GST will change the way India does business: Who will win, who will lose
Press Release 8 August 2016,
Indirect taxes in India have driven businesses to restructure and model their supply chain and systems owing to multiplicity of taxes and costs involved. With hopes that the Goods and Services Tax (GST) will see the light of the day, the way India does business will change, forever. Total tax collection in India (direct & indirect), currently stands at Rs 14.6 lakh crore, of which almost 34 per cent comprises indirect taxes, with Rs 2.8 lakh crore coming from excise and Rs 2.1 lakh crore from service tax. With the implementation of the GST (Goods and Services Tax), the entire indirect tax system in India (excise, state-level VAT, service tax) is expected to evolve.
The tax revenue mix can change as per the economic condition of the country. In developing countries, indirect taxes comprise a higher share of total taxes; in developed countries, their contribution is significantly lower.
GST will help grow logistics market in India
Sector wise impact of GST:-
Highlights: The implementation of GST will lead to lower transit cost and thereby generate higher truck utilisation. This will boost demand for high tonnage trucks and lead to overall reduction in transportation costs. It will facilitate seamless inter-state flow of goods, which is expected to directly accelerate demand for logistics services.
Impact: The logistics sector is largely fragmented and comprises many unorganized players. Several players in the unorganised sector avoid tax which generates a cost gap between them and the organized players. With the GST coming into picture, we expect an overall positive impact, with a reduction in the cost competitiveness as all the players will be brought under a uniform tax base, thereby improving growth opportunities for the organized players.
Key beneficiaries: VRL Logistics, GATI, Blue Dart, Transport Corporation of India, Snowman Logistics.
The effective tax rate in the sector currently ranges between 30 per cent and 47 per cent.
Highlights: On implementation of GST the tax rate is expected to oscillate between 20-22 per cent | It is expected to drive overall demand and reduce cost for the end user by about 10 per cent | The transportation time and the overall cost will be reduced as the goods will be transferred from one state to another by easily surpassing various octroi and check points | In addition to this, the cost for the logistics and supply chain inventory will be curtailed by almost 30-40 per cent.
Impact: In a long run, GST is expected to remain positive for automobile sector.
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