Lok Sabha Question No. 329 (STARRED), answered on 2018-03-19
Subject: Impact of GST on Commerce and Industry Sector
Ministry: COMMERCE AND INDUSTRY
Asked by: BHAIRON PRASAD MISHRA

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA STARRED QUESTION NO. 329(H) TO BE ANSWERED ON 19 th  MARCH,2018

## IMPACT OF GST ON COMMERCE AND INDUSTRY SECTOR

## *329(H). SHRI BHAIRON PRASAD MISHRA:

Will the Minister of COMMERCE & INDUSTRY ( वािणÏय एवं उɮयोग मंत्री ) be pleased to state:

- (a) whether  any  new  change  has  come  in  the  commerce  and  industry  sector  after implementation of the Goods and Services Tax (GST);
- (b) if so, the details thereof; and
- (c) the details of the reaction of the corporate sector thereto?

## ANSWER

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## THE MINISTER OF  COMMERCE AND INDUSTRY (SHRI SURESH PRABHU)

- a) to c):  A Statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (c) OF LOK SABHA STARRED  QUESTION  NO.  329(H)    FOR  ANSWER  ON  19 th   MARCH,2018 REGARDING  'IMPACT  OF  GST  ON  COMMERCE  AND  INDUSTRY SECTOR'.

(a)  &  (b): The  introduction  of  Goods  and  Services  Tax  on  1st  of  July  2017  was  a  very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, the aim is to mitigate cascading of taxes and pave the  way  for  a  common  national  market.  From  the  consumer  point  of  view,  the  biggest advantage  would  be  in  terms  of  reduction  in  the  overall  tax  burden  on  goods,  which  was estimated  to  be  around  25%-30%.  Introduction  of  GST  would  also  make  Indian  products competitive in the domestic and international markets.  This would have a positive impact on economic  growth.  This  tax  reform,  because  of  its  transparent  and  self  policing  character, would be easier to administer.  The introduction of GST has improved the competitiveness of trade and industry in four major ways:

i)  GST  has  replaced  eight  central  and  nine  state  taxes  such  as  central  excise  duty, service tax, state VAT, entry tax among others. This means the integration of many taxes  levied  at  central,  state  and  local  levels,  each  with  a  different  tax  compliance system. As exports are zero rated, the exporters will get refund of most of the taxes paid  on  the  inputs.  In  the  past,  many  such  taxes  remained  un-refunded/underrefunded.

ii) Earlier, only some States refunded VAT on exports, while now the refund as part of GST refund will be applicable to all States.

iii) GST has reduced the tax on tax or the cascading effect of taxes.

iv)  GST  would  lead  to  lower  transportation  and  distribution  costs.  Pre  GST,  firms spent  a  high  cost  on  product  sourcing,  distribution  and  warehousing.  The  high  cost was essentially due to expenses incurred on branches and warehouses that existed due to  tax  saving  rather  than  business  considerations.  GST  removes  this  arbitrage  thus reducing logistics cost and making exports competitive.

During  the  current  year,  monthly  exports  are  consistently  higher  than  the  monthly exports of   previous year except in Oct 2017. Post-GST (July 2017 - Feb 2018) the growth rate of India's merchandise Export is 11.3% as compared to the same period of previous year.

Further,  the  index  of  industrial  production  (IIP)  registered  a  cumulative  growth  of 3.7% during the period April to December 2017 over the corresponding period of previous year.

(c) : Implementation  of  Goods  and  Services  Tax  has  been  widely  welcomed  by  the Corporate  Sector.  However,  there  have  been  initial  difficulties  faced  by  the  companies  in filing of returns. The major issues are working capital blockage due to the process of upfront payment of GST, filing of returns, GST rates on job work and refund of Integrated GST and Input Tax Credit (ITC), high rates of GST on certain items and other Information Technology issues. The Government addressed these issues through announcement of a relief package for exporters  in  October  2017.  Benefits  under  the  Advance  Authorization  Scheme,  Export Promotion Capital Goods Scheme and 100% Export Oriented Unit  Scheme  were extended for  sourcing  inputs  from  abroad  without  payment  of  IGST  apart  from  Customs  Duty. Moreover, several relief measures have been taken for small traders to allow them to adjust to the compliance requirements of the new law viz., option to file quarterly return to taxpayers having annual turnover of up to Rs.1.5 crores in the previous year; payment of tax on supply of  goods  to  be  made  at  the  time  of  issuance  of  invoice  and  not  on  receipt  of  advance; suspension  of  the  application  of  reverse  charge  mechanism  under  section  9(4)  of  the CGST/SGST Acts, 2017 and section 5(4) of the IGST Act, 2017 till 31st  March, 2018 for all categories of registered persons; and simplification in the return filing process by continuing filing of the GSTR-3B return up to March, 2018 along with reduction in late fees for filing of returns. The 26 th Meeting of the GST Council on 10.03.2018 has decided to further extend the tax  exemptions  till  1.10.2018.  Exports  were  allowed  on  furnishing  of  Letter  of Undertaking (LUT), without the requirement of Bond/bank guarantee.  Further, GST on sale of  Duty Credit Scrips (which are basically incentive on exports) has been reduced to Zero from  the  earlier  rate  of  12%.    GST  on  job  work  in  textiles  sector,  diamond  processing  in Jewellery  sector  and  leather  and  footwear  sectors  has  been  brought  down  to  5%.  The Government has  also  taken  measures  and  issued  instructions  to  expeditiously  disburse  the refund  of  IGST  paid  on  goods  and  services  exported.  Besides,  GST  council  is  meeting  at regular intervals of time to address the concerns of industry regarding various issues related to  GST  including  rationalisation  of  GST  rates,  simplification  in  filing  of  GST  returns, expediting the process of refunds of Integrated GST and Input Tax Credit for exporters.

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