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Investment 2016-08-04

The only drawback of recent GST implementation

With GST implementation manufacturing goods get cheaper and services will be more expensive. For services like restaurants, hotels, air, train travel, mobile communications, these industries will be affected more.

By Deputy Features Editor
The only drawback of recent GST implementation

The goods and service tax (GST) is another leap in India’s economy to take the taxation process to a next level. Even though Rajya Sabha passed the bill in the current session, the final procedures still remain unsolved and will be finalised only after the winter sessions.

Though people can get a hard hit at their pocket in the first phase of the bill, but in longer term, the country’s agriculture and food processing sector, which is one of the major contributors in country’s GDP and development, will definitely be benefited.

Making a big impact

However, according to experts in the industry if the GST rate is less than or equal to 18 per cent, then it should be positive for most consumer goods companies. Also, there will be a better opportunity in the supply chain and ware housing providing more opportunity in the food service sector as half of the goods is killed while outsourcing.

"The biggest pros of GST is that we will have a single tax without the cascading effect of multiple taxes, so only value addition is taxed at each point that is a healthy international practice," shared Piruz Khambatta, Chairman and Managing Director, Rasna, and Chairman of CII National Committee on Food Processing.

Also, as GST seems a lucrative affair inviting foreign investments in the country, manufacturing and supply chain unit is the biggest beneficial of the race.

Uniformity in tax

With GST implementation manufacturing goods get cheaper and services will be more expensive. For services like restaurants, hotels, air, train travel, mobile communications, these industries will be affected more.

“There’s a proposal of high GST around 30-40 per cent for aerated beverages which constitute a significant part of bills of QSR. This will have an impact on consumers. On the other hand, alcohol is kept out of the purview of GST this will give room for state to have their taxes. Ultimately cost is always passed to consumers,” pointed Rahul Singh, Founder & CEO, The Beer Café.

Adding to the same lines, Nainjyot and Gurvinder , Owner of Locale Cafe and Bar, Saket said, " The present service tax rate is 15 percent which on implementation of GST will rise to 18 percent so services will become more expensive, so will be the eating out.”

Indian consumers will definitely be feeling the pinch of higher prices of services with the implementation of GST. Whereas the manufacturing goods will get cheaper. Presently, the customer pays approx 25 to 26 percent of extra cost of production due to excise duty and value added services, but with GST the prices of vehicles, electronics will fall.

Dinesh Arora, Managing Director of DNJ Hospitality commented, “We are happy that GST is coming as there will be a uniform tax. Mostly, the consumers are not even aware of or ignore the tax they pay for things they buy. GST is a welcome move as there will be more transparency in the system.”

Even at restaurant, Customer has to pay multiple taxes like VAT, Service Tax. When GST gets implemented the tax can be 15 or 18 or 19 per cent, a uniform Tax. Under the proposed GST, effective tax rate on goods will decline and Service rate may increase. Eating out, travelling, Phone bills will be expensive and the only positive point is that India will become one market with free movements of goods across cities. Tax compliance will be faster, easier and less costly.

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