Is GST a beneficial tax regime?

The implementation of Goods & Services (GST) tax has been delayed for a long time. But current efforts of the government in ironing out differences between the centre and the state indicate that GST may become be effective from April 2016. This tax would merge a host of indirect tax rates such as excise duty and service tax at the centre level and VAT along with octroi at the state level in to a single GST rate. The GST rate would be uniform across states. Uniformity in tax rates would ensure that geographical location is not a guiding factor for setting up of warehouses and depots by companies. Also the reduced paperwork will cut down the delivery time for goods. This would automatically bring down the logistic costs of companies. 

But the biggest benefit from the implementation of GST is that it will bring in a large number of the un-organized players under the tax net. This will reduce the undue cost advantage enjoyed by them thereby boosting sales of the organized segment. Moreover, the cost savings will enable organized players to pass on the benefits in the form of price-cuts benefitting the end-consumer. The outcome would be a leg-up in demand thereby boosting economic growth. Thus GST is a win-win situation for all. 

Since GST deals with warehousing and logistics, FMCG companies that sell goods of daily consumption are likely to be major beneficiaries. However FMCG companies are worried about the GST rates which as per estimates have been pegged at 24-27%. Companies such as Marico,Dabur and the Godrej Group feel the rates are high and passing them on will ultimately impact the end consumers. 

There is no doubt that GST is a beneficial tax rate and would bring more transparency and uniformity in the indirect taxes borne by companies. This in turn would make it easier for them to do business. But the true impact of GST can only be gauged after it has been implemented.