Managerial Economics Assignment

Goods And Service Tax

(GST)

Submitted By :- Mohit Kaul

Submitted to:
&
Dr. Tilak Raj Sharma
Arjun Chawla
MBA General B
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MBA General B
 INDEX
SNo. Contents Page
No.
1. Introduction 3
2 Origin 3
3 GST in India 4-5
4 Need of GST in India 6
5 History of GST in India 7
6 GST roadmap and Challenges 8
7 Previous Constitutional Amendments on Taxation Power 8
8 GST models and Issues 9-10
9 Models of GST in India 10
10 Illustration of GST 11
11 System of GST 12
12 Steps for Implementation of GST 13
13 Stakeholders of GST 14-15
14 Workflow 15-16
15 GST rates in India 17-20
16 Global Scenario of GST 20-21
17 Advantages of GST 22
18 Impact of GST 22-32
19 What The Future Looks Like 33
20 Reference 34

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 Goods and Services Tax

What is GST?
Introduction
GST is a comprehensive value added tax on goods and services. It is
collected on value added at each stage of sale and purchase in the supply
chain without State boundaries. “The success of GST depends on proper
administration. Much will depend on its simplicity and efficient
implementation, which are even more difficult in a disparate federal setup”

Origin

Goods and Services Tax also known as the Value Added Tax (VAT) or
Harmonized Sales Tax (HST) was first devised by a German economist
during the 18th century. He envisioned a sales tax on goods that did not
affect the cost of manufacture or distribution but was collected on the final
price charged to the consumer. The numbers of transactions are immaterial
and the tax is at a fixed percentage of the final price. The tax was finally
adopted by France in 1954. Maurice Lauré, Joint Director of the French Tax
Authority, the Direction générale des impôts, was the first to introduce VAT
on April 10, 1954. Initially directed at large businesses, it was extended over
time to include all business sectors.

GST in India
Goods & Services Tax Law in India is a comprehensive, multi-stage,
destination-based tax that will be levied on every value addition.

In simple words, GST is an indirect tax levied on the supply of goods and
services. GST Law has replaced many indirect tax laws that previously
existed in India.

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Need of GST in India
GST was initially proposed to replace a slew of indirect taxes with a unified
tax and was therefore set to dramatically reshape the country's 2 trillion
dollar economy.

GST will break the complicated structure of separate central and state taxes
which often overlap with each other to create a uniform taxation system
which will be applicable across the country. Taxes will be implemented more
effectively since a network of indirect taxes like excise duty, service tax,
central sales tax, value added tax (VAT) and octroi will be replaced by one
single tax. The state will still have a say in taxation, as the number of taxes
will be reduced to three with Central GST, State GST and Integrated GST for
inter-state dealings.

Pattern of tax levy before GST was as follows

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There are multiple change-of-hands an item goes through along its supply
chain: from manufacture to final sale to consumer.

Let us consider the following case:

 Purchase of raw materials

 Production or manufacture
 Warehousing of finished goods
 Sale of the product to the retailer
 Sale to the end consumer

Goods and Services Tax will be levied on each of these stages, which makes
it a multi-stage tax.

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History of GST in India

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 SIGNIFICANCE OF GST
• Introduction of GST resulted in abolition of multiple types of taxes on
goods and services.2
• Reduces effective rates of tax to one or two floor rates.
• Reduces compliance cost and increases voluntary compliance.
• Removes cascading effect of taxation and removes distortion in the
economy.
• Enhances manufacturing and distribution efficiency, reduces cost of
production of goods and services, increases demand and production of goods
and services.
• As it is neutral to business processes, business models, organization
structure, geographic location and product substitutes, it will promote
economic efficiency and sustainable long-term economic growth.
• Will give competitive edge in international market for goods and services
produced in India, leading to increased exports.
• Reduces litigation, harassment and corruption.
• Resulted in widening tax base and increased revenue to the Centre and
State.
• Reduces administrative cost for the Government.

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 GST – THE ROAD MAP AND THE
CHALLENGES
The concept of the desirable and aspiration form of GST for India has been,
and remains, evolving. Initially, GST was intended as a fully-integrated
system encompassing within itself all of the existing indirect taxes. Clearly,
this is no mean task and apart from the political and economic will, it also
requires some significant changes in the Constitutional distribution of power.

