Considering a plethora of taxes, tearfully tedious processes and a whopping amount of mandatory paperwork, India’s system of taxation is enough to irk its population. With the GST wheels to be set in motion on April 1, 2017, promising a single and simplified tax, efficiency logistics, distribution and compliance will be fortified, hopefully.
The much awaited Goods and Services Tax (GST) Bill, a propitious vehicle of growth for the economy, has eventually managed to receive a green signal from the major opposition party, Congress, and is all set to perch upon India’s indirect tax structure, next year. The Bill which remained in suspension for quite a while would now see the light of the day, post key concessions made by the government. The government hopes that at least 16 states endorse the legislation over the next 30 days for rolling out GST from April.
While the GST has sparked countrywide hopes for a single national tax that will come in place of an intricate mesh of levies, India Inc is keenly awaiting its passage, elated. Major industry players are hailing GST as a reform that would effectively usher in an era of liberalization; something which the country has not seen in decades. Taxes, logistics and operational costs will get tempered, which will play out in favor of businesses as well as consumers and producers. Whether, this would result in the moderation of the prices of their products, would get determined post the Bill being passed.
In anticipation of the passage of GST, the market has already been rallying. That said, finalized tax rate, product exemption list and the time of implementation will determine a large chunk of the extent of short-term benefits, since much of the benefits are in the long-term as per market reports.
Hindustan Unilever Ltd (HUL), Maruti Suzuki, PVR, Century Plyboard, Pidilite Industries and others are among stocks that would gain the most, from GST implementation. The rallying stocks promise a minimum investment horizon of 12 months to investors, as per an ET report.
Given its ability to realign warehousing and supply chain requirements of companies, GST will be a harbinger of upbeat news for port logistics players such as CONCOR, Gateway Distriparks and Allcargo Logistics, thereby buoying demand for ICDs, CFSs, Multi modal logistics parks and container trains. Despite the likelihood of a rising service tax, the industry should be able to shield its margins, by passing on the tax to trade, as per Mr. K. Ravichandran, Sr. VP, Co-Head, Corporate Sector ratings, ICRA Ltd.
With effective tax allaying to 18 per cent from 26%-28%, Asian Paints, Berger Paints and Kansai Nerolac, will be major beneficiaries of the GST roll out. With competition from unorganized players gradually easing out given the shrinking pricing gap, these companies could be at an advantage. Further, share of the huge unorganized market (35%) in the paints industry, should dip owing to the plummeting pricing gap when put across the organized players of the sector. As a result, room will be created for established paint companies to augment volumes, Ravichandran added.
In the midst of mixed reactions, GST, having Rajya Sabha’s unanimity to pass the same, may have crossed the bumpier and thornier parts of the journey. However a long road still lies ahead of it, which can be traversed via certain factors. On passage by both Houses of the Parliament, GST will have to be ratified by States. Thereafter, there will be need for supporting legislations to come into play. Additionally, the "functional modalities" between the States and the Centre are also required to be worked out, says Finance Minister, Arun Jaitley, as per published data.
In addition to eradicating the multiple tax woes vexing the real estate sector, both at the Centre and State level, GST implementation will hopefully drive more transparency into the sector, with its comprehensive and uniform tax structure. Timely delivery of building material across India will be ensured, given the unfaltering distribution network it will enable in the country. However, caution is warranted over firming up the final rate of GST, so as to keep the Bill’s purpose intact. The final rate will be a germane influence on the sector. Should the rate be at par with the existing cumulative taxes, it will most definitely, water down sentiment, since the final cost for buying an under construction flat will hit the roof. Implementation of the Bill by all States together, is a requisite for the same to be successful, stated Neha Hiranandani, Director, House of Hiranandani.
On the other hand, credit chain in the system will gain strength, with restrictions on credit utilization, easing off. However, total costing of the project will be directly impacted since GST will be applicable on the materials purchased by the developer for construction. Given that the Bill has not yet laid guidelines on land valuation and has also kept the sector at bay from input tax credit, increased cost could be in store for the end consumer. Moreover, costs for the buyers could be shoved upwards as implementation of the Bill will not subsume the stamp duty levied by the States. The latter, in order to meet revenue targets, may increase it from time to time, she said.
GST will hopefully alleviate looming inefficiencies in the Indian taxation system. Inefficiencies, that are the repercussions of a cumbersome regime entailing an array of taxes on goods and services, have long tethered the country’s GDP from growing meatier. Considering a plethora of taxes, tearfully tedious processes and a whopping amount of mandatory paperwork, India’s system of taxation is enough to irk its population. With the GST wheels to be set in motion on April 1, 2017, promising a single and simplified tax, efficiency logistics, distribution and compliance will be fortified, hopefully.
