October 10th marked the first 100 days of the GST module – a time filled with all the vibrant promises by the government about GST’s cool effects on one hand and the industry experts debating about the induced complexities, disruptions and uncertainty on the other.
Analyzing the after effects of GST on the top five sectors in the Indian economy would give you a fair idea of it. These sectors are
- FMCG [0 to 26% earlier] [Now, 0 to 28%]
- Travel and aviation [5.6 to 8.4% earlier] [Now, 5-12%]
- E-commerce [15% earlier] [Now 18%]
- Restaurants [up to 20% earlier] [Now, 12-18%] Hotels [up to 30% earlier] [Now up to 28%]
- Real Estate [11 to 20% earlier] [Now, 12-18%]
The tax rates for the generic and overall products in this category doesn’t seem much effected, however the very basic essentials like toothpaste, hair oil, soap etc. have gone down. The sector seems to be benefitted by the seamless flow of credit, though, some of the players have wrapped up their regional warehouses to get rid of the compliance pressures and to leverage the full benefits of GST in the form of e-way bill.
2. Travel and Aviation:
The economy class traveler has reasons to cheer while the one in the business class feels the heat. No doubt, the seamless flow of credit nourishes the sector, however the aviation fuel which is kept out of GST is surging the flying costs for the industry. Complexities in terms of multiple registrations have also choked some bandwidth for the sector.
The e-commerce spread is out of the State VAT laws and would not be counted in as ‘agents of supplier of goods’. While the elevated pool of credits has cushioned the industry, though the smaller e-tailer finds itself lost in the colossal compliances. The industry is also kept aside to avail the Composition Scheme.
4. Restaurants and Hotels:
The subsuming of all the multiple taxes being coined to one has a definite impact on the effective tax incidence, however, the state wise registration has added to the compliance burdens. Alcohol being out of the GST umbrella has contributed to increased tax costs + documentational intricacies.
5. Real Estate:
There has been some amount of clarity and transparency imbibed by the classification of works contracts transactions being now considered as supply of service and with the introduction of a single tax concept compared to the erstwhile era where both VAT and service tax was charged. Increased rate of tax on most inputs like cement, paint etc. is causing the overall cost of erection go up, while no GST on Stamp Duty adds to the pinch. The sector which is flooded with the unregistered service providers gets a momentary relief for not paying the tax under reverse charge mechanism until 31st march 2018.
Nutshell, there has been a round of hits and misses across different verticals of the economy, however, the industry experts also don’t deny that the long term remunerations of the new generation taxation regime outweigh the mid-way tantrums.
As reported in Times of India.