PREVIOUS CONSTITUTIONAL AMENDMENT

ON TAXATION POWER
In the Pre GST time the taxation process was very tedious. The Taxation
Power under the Constitutional Amendment was classified under the three
categories which are Union List, State List and Concurrent List. Seeing this
Scenario a Special Joint Working group was constituted which was tasked
with the responsibility of looking into and ensuring the implementation of
GST.

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GST model and Issues
Designing of a GST model involved three key components

 Determination of the system – origin based, destination based, and

single point, multi point and so on identification of activities and/or
goods and services to be covered under each system determination of
level of government imposing and collecting GST.
 There is a fair degree of consensus in India tax as system is concerned.
There is fair degree of consensus on coverage of activities and goods
and services. India will continue to have Customs duty which would
not be rebatable and rest of the principal taxes i.e. CENVAT, State
VAT and Service Taxes would form part of proposed GST.
 Few other issues remain to be addressed like
a) Whether stamp duty should also become part of GST?
b) Which is other taxes being levied by each of the States and
c) Whether they should become part of GST or remain out of it?

Stamp duty, being more in the nature of tax on property, rather than on
transaction, ought to remain outside GST as is agreements involving sale of
goods and/or provision of services. The other issue relates to Octroi duty
which is currently levied by various municipalities and, in some cases, by
States on entry of goods in the local area for use, consumption or sale
therein. This should be merged with GST and a mechanism to transfer
resources to local authorities from out of the total revenues of the States
needs to be worked out.

 The third key component was consensus building. This component of

the design was relevant for a country having federal structure of
governance (e.g. Canada, Brazil or, for that matter, even European
Union).

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  There were three alternatives in this context:
1) GST at Union Government Level only (Alternative I)
2) GST at State Government Level only (Alternative II)
3) GST at both, Union and State Government Levels (Alternative III)

 Canada has GST at Union Level extending to all goods and services
covering all stages of value addition. In addition, there is tax at
province (State) level in different forms which include VAT, Retail
Sales tax and so on. European Union (EU) nations have adopted
“Classic” VAT.

 In Indian context, an additional dimension was added by the provisions

of Constitution which specifically reserve power to impose tax on
specific activities to specific level of government.

Model of GST in India

Dual Model
This model in common parlance is generally referred to as a dual GST
model’. Under this model, there is a Central GST (CGST) and a State GST
(SGST) and each of the tax is levied on a comprehensive base comprising
both goods and services. In other words, supply of goods and services
attracts both CGST and SGST.

Components of GST
There are 3 applicable taxes under GST: CGST, SGST & IGST.

Central Goods, Service Tax(CGST): All the taxes(Additional Excise,

Counter Veiling Duty, cesses, Central Excise, Customs) that come under
Central Government are included in this kind.

State Goods, Service Tax(SGST): All the taxes which come under State
government(VAT, Entertainment Tax, luxury tax, betting-gambling tax,
octroi, entry tax, purchase tax, State tax, and lottery tax) are included in this
type.

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Special organization in Central level (IGST): It was conducted by Central
government & the taxes that are paid had IGST redemption. It distributes
those taxes among the countries. The only thing is that the demands and
plans of this IGST are in motion but not yet decided.

Illustration:
A dealer in Maharashtra sells goods to a consumer in Maharashtra worth Rs.
10,000. The GST rate is 18% : comprising CGST of 9% and SGST of 9%.

In such cases, the dealer collects Rs. 1800 and of this amount, Rs. 900 will
go to the Central Government and Rs. 900 will go to the Maharashtra
government.

Now, let us assume the dealer in Maharashtra had sold the goods to a dealer
in Gujarat worth Rs. 10,000.

The GST rate is 18% comprising of only IGST. In such case, the dealer has
to charge Rs. 1800 as IGST. This IGST revenue will go to the Central
Government.

In most cases, the tax structure under the new regime will be as follows:

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Systems of GST

Apart from the GST models, it is important to understand the systems of

GST as well. The various prevalent systems of GST primarily revolve around
issues pertaining to availment of credits and payment of taxes. The three
systems10 prevalent internationally are depicted below:

Invoice System
The input credit can be availed on the basis of invoice when such an invoice
is received. Similarly, the output tax needs to be discharged after the invoice
is raised. The facts with respect to payments made for procurements and
payments received on supplies are immaterial. This is similar to the existing
provisions of VAT in India.