Prime Minister, Narendra Modi’s ease of doing business and creating a business-conducive environment in India, forms an essential part of his exuberant India-makeover plans. That whether GST, with its glittering promises of driving monumental growth will make way for its forward momentum, is something which remains to be seen.
While the GST has sparked countrywide hopes for a single national tax that will come in place of an intricate mesh of levies, India Inc is keenly awaiting its passage, elated. Major industry players are hailing GST as a reform that would effectively usher in an era of liberalization; something which the country has not seen in decades. Taxes, logistics and operational costs will get tempered, which will play out in favor of businesses as well as consumers and producers. Whether, this would result in the moderation of the prices of their products, would get determined post the Bill being passed.
In anticipation of the passage of GST, the market has already been rallying. That said, finalized tax rate, product exemption list and the time of implementation will determine a large chunk of the extent of short-term benefits, since much of the benefits are in the long-term as per market reports.
Hindustan Unilever Ltd (HUL), Maruti Suzuki, PVR, Century Plyboard, Pidilite Industries and others are among stocks that would gain the most, from GST implementation. The rallying stocks promise a minimum investment horizon of 12 months to investors, as per an ET report.
Given its ability to realign warehousing and supply chain requirements of companies, GST will be a harbinger of upbeat news for port logistics players such as CONCOR, Gateway Distriparks and Allcargo Logistics, thereby buoying demand for ICDs, CFSs, Multi modal logistics parks and container trains. Despite the likelihood of a rising service tax, the industry should be able to shield its margins, by passing on the tax to trade, as per Mr. K. Ravichandran, Sr. VP, Co-Head, Corporate Sector ratings, ICRA Ltd.
With effective tax allaying to 18 per cent from 26%-28%, Asian Paints, Berger Paints and Kansai Nerolac, will be major beneficiaries of the GST roll out. With competition from unorganized players gradually easing out given the shrinking pricing gap, these companies could be at an advantage. Further, share of the huge unorganized market (35%) in the paints industry, should dip owing to the plummeting pricing gap when put across the organized players of the sector. As a result, room will be created for established paint companies to augment volumes, Ravichandran added.
In the midst of mixed reactions, GST, having Rajya Sabha’s unanimity to pass the same, may have crossed the bumpier and thornier parts of the journey. However a long road still lies ahead of it, which can be traversed via certain factors. On passage by both Houses of the Parliament, GST will have to be ratified by States. Thereafter, there will be need for supporting legislations to come into play. Additionally, the "functional modalities" between the States and the Centre are also required to be worked out, says Finance Minister, Arun Jaitley, as per published data.
In addition to eradicating the multiple tax woes vexing the real estate sector, both at the Centre and State level, GST implementation will hopefully drive more transparency into the sector, with its comprehensive and uniform tax structure. Timely delivery of building material across India will be ensured, given the unfaltering distribution network it will enable in the country. However, caution is warranted over firming up the final rate of GST, so as to keep the Bill’s purpose intact. The final rate will be a germane influence on the sector. Should the rate be at par with the existing cumulative taxes, it will most definitely, water down sentiment, since the final cost for buying an under construction flat will hit the roof. Implementation of the Bill by all States together, is a requisite for the same to be successful, stated Neha Hiranandani, Director, House of Hiranandani.
On the other hand, credit chain in the system will gain strength, with restrictions on credit utilization, easing off. However, total costing of the project will be directly impacted since GST will be applicable on the materials purchased by the developer for construction. Given that the Bill has not yet laid guidelines on land valuation and has also kept the sector at bay from input tax credit, increased cost could be in store for the end consumer. Moreover, costs for the buyers could be shoved upwards as implementation of the Bill will not subsume the stamp duty levied by the States. The latter, in order to meet revenue targets, may increase it from time to time, she said.
GST will hopefully alleviate looming inefficiencies in the Indian taxation system. Inefficiencies, that are the repercussions of a cumbersome regime entailing an array of taxes on goods and services, have long tethered the country’s GDP from growing meatier. Considering a plethora of taxes, tearfully tedious processes and a whopping amount of mandatory paperwork, India’s system of taxation is enough to irk its population. With the GST wheels to be set in motion on April 1, 2017, promising a single and simplified tax, efficiency logistics, distribution and compliance will be fortified, hopefully.
Prime Minister, Narendra Modi’s ease of doing business and creating a business-conducive environment in India, forms an essential part of his exuberant India-makeover plans. That whether GST, with its glittering promises of driving monumental growth will make way for its forward momentum, is something which remains to be seen.
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