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Negative Impact of GST

Negative Impact of GST

The Goods and Services Tax (GST) was rolled out on 1st July 2017. The transition from the previous tax regime has proceeded smoothly without any major impediments.

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The GST has been launched to achieve a goal of “one nation one tax”. However, there have been some hurdles. Here are five negative impacts of GST after its implementation.

1. Movement of heavy vehicles

The new tax regime is causing some confusion and has resulted in the decline in the number of trucks moving from one state to another. However, in most states, octroi, sales tax, and other check posts have been removed after the roll out of GST. This has reduced the logistics and transportation costs for companies, thus providing excellent growth opportunities. Several companies now opt for a business loan to expand their operations to different states under the single tax regime.

2. Tax on sanitary napkins

One of the biggest criticisms against GST is the 18% tax that will now be levied on sanitary napkins. A huge impact of this tax would be on the majority of the female population of India.

3. Real estate prices

The implementation of GST may significantly affect the real estate market. Buyers will now have to pay an 18% tax on real estate services. As a result, the market for real estate is estimated to decrease after GST.

4. Service tax sector to become costlier

Before, GST was implemented service tax was levied at the rate of 15%. However, the new applicable rate has increased to 18%. This would increase the costs for financial facilities, such as business loans, home loans, and others. Furthermore, the insurance premiums and investments would also become costlier due to higher GST rate.

5. Air ticket prices to increase

Non-economy class tax levy on air tickets was 9% before GST. In the new tax regime, the rate would increase to 18%. This would directly increase the air ticket prices by 9% to 12%. This price hike would have to be paid by the consumers, making luxury travel more expensive.

6. Higher prices for luxury products

Branded jewelry and clothes, and telecom services would become expensive in the GST regime. This is because the GST rate for luxury products is higher than the applicable rates in the pre-GST era.

Although there may be certain transition issues, most experts have welcomed the implementation of GST. The new tax era would replace a large number of indirect taxes. This would make the tax structure simpler and ensure greater compliance with the regulations. As a result, the economy is expected to become globally competitive opening up several opportunities for companies. The financial institutions expect to see an increase in the number of commercial loan borrowers as they take advantage of new opportunities in the GST regime.

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