Winners And Losers From Passage Of Landmark GST Reform: 10 Facts

Winners And Losers From Passage Of Landmark GST Reform: 10 Facts

The realty sector is expected to benefit from lowered construction and procurement costs and funding.

The Rajya Sabha backed a major tax reform on Wednesday that seeks to transform the country into a common market, though opposition benches urged Finance Minister Arun Jaitley not to overtax businesses and consumers. A government-appointed panel has suggested a standard goods and services tax (GST) rate of 17-18 per cent but states want a higher level.

Here's a 10-point guide to what is likely to get cheaper and more expensive:

  1. GST will harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.

  2. Typically, these taxes in aggregate constitute around 25 per cent to 40 per cent of the price of products with certain categories being taxed at lower rates.

  3. Economists project an increase of 0.4-0.8 percentage points in India's economic growth within three to five years of GST rollout.

  4. The real estate sector is expected to benefit from lowered construction and procurement costs and funding, which may help developers secure higher margins.

  5. The direct impact in terms of tax outflow for developers and consumers will depend on whether the final GST rate is more or less than the taxes paid currently. The current rate of indirect taxes is over 25 per cent, developer Tata Housing said.

  6. A thorny issue would be stamp duties - taxes placed on legal documents around the transfer of property - as the bill seeks to keep those out of the final structure.

  7. GST may bring down transaction cost for retail businesses thus helping reduce prices. Analysts expect a strengthening of supply-chain management to bring about lower inflation.

  8. Input costs are likely to be reduced after GST, and car manufacturers may expand to more states because of uniformity in taxation. Excise duties, which are priced into the final cost of vehicles, are expected to go.

  9. The light electricals' sector might be benefitted as effective indirect taxes are expected to fall to around 18 per cent from 29-30 per cent. Havells, V-Guard and Bajaj Electricals are likely to benefit, analysts say.

  10. For telecom, service tax rates will go up to 18 per cent from 15 per cent.  Carriers including Bharti Airtel, Vodafone India and Idea Cellular may have to take a hit on margins in the short-term as they will not be able to fully pass on the tax increase to pre-paid customers, who dominate their subscriber base.



Highlights

  • Rajya Sabha on Wednesday backed Goods and Services Tax reform
  • It will harmonize 11 state and central levies into a national sales tax
  • Economists project 0.4-0.8 percentage point rise in growth post rollout
More News