Mumbai: Corporate India is upbeat about the new goods and services tax (GST), which is considered to be the single biggest tax reform undertaken by the country since independence. While there are still concerns regarding the preparedness of industry with regard to the systems and processes, industry captains believe that the new tax regime, apart from simplifying and streamlining the tax system, would also positively impact economic growth in the long term, as higher tax revenue collection on account of higher tax base would equip the government to spend more on development projects.
R. Kannan, head of corporate performance monitoring and research at Hinduja Group, said change on this scale had not been affected in any part of the world earlier. “The system will take two to three years to stabilise,” he said.
However, he added that the new system would widen the tax base by bringing many of the entrepreneurs who are not currently paying tax under the network. “This will increase the revenue of the government. Further, the transactions happening in the parallel economy will be captured in the official statistics resulting in higher GDP. It will increase the collection of taxes and reduce the budget deficit. The government would be able to spend more on economic development activities,” Mr Kannan said.
Stating that the GST is a transformational structural reform, Chanda Kochhar, MD & CEO of ICICI Bank, said it would have multiple benefits like the creation of a national market, enhanced ease of doing business, greater productivity and efficiency besides improved tax compliance, which would benefit both businesses and consumers.
Since the GST council has categorised goods and services under five different tax slabs (3 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent), the impact of the new tax structure will be different on various sectors. FMCG categories (hair oil, soap and toothpaste), SUVs, and multiplexes will have rates lower than the prevalent rates while other categories of FMCG like detergents, skin and hair care products, luxury hotels, tractors, jewellery, building material and aerated drinks will see an increase in tax rates.
“Home appliances have become a necessity now with evolving consumer lifestyle and a lower tax slab would have made appliances more affordable in a low penetrated market. With 28 per cent GST, we expect the consumer price (market operating price- MOP) of home appliances to marginally go up by 1-2 per cent post implementation of GST. This could have an impact on demand in the short run. However, normal monsoon, boosting agricultural economy and hike in allowances to government employees will propel demand during the forthcoming festive season,” said Kamal Nandi, business head and executive vice-president at Godrej Appliances.