Payment System
Under the payment system of the GST, the input credit on supplies procured
can be availed on the basis of payment. Even the output tax needs to be
discharged after the payment is received for the supplies made to the
customers. The facts with respect to invoices received for procurements and
invoices raised for supplies made to customers have no significance. This
system is similar to the existing provisions of
Service Tax as per the provisions of the Finance Act, 1994.

Hybrid System
This system is the blend of invoice system and payment system. The input
credit can be availed on the basis of invoice when such an invoice is
received. However, the output tax needs to be discharged after the payment is
received for the supplies made to the customers. This system is the most
beneficial one from the aspect of the assessee as the credit can be taken
immediately on receipt of an invoice but the tax needs to be discharged only
after the payment for the supplies received.

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Steps for Implementation of GST
In order to effect the proposed model of GST, the Government would be
required to amend the Constitution to empower the State to levy tax on
services and to empower the Centre to levy tax on goods. States are required
to be empowered to levy tax on import. Besides Constitutional amendments,
GST implementation would also require installation of requisite IT
infrastructure both at the Central and State level.

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STAKEHOLDERS of GST
The stakeholders of GSTN are shown below:

Small taxpayers: The economic activity in India is concentrated among

small taxpayers. They may not have the skill or the resources to effectively
migrate to GST. Thus, adequate preparations must be done to ensure smooth
migration for small taxpayers to GST. This includes extensive consultations,
setting up of facilitation centers, education and training.

Corporate taxpayers: Corporate taxpayers may operate across various

States and typically have sophisticated IT systems for accounting, e-filing
returns, payments etc. Common file formats and message specifications
should be released early to allow IT vendors that provide software to
corporate taxpayers to modify and release updated versions with GST
support.

State tax authorities: The State tax authorities would be responsible for
collecting SGST. Common file formats, interfaces, and policy administration
will enable accurate and timely assessments, and risk-based investigations
resulting in enhanced productivity and revenues.

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CBEC: CBEC would be responsible for collecting CGST and IGST.
Common file formats, interfaces, and policy administration will increase the
productivity of CBEC. It will allow for accurate and timely assessment, risk-
based investigations and facilitate IGST settlement by Centre at agreed time
intervals.

RBI: The Reserve Bank of India can facilitate the interface with various
banks to facilitate movement of States’ and center’s funds. The processes of
funds settlements and documentary compliance are independent.

Banks: Banks can accept duty from the taxpayers and process challans. All
tax collections (whether physical or electronic) will happen at bank branches,
or through the banks’ IT systems. Banks will route the tax collected to the
concerned authorities through the RBI channel. Other Stakeholders include
CAG, GSTN, TRPs and facilitation agencies.

Workflows

The figure below shows the workflow of GSTN. The following three
processes constitute the most important workflows of the GST administration
and would be covered in the first phase:

Registration: A unique ID is necessary to identify each taxpayer. The PAN

based ID should be common to both the States and the centre. A common
PAN-based taxpayer registration has several benefits including a unified
view of taxpayers for all tax authorities. A PAN based registration system
has already been implemented in CBEC and several States are also capturing
PAN data.

Returns: Both, the States and centre require taxpayers to file periodic returns
to assess whether the taxpayers have computed, collected, and deposited their
taxes correctly. ITC credit can also be verified on the basis of the returns
filed and revenues reconciled against challan data from banks.

Challans: Challans are the payment instruments used by taxpayers to

actually pay their taxes. Challans are deposited at collecting banks and are
forwarded by them to the tax administrations.

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IGST: Under GST, interstate trade will be leviable to IGST. Under IGST,
the tax paid by the selling dealer in the exporting State will be available as
ITC to the purchasing dealer in the importing State. This requires verification
of ITC claims and transfer of funds from one State to another. Further, in an
interstate business to consumer transaction, tax collected in one State has to
be transferred to another State as finalized by the business processes. Thus,
periodic interstate settlement is required.
In addition, there are several other workflows such as processing refunds,
taxpayer audits, and appeals. It is reiterated that the core services envisaged
through common portal are limited to registration, payments and returns in
the first phase. Other value added services will be added subsequently based
on the needs of the Stakeholders. The IT infrastructure should be designed
taking into account all stakeholders, and all related workflows.

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 GST rates in India
The government has categorised items in five major slabs - 0%,
5%, 12%, 18% and 28%.

