GST will turn India into one common market Cheap Kanken Backpack , leading to greater ease of doing business and big savings in logistics costs from companies across all sectors. Some companies will gain more as the GST rate will be lower than the current tax rates they pay, others will lose as the rate will be higher than the present effective rate. While the rate of GST is yet to be decided, industry observers have assumed an 18% rate recommended by a government panel in making their impact calculations. ET looks at the likely impact across sectors.
Positive : GST will eliminate multiple levies. It will also allow deeper penetration of digital services.
Negetive : IT companies can have several delivery centres and offices working together to service a single contract. With GST, companies might require each centre to generate a separate invoice to every contracting party. Duty on manufactured goods is going to go up from existing 14-15% to 18%, which means the cost of electronics from mobile phones to laptops- will rise.
Positive : Companies could generate substantial savings in logistics and distribution costs as the need for multiple sales depots will be eliminated. FMCG companies pay nearly 24-25% including excise duty Cheap Fjallraven Kanken Backpack , VAT and entry tax. GST at 17-19% could yield significant reduction in taxes. Warehouse rationalisation and reduction of overall tax rates, is expected to generate saving which could cumulatively range between 200-300bps.
Key beneficiaries : Hindustan Unilever, Colgate, GSK, Asian Paints
Negative : If the recommended 40% "sindemerit" GST for aerated beverages and tobacco products is levied Cheap Fjallraven Backpack , then prices may increase by over 20%. Food companies: many see increase in effective tax as many companies enjoy concessional rate of excise.
Positive : GST will help create a single unified market across India and allow free movement and supply of goods in every part of the country. It will also eliminate the cascading effect of taxes on customers which will bring efficiency in product costs.
Negative : The tax collection at source (TCS) guidelines in the GST regime will increase administration, documentation workload for ecommerce firms and push up costs.
Positive : Handset prices likely to come downeven out across states. Manufacturers are also likely to pass on to consumers cost benefits they will get from consolidating their warehouses and efficiently managing inventory. For handset makers, GST will bring in ease of doing business as they may no longer need to set up state specific entities and transfer stocks to them and invest heavily into logistics of creating warehouses in each state across the country.
Negative : Call charges, data rates will go up if tax rate in the GST regime exceeds 15%. Tower firms won't be able to set off their input duty liabilities if petro-products continue to stay outside GST framework. Negative for Bharti Airtel, Idea and Reliance Comm.
Positive : On-road price of vehicles could drop by 8% Cheap Fjallraven Kanken , as per a report by Motilal Oswal Securities. Lower prices can be construed as indirect stimulus to boost volumes. Key beneficiaries: Maruti Suzuki, M&M; Eicher Motors' margins may expand.
Negative : Demand for commercial vehicles may be hit in the medium term. GST will subsume local taxes, reduce time at check-posts, ease logistics hurdles. With fleet productivity increasing, operators may not feel the need to expand mid-term.
Negative : Flying to become expensive Cheap Fjallraven , as service tax will be replaced by GST. Service tax on fares currently range between 6% and 9% (depending on the class of travel). With GST, the rate will surpass 15%, if not 18%, effectively doubling the tax rate.
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