|Game Changer for Indian Economy?|
What is GST?
GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate. GST is a consumer based tax and not origin based. Under this structure of GST, the tax will be collected by the states where the goods or services actually consumed. More than 140 countries have introduced GST in some form.
Benefits of GST
Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets). Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.
According to experts, once the GST is implemented, the price reduction in the FMCG space could be around 4 to 5% across categories. As the prices of consumer goods fall, consumption would increase considerably. The introduction of GST will lead to an incremental GDP growth of 1.5 to 2 percentage points. Once GST is introduced, India will have 10% GDP growth for ten years in a row!!
One tax Instead of Several
GST is a value added tax. The common base for charging GST for Centre and the state will consist of an combination of several central taxes and state taxes which will enable them to give one tax rather than giving about 16 taxes. It will lower the tax rate by broadening the tax base and minimising exemptions. It will reduce distortions by completely switching to the destination principle. It will promote exports, employment and is expected to spur growth.
Common market Across India
Currently, goods are being sold mostly within the produced state in order to avoid paying the Central Sales Tax. Once GST is implemented, good quality products being manufactured in one part of the country will find more market in the farthest part of the country because there will be no CST and no entry tax
Faster Delivery of Goods
India’s long distance truckers are parked more than 50 per cent of the time. This leads to delaying of delivery of goods at destinations. The abolition of entry tax will be a great boon for the movement of goods by road transport.
Hi Sir, Can you please name few companies which are major beneficiaries of GST, if passed in the parliament?
You can bet on Gati, Kanpur Plastipacks and Century plyboards
It will be helpful for small investor like us if you name some companies which will have most benefits of gst.
Thanx for your valuable opinion.
Thanks for the stock ideas.