Here is the complete updated list of rates according to GST:-

Rough industrial diamonds including unsorted rough diamonds to face
0.25% instead of 3% GST

No tax(0%)
Goods
No tax will be imposed on items like Jute, fresh meat, fish chicken, eggs,
milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour,
besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed
books, newspapers, bangles, handloom, Bones and horn cores, bone grist,
bone meal, etc.; hoof meal, horn meal, Cereal grains hulled, Palmyra jaggery,
Salt - all types, Kajal, Children's' picture, drawing or colouring books,
Human hair, Khadi purchase .

Services
Hotels and lodges with tariff below Rs 1,000, grandfathering service has
been exempted under GST. Rough precious and semi-precious stones will
attract GST rate of 0.25 per cent.

5%
Goods

Items such as fish fillet, Apparel below Rs 1000, packaged food items,
footwear below Rs 500, cream, skimmed milk powder, branded paneer,
frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene,
coal, medicines, stent, lifeboats, Cashew nut, Cashew nut in shell, Raisin, Ice
and snow, Bio gas, Insulin, Agarbatti, Kites, Postage or revenue stamps,
stamp-post marks, first-day covers, Branded food, walnuts, dried tamarind,
roasted gram, Dhoop batti, Corduroy fabric, saree fall, Paper mache items,Oil
cakes, Duty Credit Scrips,Cotton quilts(quilts not exceeding Rs 1000 per
cakes, Duty Credit Scrips,Cotton quilts(quilts not exceeding Rs 1000 per

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piece),corals, Rosaries and prayer beads, Hawan samagri, Grass, leaf and
reed and fibre products, including mats, pouches, wallets, mangoes sliced
dried, Khakra and plain chapati /roti, branded Namkeens, Ayurvedic, Unani,
Siddha, Homeopathy medicines; Paper waste or scrap; Real Zari; Plastic
waste, parings or scrap; Rubber waste, parings or scrap; Hard Rubber waste
or scrap; Paper waste or scrap; Real Zari; Cullet or other waste or scrap of
Glass; E-Waste; Biomass briquettes.

Services
Transport services (Railways, air transport), small restaurants will be under
the 5% category because their main input is petroleum, which is outside GST
ambit. Textile job work will be taxed at 5%.

12%

Goods

Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry
fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen,
Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture
books, umbrella, sewing machine, cellphones, Ketchup & Sauces, All
diagnostic kits and reagents, Exercise books and note books, Spoons, forks,
ladles, skimmers, cake servers, fish knives, tongs, Spectacles, corrective,
Playing cards, chess board, carom board and other board games, like ludo,
rubber band, Wood, stone, metals, marble idols,Table and
kitchenware,Batters, including idli / dosa batter, Textile
caps,sprinklers,Cotton quilts(quilts exceeding Rs 1000 per idli / dosa batter,
Textile caps,sprinklers,Cotton quilts(quilts exceeding Rs 1000 per
piece),Statues, statuettes, pedestals,ceramic articles, porcelain items,
ornamental articles, bells, gongs, non-electric of base metal,animal carving
material, synthetic filament yarn, such as nylon, polyester, acrylic, etc;
artificial filament yarn, such as viscose rayon, Cuprammonium; Sewing
thread of manmade staple fibres; Yarn of manmade staple fibres;

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Services
State-run lotteries, Non-AC hotels, business class air ticket, fertilisers, Work
Contracts will fall under 12 per cent GST tax slab

18%
Goods
Most items are under this tax slab which include footwear costing more than
Rs 500, Trademarks, goodwill, software, Bidi Patta, Biscuits (All categories),
flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved
vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water,
tissues, envelopes, tampons, note books, steel products, printed circuits,
camera, speakers, Kajal pencil sticks, Headgear and parts thereof,
Aluminium foil, Weighing Machinery [other than electric or electronic
weighing machinery], Printers [other than multifunction printers], Electrical
Transformer, CCTV, Optical Fibre, Bamboo furniture, Swimming pools and
padding pools, Curry paste; mayonnaise and salad dressings; mixed
condiments and mixed seasonings, Tractor parts, raincoats, Medical grade
disposable gloves, Computer monitors(up to 20 inch),Custard powder, Rice
rubber rolls for paddy de-husking machine, Kitchen gas lighters, poster
Colour; Modelling paste for children amusement; Fittings for loose-leaf
binders or files, letter clips, letter corners, paper clips, indexing tags and
similar office articles, of base metal; staples in strips;

Services
AC hotels that serve liquor, telecom services, IT services, branded garments
and financial services will attract 18 per cent tax under GST, Room tariffs
between Rs 2,500 and Rs 7,500, Restaurants inside five-star hotels

28%
Goods
Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and
wafers coated with choclate, pan masala, aerated water, paint, deodorants,
shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper,

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ceramic tiles, water heater, dishwasher, weighing machine, washing machine,
ATM, vending machines, vacuum cleaner, shavers, hair clippers,
automobiles, motorcycles, aircraft for personal use, will attract 28 % tax - the
highest under GST system.

