After the implementation of the new regime, the service sector of the country improved the business conditions in the month of June. According to the survey report, Nikkei Purchasing Managers’ Index (PMI), services grow to an eight- month high of 53.1 in the month of June from 52.2 as compared to previous month. An index reading above 50 points is an indicator of economic expansion whereas below 50 points is a sign of contraction.
However, Business Expectation Index for services fell down four- month low of 56.2 as the comparison to 57.8 in May whereas in the case of manufacturers, the Future Output Index fell down as three- month low 59 in the month of June as compared to 61.7 in the month of May.
Under the new regime, the services will be imposed 18 percent i.e., 3 percent higher than the earlier (15 percent). Due to increase in prices of discretionary services, it is expected that the demand for entertainment and recreation could fall down.
The compliance cost could increases. The Central wise registration is not required in the new regime. The Service provider will have to be registered as the state- wise, in all places they are providing services. People who provide services across India will be benefited the most.
There is limited clarity on how the input tax credit mechanism would work for services. For services, Anti- profiteering provision would be more complicated rather than products, granted the intangible nature of the former.
Sharing similar concerns, Pollyanna De Lima, the economist at IHS Markit and author of the Nikkei PMI report, said, “Nonetheless, the falls in confidence levels highlight no easy walk to stronger economic prosperity. Optimism weakened at goods producers and service providers alike, hampered by concerns among some firms that the goods and services tax could harm consumer demand, with competitive pressures also seen as a threat to the outlook.”
