Goods and Services Tax or GST is a reality as business operations have been taking place across the states and around the world under new taxation policy in India. There are certainly expectations that this tax reform will boost the Indian economy; however, there are doubts as well that it will have both positive and negative impacts on industries. It may be too early to make any proper analysis on impact of GST on various sectors in India as GST has been implemented recently. We all have to wait for at least a year to have complete and correct outlook of GST impact on various industries in India.
So, what is the impact of GST on various sectors in India? Let’s get the answer of it by putting some light on impact of GST on various sectors such as textile, iron & steel, pharma & healthcare, cement and telecom.
Textile Industry in India
The textile industry in India brings employment opportunities to a large number of skilled and unskilled workers. It contributes about 10% of the total annual exports of India. And this figure is likely to increase in current fiscal. GST impact on readymade garments such as trousers, saree, shoes, apparel and other clothing materials is experienced due to cotton value chain on these products. In a recent decision taken by the GST Council members, the tax rate on job work for textiles and textile products has been reduced to 5% from 18%. Other impact of GST on textile industry is input tax credit, which is not allowed if a registered taxpayer procures the inputs from composition scheme taxpayers or the unorganized sector. It is available for the tax paid on capital goods.
Iron and Steel Industry in India
Iron and steel are primary requirements of the construction industry and commonly used in the manufacturing of machine parts. After GST implementation, special additional duty (SAD) on iron and steel has been abolished. The other major impact of GST on iron & steel industry in India includes – reduction of cost & time in logistics, bringing more employment opportunities in undeveloped states, utilizing natural resources and protection to domestic industry. What is GST rate on iron and steel in India? The tax rates on iron and steel range from 12% to 28%.
Pharma & Healthcare Industry in India
India’s pharmaceutical industry ranks 14th in terms of value and is 3rd largest in the world. GST impact on healthcare industry is constructive. It has helped industries to streamline the taxation structure as eight types of taxes were levied on pharmaceutical industry before GST. The GST impact on pharma companies reveals that they can now rationalize their supply chain and they need to review their distribution networks and strategies. The GST rates on pharma & healthcare industry range from 5% to 12%. So, like other sectors, there is a impact of GST on healthcare industry.
Cement Industry in India
India is the 2nd largest cement producer in the world right after China. Under GST regime, effect of GST on cement industry will not be significant particularly on GST rate on cement. Earlier tax rates on cement products were between 27% and 32%, however now GST rates of 5% to 28% are levied on cement articles. Many market experts believe that there is a positive impact of GST on cement industry in India on certain parameters. For example, GST gives a boost to supply chain management of cement. So, cement manufacturers can maintain multiple warehouses across states to avoid state entry taxes and CST. Moreover, as vehicles transporting cement from one state to another are spending lesser time at checkpoints, so transit time gets declined. Certainly, cement industry can enjoy savings on transportation costs.
Telecom Industry in India
Telecom industry of India can basically be divided into three parts namely equipment manufacturers, infrastructure providers and telecom service providers. After launch of Reliance Jio, the sector is facing severe pressure in the form of intense competition. Now Goods and Services Tax or GST has been implemented, the GST on telecommunication services is taxed at 18%, which is higher than rates charged earlier. GST rates are also applicable in different range on other products and services in the telecom industry. Certainly, like other industries, there is an impact of GST on telecom sector in India.
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