Services
Private-run lotteries authorised by the states, hotels with room tariffs above
Rs 7,500, 5-star hotels, race club betting, cinema will attract tax 28 per cent
tax slab under GST

Cess on cars
Small cars: No cess
Mid-range cars: 45%
Large cars: 48%
13 seater cars: No cess
SUV vehicle: 50%
Hybrid vehicles: No cess
Luxury vehicles: 5%

Global scenario and GST

More than 150 countries have introduced GST/National VAT in some form.
It has been a part of the tax system in Europe for the past 50 years and is the
preferred form of the indirect tax in the Asia-Pacific region. There are
different models of GST currently in force, each with its own peculiarities.
While country such as Singapore virtually taxes everything at a single rate,
some countries have more than on rate (a zero rate, certain exemptions and
higher and lower rates). In some countries it is recoverable only on goods
used in the production process and specified service. The standard GST rates
in most of the countries ranges between 15-20% which is shown below. In
Scandinavian countries (north Europe) where social security coverage is
higher, it ranges between 22-25 percent.

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 Advantages of GST

 Removing Cascading tax effect.

 Higher threshold for registration.
 Composition Scheme for small businesses.
 Online simpler procedure under GST.
 Lesser compliances.
 Defined Treatment for e-commerce
 Increased efficiency in logistics.
 Regulating the unorganised sector.

Impacts of GST
GST: The Short-Term Impact

E-commerce
The e-commerce sector in India has been growing by leaps and bounds. In
many ways, GST will help the e-com sector’s continued growth but the long-
term effects will be particularly interesting because the GST law specifically
proposes a Tax Collection at Source (TCS) mechanism, which e-com
companies are not too happy with. The current rate of TCS is at 1%.

No threshold for GST registration: Government has specified a threshold

limit for all the businesses. A business is liable to register under Goods and
Services Tax once such threshold limit is breached However such limit is
not applicable in case of E Commerce sellers. All the businesses carrying out
e-commerce activity are required to get registered under GST irrespective of
their turnover.

No Benefit under Composition Scheme: Most of these sellers registered

with marketplace operators are small and medium businesses. Government
has introduced composition scheme under GST law. This scheme is primarily
aimed to reduce the burden of compliance for small and medium businesses.
Under this scheme, businesses are required to file returns quarterly instead of
monthly and pay taxes at nominal rates up to 2%.

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Tax Collection at Source by Marketplace Operator: Under the new tax
regime, marketplace operators are mandatorily required to deduct a
percentage amount as the GST liability of seller and deposit it with
government. This mechanism is being termed as “Tax Collection at Source
(TCS)” under the GST law. Eventually the marketplace seller will have to
file monthly return under GST to claim the credit of TCS collected by the
marketplace operator. This will also impact the liquidity and cash flow of
these sellers.

Telecommunications
People will have to pay more on mobile phone bills as GST on telecom
services is now 18%, as opposed to the earlier tax rate of 15%. However,
telecom companies may absorb this 3% rise due to fierce competition.

Real Estate
Under construction properties will be cheaper than ready-to-move-in
properties. The GST rate for an under-construction property is 18% but the
effective rate on this kind of property will be around 12% due to input tax
credits the builder will avail of.

Jewellery:
The gold investment will become slightly expensive because there will be
3% GST on gold & 5% on the making charges. The earlier tax rate on gold
was around 2% in most of the states and the GST is increased from the
existing rate to around 2% to 3%.

Restaurant Bills/EATING OUT:

Your restaurant bill would depend on whether you dined at an AC or Non-
AC establishments which do not serve alcohol. Now dining at five-star hotels
will be charged at 18% GST rate and the Non-AC restaurants will be charged
12% and a 5% GST will be charged from small hotels, dhabas and
restaurants who do not cross an annual turnover of INR 50 Lakh.

