] before invoice realization, heavy

penalties for delay payments, complexity of depicting CGST, IGST and SGST in a

categorical manner.

Impact Analysis

GST is not a contemporary tax structure and it is proven and globally accepted model

of taxing system. However, considering the demographics, socio economic conditions and the

size of the Indian economy, the implementation has encountered many teething problems. It

is evident from the industry reports, GST filing information and the impact survey inputs that

the scope of GST implementation has led to some interim challenges for the small and micro

business segment. [18] Though in larger context, the impact might have been the same to the

large scale businesses too, still this result subsumes only on the impact for small and micro

business segment. [19]

It is very important that the government as a major stakeholder has to focus on the

ground level issues of implementation. For instance, if the issues of complexities in the

returns filing process are eased, it could trigger more regular filings from many of the small

traders. [4]Despite that the process is currently under review by the implementation

committee, still the action needs to be faster to ensure momentum in the system. [21]

Simplifying the process of filing and reducing the number of filings that are required can ease

the process to great extent. [10]

From the descriptive statistics that is estimated for the responses on the overall impact

of GST, the average ranking is 3.09 which indicate a moderate and balanced set of views

from the respondents. Understanding the factors that the process is at early stages and there is


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need for robust and significant levels of system development, it can be stated that if the key

issues that are plaguing the implementation are addressed in quick turnaround, GST can be a

good platform of tax structure contributing to the economic growth of the nation. [3]

4. Conclusion

GST tax structure in India was launched in economic reform conditions, to embrace

the global practice, thus increasing the transparency in the system, easing complexities and

enabling simple taxation structure. Considering the socio economic position of the country,

the launch of the GST system is certainly a revolutionary development.

In the eve of nearing one year post launch, the study reflects that few of the

significant issues like fuel under GST ambit, need for improvising the GSTIN network and

other such related trends are turning out to be the bottle neck factors towards realising the

actual outcome of GST implementation. In lines with the impact survey conducted with small

and micro businesses, it is evident that the people rate the impact of GST as a balance and

there is potential scope for improvement in the process. However, to ensure smooth and

successful outcome ensuring that the implementation system is managed addressing the gaps

in the process is very important. If such measures are taken up by the government in a rapid

pace, it can be very resourceful outcome for sustainable economic development.

5. References

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