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GSTAnalysisandOpinions
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GSTispurportedtobringintheonenationonetaxsystem,butitseffectonvariousindustrieswillbeslightly
different.Thefirstlevelofdifferentiationwillcomeindependingonwhethertheindustrydealswithmanufacturing,
distributingandretailingorisprovidingaservice.

ImpactofGSTonManufacturers,DistributorandRetailers
GSTisexpectedtoboostcompetitivenessandperformanceinIndiasmanufacturingsector.Decliningexportsand
highinfrastructurespendingarejustsomeoftheconcernsofthissector.Multipleindirecttaxeshavealso
increasedtheadministrativecostsformanufacturersanddistributorsanditisbeinghopedthatwithGSTinplace,
thecomplianceburdenwilleaseandthissectorwillgrowmorestrongly.

ImpactofGSTonServiceProviders
AsofMarch2014,therewere12,76,861servicetaxassesseesinthecountryoutofwhichonlythetop50paid
morethan50%ofthetaxcollectednationwide.MostofthetaxburdenisbornebydomainssuchasITservices,
telecommunicationservices,Insuranceindustry,businesssupportservices,BankingandFinancialservicesetc.
ThesepanIndiabusinessesalreadyworkinaunifiedmarket,andwhiletheywillseecomplianceburdenbecoming
lessertherewillapparentlynotbemuchchangeinthewaytheyfunctionevenafterGSTimplementation.

SectorwiseImpactAnalysis
Logistics

InavastcountrylikeIndia,thelogisticssectorformsthebackboneoftheeconomy.Wecanfairlyassumethata
wellorganizedandmaturelogisticsindustryhasthepotentialtoleapfrogtheMakeInIndiainitiativeofthe
GovernmentofIndiatoitsdesiredposition.

Ecom

TheecomsectorinIndiahasbeengrowingbyleapsandbounds.Inmanyways,GSTwillhelptheecomsectors
continuedgrowthbutthelongtermeffectswillbeparticularlyinterestingbecausethemodelGSTlawspecifically
proposesataxcollectionatsource(TCS)mechanism,whichecomcompaniesarenottoohappywith.The
currentrateofTCSisat1%anditllremaintobeseenifitdilutestherapidboominthissectorinanywayinthe
future.

Pharma

Onthewhole,GSTisexpectedtobenefitthepharmaandhealthcareindustries.Itwillcreatealevelplayingfield
forgenericdrugmakers,boostmedicaltourismandsimplifythetaxstructure.Ifthereisanyconcernwhatsoever,
thenitrelatestothepricingstructure(asperlatestnews).Thepharmasectorishopingforataxrespiteasitwill
makeaffordablehealthcareeasiertoaccessbyall.

Telecommunications

Inthetelecomsector,pricesareexpectedtocomedownafterGST.Manufacturerswillsaveoncoststhrough
efficientmanagementofinventoryandbyconsolidatingtheirwarehouses.Handsetmanufacturerswillfinditeasier
toselltheirequipmentasGSTwillnegatetheneedtosetupstatespecificentities,andtransferstocks.Thewill
alsosaveuponlogisticscosts.

Textile
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TheIndiantextileindustryprovidesemploymenttoalargenumberofskilledandunskilledworkersinthecountry.It
contributesabout10%ofthetotalannualexport,andthisvalueislikelytoincreaseunderGST.GSTwouldaffect
thecottonvaluechainofthetextileindustrywhichischosenbymostsmallmediumenterprisesasitcurrently
attractszerocentralexciseduty(underoptionalroute).

RealEstate

TherealestatesectorisoneofthemostpivotalsectorsoftheIndianeconomy,playinganimportantrolein
employmentgenerationinIndia.TheprobableimpactofGSTontherealestatesectorcannotbefullyassessedas
itlargelydependsonthetaxrates.However,itisagiventhatthesectorwillseesubstantialbenefitsfromGST
implementation,asitwillbringtotheindustrymuchrequiredtransparencyandaccountability.

Agriculture

AgriculturalsectoristhelargestcontributingsectortheoverallIndianGDP.Itcoversaround16%ofIndianGDP.
Oneofthemajorissuesfacedbytheagriculturalsector,istransportationofagriproductsacrossstatelinesall
overIndia.ItishighlyprobablethatGSTwillresolvetheissueoftransportation.GSTmayprovideIndiawithitsfirst
NationalMarketfortheagriculturalgoods.However,therearealotofclarificationswhichneedtobeprovidedfor
ratesforagriculturalproducts.

FMCG

TheFMCGsectorcouldseesignificantsavingsinlogisticsanddistributioncostsastheGSTwilleliminatetheneed
formultiplesalesdepots.TheGSTrateforthissectorisexpectedtobearound17%whichiswaylesserthanthe
2425%taxratepaidcurrentlybyFMCGcompanies.Thisincludesexciseduty,VATandentrytaxallofwhichwill
besubsumedbyGST.

Freelancers

FreelancinginIndiaisstillanascentindustryandtherulesandregulationsforthischaoticindustryarestillupin
theair.ButwithGST,itwillbecomemucheasierforfreelancerstofiletheirtaxesastheycaneasilydoitonline.
Theywillbetaxedasserviceproviders,andthenewtaxstructurewillbringaboutcoherenceandaccountabilityin
thissector.

Automobiles

TheautomobileindustryinIndiaisavastbusinessproducingalargenumberofcarsannually,fueledmostlybythe
hugepopulationofthecountry.Underthecurrenttaxsystem,thereareseveraltaxesapplicableonthissectorlike
excise,VAT,salestax,roadtax,motorvehicletax,registrationdutywhichwillbesubsumedbyGST.Thoughthere
isstillsomeambiguityduetotaxratesandincentives/exemptionsprovidedbydifferentstatestothe
manufacturers/dealersformanufacturingcar/bus/bike,thefutureoftheindustrylooksrosy.

Startups

Withincreasedlimitsforregistration,aDIYcompliancemodel,taxcreditonpurchases,andafreeflowofgoods
andservices,theGSTregimetrulyaugurswellfortheIndianstartupscene.Currently,manyIndianstateshave
verydifferentVATlawswhichcanbeconfusingforcompaniesthathaveapanIndiapresence,speciallytheecom
sector.AllofthisisexpectedtochangeunderGSTwiththeonlysorepointbeingthereductionintheexciselimit.

BFSI

AmongtheservicesprovidedbyBanksandNBFCs,financialservicessuchasfundbased,feebasedand
insuranceserviceswillseemajorshiftsfromthecurrentscenario.Owingtothenatureandvolumeofoperations
providedbybanksandNBFCvisavisleasetransactions,hirepurchase,relatedtoactionableclaims,fundand
nonfundbasedservicesetc.,GSTcompliancewillbequitedifficulttoimplementinthesesectors.

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