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FMCG

Previously Currently
Product Companies impacted
taxed at taxed at

HUL, P&G, Jyothy

Detergents 23% 28%
Laboratories

HUL, P&G, Dabur,

Shampoo 24-25% 28%
Himalaya, Patanjali

P&G Hygiene and Health

Sanitary napkins 10-11% 18%
Care

HUL, Dabur, Himalaya,

Skincare 24-25% 28%
Patanjali

Hair dyes 23-28% 28% Godrej Consumer Products

Ayurvedic medicine 7-10% 12% Dabur, Emami

Toothpastes, soaps, Colgate-Palmolive, HUL,

22-24% 18%
hair oil P&G

Asian Paints, Berger

Paints 25-26% 28%
Paints, Nerolac

Branded paneer 3-4% 5% Nestle, Mother Dairy

Amul, Nestle, Mother

Butter, ghee, cheese 4-5% 12%
Dairy

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  Reduction in logistics costs: The FMCG sector will also benefit from
GST by saving a considerable amount of expenses on logistics.
Distribution costs for the FMCG sector currently amount to 2-7
percent of the total cost, but are expected to drop to 1.5 percent after
implementation of GST software. Due to the smoother supply chain
management in regards to paying tax, claiming input credit, and
removing CST under the GST regime, there will be a cost reduction in
terms of transportation and storage of goods. The reduction in taxes
and distribution costs should enable companies to lower prices on
consumer goods.
 Increase in effective tax rates: Aerated beverages have been placed in
the highest tax slab of 28 percent and will now attract an additional tax
of 12 percent. Beverage companies have said the effective tax rate of
40 percent on sweetened aerated water and flavored water under GST
is against the stated policy of maintaining parity with the existing
weighted average tax, which is significantly below 40 percent.

Freelancers
Freelancing in India is still a nascent industry and the rules and regulations
for this chaotic industry are still up in the air. But with GST, it will become
much easier for freelancers to file their taxes as they can easily do it online.
They are taxed as service providers, and the new tax structure has brought
about coherence and accountability in this sector.

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26
Automobiles
The automobile industry in India is a vast business producing a large number
of cars annually, fueled mostly by the huge population of the country. Under
the previous tax system, there were several taxes applicable on this sector
like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty
which will be subsumed by GST.

*Nccd *Road *Motor TOT

Segment Excise +auto VAT Total CGST SGST Difference
tax vehicle tax AL
cess

Small Cars State 28%(appr

12.50% 1.1% 14% State based 9% 9% 18% 10%
<1200cc based ox)

Mid-SizeCars
State
from 1200cc to 24% 1.1% 14% State based 39% 9% 9% 18% 21%
based
1500cc

Luxury State
27% 1.1% 14% State based 42% 14% 14% 28% 14%
Cars>1500cc based

SUV’s >1500cc,
State
>170mm ground 30% 1.1% 14% State based 45% 14% 14% 28% 17%
based
clearance

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Consumer durables

White good players were previously taxed at 27 per cent (including 13.5 per
cent VAT) against 28 per cent under the new GST regime.

There are expectations that with GST coming in picture, there will be some
increase in the prices of most consumer durable items.

However, market analysts do not see any significant impact on the margins
of the consumer durable companies post GST implementation.

One should keep an eye on companies like Crompton Greaves, Symphony,

Whirlpool, Havells and Voltas.

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Airlines
Travelling in business class will become expensive as after the rollout of
GST, tax rate will increase from 9 per cent to 12 per cent.

However, GST on economy class is set at 5 per cent, lower than the previous
6 per cent.

Aviation Turbine Fuel has kept outside the GST and the indirect tax structure
will continue. As a result, aviation companies will now face two set of taxes,
i. e. GST and indirect tax.

Tax input credit under the GST is only available on input services for
economy class travel.
Lower tax rate on economy travel is positive for companies like InterGlobe
Aviation, Jet Airways and SpiceJet.

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Brokers and equity investments
With the service tax being subsumed into your overall GST, the rate of GST
on financial services stands modified from 15 per cent to 18 per cent.

Angel Broking in a blog explains that on a 1 per cent round brokerage, your
overall cost due to the subsuming of service tax into GST will be about 0.03
per cent or 3 basis points.

From a long-term investor’s perspective, this may not be too significant since
the overall shift is just about 3 basis points.

However, for short term traders, this 3 basis points additional cost will
change the economics of churning their funds in the equity markets.

