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Understanding GST and its Impact on Different Businesses

2 min


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It has been almost a year since GST altered the wheels of the Indian taxation system. By blending a myriad of taxes levied both at the central and state levels, GST proved to be a significant indirect tax reform. 

Predominantly speaking, GST comes with four slabs of taxation – 5%, 12%, 18%, or 28%. So, while a GST calculator (available from multiple reliable sites) can aid in calculating the incurred taxation amount, it is crucial to take a look at the impact of GST on multiple industrial sectors. 

Small and medium enterprises (SMEs) – 

Organizations with an annual turnover exceeding the Rs. 20 Lakh mark are liable to follow the GST provisions. Compared to the previous taxation system, where exemption limits were set at the Rs. 5 Lakh mark, the implementation of GST has raised the same to the Rs. 20 lakh mark. 

Small and medium enterprises have thus, emerged on the profitable side of the post-GST era. In addition to procuring independence from the cascading effect of double taxation, SMEs can now invest more in logistics; thereby escalating their business reach manifold. 

The automobile sector – 

Precisely speaking, GST has proved to be a fresh breath of air for all automobile manufacturing industries. Owing to the emergence of GST, several taxes such as…

  • Sales Tax

  • Road Tax

  • Excise Duty

  • VAT (Value Added Tax)

  • Registration Duty

  • Motor Vehicles Tax

…have made their way for a single taxation system. In a recent update, however, a 10% rise in cess has been implemented by the GST council (25% from the existing 15%). Moreover, motor vehicles capable of carrying more than 13 heads will incur a 25% cess. 

Note: A GST calculator available on reliable sites can help individuals calculate the precise GST to be imposed on their chosen vehicle. All one needs to do is enter the price and GST percentage given.

Real estate: Profitable?

While the real estate industry is proving to be a significant employment sector in India, implementation of GST may have significant effects. 

  • Under the Goods and Service Tax scheme, under-construction properties now incur 12% GST on the existing property value. (As compared to the previous 6%.)

  • GST on constructed (finished) buildings are nil. 

Needless to say, contractors will have two options – bear the tax burden and increase the overall property cost or leave the “payable taxation” intricacies on the purchaser. 

Note: Irrespective of an under-construction or ready to move-in project, GST applied on the same will not incur registration charges and stamp duty. 

Impact on FMCG industries – 

FMCGs, currently considered as the fastest growing industry have borne both profits and losses. While the previous taxation system incurred around 22-24% on FMCG, with GST, it stands at 18%.

Precisely stating, there has been a two-fold impact on Fast Moving Consumer Goods under GST:

  • Effective tax rates:

Let’s cite an example. While taxation on aerated drinks clocks around the 28% mark, another 12% tax is levied on the same. With an effective taxation of 40%, sales may receive a setback according to veterans, and in this respect, a GST calculator is proving to be helpful. 

  • Savings on logistics:

Rates on logistics charges have come down from 2.7% (approx.) to 1.5%. So, the net prices of consumer goods are expected to decrease considerably. 

Adding on further, GST will also have a close impact on availing services such as financing and loans. A business loan for instance from reliable financial institutions like Bajaj Finserv now incur a GST of 18% (as compared to the previous 15%). 

However, one must use a GST calculator to extract the exact taxation amount imposed. So, on this first anniversary of GST in India, profitable scenarios have predominantly taken the foreground. While a few hiccups exist, those are made-over with their associated taxation rates.



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