Massive job loss looms ahead

The HSN codes have been given for most of the products in 4 digits instead of 8 digits code leading to confusion and multiple HSN Codes being applied for the same good by different suppliers. Certain category of service providers would be required to pay GST even though the service recipient is located outside India and the service provider is in India, earning in foreign currency from them. 

This is because of the place of supply provisions contained within GST Act. The worst-affected would be brokers, agents, Intermediaries rendering service to their foreign clients who will become uncompetitive in the global market. 

Unregistered dealers in the B2B segment will no longer be welcome. This is because the registered supplier buying goods/ services from unregistered suppliers will have to pay GST under Reverse Charge and prepare two documents i.e. a self-Invoice and a payment voucher leading to increased compliance. This would lead to massive job loss. A big engineering enterprise has removed around 260 unregistered dealers from its Vendor List due to this. 

While this has an adverse impact on small businesses, on the flip side, this also leads to a lot of small assessees to be registered which will ultimately lead to exposure of income to Income tax department. Increased transparency is always in the right direction for a developing economy. 

On the other hand, removing of check-posts and entry based taxation would increase the  efficiency in inland transportation which could result in cost savings. Seamless credit of IGST across the value chain in place of CST which was not creditable before should reduce the cost of Operations and improve efficiency. 

This will also lead to consolidation of warehouses, resulting in reduction of supply chain cost and could improve overall efficiency of any business. Power sector is in for a major shock. All along they were purchasing goods by paying 2 pc CST, for example, coal (or) any other raw material for generating Electricity. 

Going forward, in the absence of C – Form and concessional rate, they will have to purchase goods at applicable rates. In view of this rate of tax for coal has been increased from 2 pc to 5 pc. This will significantly increase the cost of generating electricity which will be ultimately passed on to common man. Double taxation which is currently paid on certain goods / services such as software, intangible goods etc. will no more suffer this anomaly as this will be subjected to GST as a service and consequently, this should provide relief to IT and Knowledge based sectors.