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Whether that actually impacts the eventual volumes and liquidity in the
markets remains to be seen.

One thing investors and traders need to watch out for in the equity market is
whether this higher cost results increases the basis risk or not.

Shares of companies like Motilal Oswal Financial Services, Edelweiss

Financial, Geojit Financial Services etc will remain in limelight

Cement.

According to Angel Broking, GST implementation is expected to be neutral

for the cement industry.

Earlier, cement was taxed at 12.5 per cent excise and VAT rates between
12.5-15.5 per cent. Under GST, the cement will be taxed at 28 per cent,
which is nearly the same as the current tax structure.

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Reduction in the prices of coal and GST will benefit cement companies
further.

D-Street investor should keep an eye on companies like UltraTech Cement,

Birla Corporation, JK Lakshmi Cement, Deccan Cement and India Cement
etc.
IPL & other related events
Events like IPL i.e. sporting events will have a 28% GST rate which is higher
than the earlier 20%.rates. This will increase the price of your tickets. And
the GST rate for other events like theatre, circus or Indian classical music
shows or a folk dance performance or a drama show will be at 18% GST
rate, this is lesser than the earlier tax rate.

DTH and cable services

The money you pay towards your DTH (Direct-To-Home) connections or to
your cable operator will reduce a bit as the rate is fixed at 18%, which is
lower than the earlier taxes which were comprising of entertainment tax in
the range of 10% to 30%, apart from the service tax of 15%.

Footwear & Apparels/Garments:

Footwear costing more than INR 500 will have a GST rate of 18% from an
earlier rate of 14.41 rate but rates for the footwear below INR 500 has been
reduced to 5%. So, you need to shell out more for buying a footwear above
INR 500/-. And with respect to the ready-made garments, the rates have been
reduced to 12% from an existing 18.16% which will make them cheaper.

Train Fare:
There will not be much of an impact. The effective tax rate has increased
from 4.5% to 5% in GST. But, passengers who travels for business trips can
claim Input Tax Credit on their rail ticket which can help them to reduce
expenses. People travelling by local trains or in the sleeper class will not be
affected, but first-class & AC travellers will have to pay more.

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Movie Tickets:
Movies tickets costing below INR 100 will be charged a GST rate of 18%
but prices above INR 100 will have a higher tax rate of 28%.

Life Insurance Premium:

The Premium Amounts on policies will rise, with an immediate impact can
be seen on your term and endowment policy premiums as the rates have been
increased under GST across life, health and general insurance.

Mutual funds Returns:

GST impact on your returns from mutual funds investments will largely be
marginal as the GST will be charged on the TER i.e. Total Expense Ratio of
a mutual fund. The TER is commonly called as expense ratio of a mutual
fund company, and the same is set to go up by 3%. The return what you get
as an investor will be reduced to that extent unless the respective mutual fund
company i.e. AMC absorbs it but that anyhow will be a marginal difference.

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What the Future Looks Like
Talking about the long-term benefits, it is expected that GST would not just
mean a lower rate of taxes, but also minimum tax slabs. Countries where the
Goods and Service Tax has helped in reforming the economy, apply only 2
or 3 rates – one being the mean rate, a lower rate for essential commodities,
and a higher tax rate for the luxurious commodities. Currently, in India, we
have 5 slabs, with as many as 3 rates – an integrated rate, a central rate, and a
state rate. In addition to these, cess is also levied. The fear of losing out on
revenue has kept the government from gambling on fewer or lower rates.
This is very unlikely to see a shift anytime soon; though the government has
said that rates may be revisited once the RNR (revenue neutral rate) is
reached.

The impact of GST on macroeconomic indicators is likely to be very positive

in the medium-term. Inflation would be reduced as the cascading (tax on tax)
effect of taxes would be eliminated. The revenue from the taxes for the
government is very likely to increase with an extended tax net, and the fiscal
deficit is expected to remain under the checks. Moreover, exports would
grow, while FDI (Foreign Direct Investment) would also increase. The
industry leaders believe that the country would climb several ladders in the
ease of doing business with the implementation of the most important tax
reform ever in the history of the country.

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 References
 https://cleartax.in/s/impact-gst-logistics-industry
 http://www.livemint.com/Opinion/NbSCQ2KGNEcTGf1PA7IxcM/GS
T-impact-on-the-logistics-sector.html
 Shodhganga
 Wikipedia
 The Economic Times

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