GST Impact on Job Creation
GST (Goods and Service tax) or what can be called the One India One tax rate for unification of multiple types of taxation is now truly underway with the GST council meeting and deliberating on over 1121 product and hundreds of service category and its rates under GST . With the approval of the council of ministers and acceptance of almost all rules related to GST and its rates structures the Govt of India is surely on its path to implement the said GST wef 1st July2017 .The initial reading of the GST tax rates and rules shows that there is a huge intent and desire to have the rates in alignment to a “Non-Inflationary “environment in India in the initial transition to GST. Rates for over 81% products are kept in 18% or lower tax slab with all Essential food items and daily consumption items at nil rates and most other household items in 5 or 12% category. With this the industry at large is surely welcoming the announcements from Srinagar by the GST council.Industry mainly related to food, FMCD, and even automobiles are either in lower than current incidence of taxation or very similar to existing tax rates, thus keeping product costs either lower or somewhat similar, barring a few anomalies ie Hybrid and SUV and sedans are now on the same tax slab or 28% + 15% cess , there marginally bringing down tax rates on SUV & Sedans but taking the taxes in Hybrid a bit higher. Overall most industry is confident that rates of products post GST shall be similar and thus would naturally lead to a spurt in demand and consumption as logistics cost and ease of doing business including taxation methods and assessments reducing. GST method of providing cenvat and real time credit on inputs cost on monthly basis in an electronic governed mechanism without much government or departmental interference will free up huge amounts of locked up capital in taxes and multitude of departmental interference and procedures, providing the companies greater and immediate flexibility to use that most scarce
capital for working capital needs or capital investment needs thereby further fueling growth and investments by private sector.
The necessity of GST to require invoicing at each stage by the supply chain and business to avail the cenvat or inputs tax credits will mean a further flip to Digital and formal economy thereby higher declaration of income, turnovers, and profits leading to increased taxation and employment by these companies. On an immediate basis our understanding is GST shall contribute to a direct employment of lacs of youth in IT and finance side reading companies to create systems to enable over 800000 companies for GST roll out and invoicing, it will further lead to savings on logistics by the entire economy and thereby greater investment by FMCD, FMCG, logistics companies, Ecom companies towards enhanced employment. BFSI industry within which the Fintech companies, small and micro lending companies, NBFC’s, payment banks etc are a great beneficiary as greater digital economy and access to information and financial records will enable more investment directly in network and people( employment ).
Over time i.e. 4-6 quarters the large amounts of data in formal economy will lead to greater participation in economic cycles , smaller and medium organizations , informal economic participants etc which will transition to formal economy will lead to enhanced GDP that India will show internally these organizations will have ability to reflect data on the basis of turnover , capable to access easier credit owing to better cibil ratings and balance sheets , will further lead to BFSI and banking sector lending to pick up thereby fueling investments and demand.
GST in itself is considered to add 2-2.25% to current national GDP rates and for an economy at near $ 2 Trillion US , going from 7.5% to 9.5~10% GDP rates will lead to large growth in years to come, the economic dividend on this is directly proportional to jobs. India will its current formal to informal economy or job shows that for nearly 50million formal jobs we still have over 450 million informal jobs, while a majority of nearly 300-325 million are in agricultural sector, even if the balance 125 million were to shift towards formal employment, that adds nearly 250% of the total employment that India has created in 70 years. This transition has large economic and financial benefits with easier access to personal finance, loans, growth in housing demands, growth in FMCD and automobiles (2 and 4 wheelers), growth in food and essentials, education, healthcare and insurance.
The transition of India’s to move towards a formal economy and digital economy may have been pushed by demonetization and digitization, however it is GST and its impact on the companies, economy and jobs in next 5-7 years that will truly make us transition from a developing economy to developed economy. Times for younger generation coming into employment and startups couldn’t be better.
The necessity of GST to require invoicing at each stage by the supply chain and business to avail the cenvat or inputs tax credits
The necessity of GST to require invoicing at each stage by the supply chain and business to avail the cenvat or inputs tax credits will mean a further flip to Digital and formal economy thereby higher declaration of income, turnovers, and profits leading to increased taxation and employment by these companies. On an immediate basis our understanding is GST shall contribute to a direct employment of lacs of youth in IT and finance side reading companies to create systems to enable over 800000 companies for GST roll out and invoicing, it will further lead to savings on logistics by the entire economy and thereby greater investment by FMCD, FMCG, logistics companies, Ecom companies towards enhanced employment. BFSI industry within which the Fintech companies, small and micro lending companies, NBFC’s, payment banks etc are a great beneficiary as greater digital economy and access to information and financial records will enable more investment directly in network and people( employment ).
Over time i.e. 4-6 quarters the large amounts of data in formal economy will lead to greater participation in economic cycles , smaller and medium organizations , informal economic participants etc which will transition to formal economy will lead to enhanced GDP that India will show internally these organizations will have ability to reflect data on the basis of turnover , capable to access easier credit owing to better cibil ratings and balance sheets , will further lead to BFSI and banking sector lending to pick up thereby fueling investments and demand.
GST in itself is considered to add 2-2.25% to current national GDP rates and for an economy at near $ 2 Trillion US , going from 7.5% to 9.5~10% GDP rates will lead to large growth in years to come, the economic dividend on this is directly proportional to jobs. India will its current formal to informal economy or job shows that for nearly 50million formal jobs we still have over 450 million informal jobs, while a majority of nearly 300-325 million are in agricultural sector, even if the balance 125 million were to shift towards formal employment, that adds nearly 250% of the total employment that India has created in 70 years. This transition has large economic and financial benefits with easier access to personal finance, loans, growth in housing demands, growth in FMCD and automobiles (2 and 4 wheelers), growth in food and essentials, education, healthcare and insurance.
The transition of India’s to move towards a formal economy and digital economy may have been pushed by demonetization and digitization, however it is GST and its impact on the companies, economy and jobs in next 5-7 years that will truly make us transition from a developing economy to developed economy. Times for younger generation coming into employment and startups couldn’t be better.
