India Inc wants faster, timely roll-out of GST

With the Goods and Services Tax (GST) set to be tabled in the Rajya Sabha, industry captains say the “giant” reform step will go a long way to revive the manufacturing sector, which is suffering from low capacity and lack of demand.

It is very important, top bosses say, to get the Congress on board so that there should not be any disruption in future.

“A giant step in reforms awaits India. The biggest since liberalisation and the boldest, considering its statelevel challenges. The GST is a gateway to economic development through superior tax administration, lower interstate trade barriers and overall ease of doing business. The nation is poised to reap the dividends of growth that would arise out of this landmark legislation. A result of relentless political will and persistence, the GST Bill’s passage will usher in Modi government’s most progressive reform initiative by far,” said Harsh Goenka, Chairman RPG Enterprises.

The top bosses said the roll-out should happen by April 1 next year so that the industry can prepare itself for the GST. “It’s very important that the Congress joins hands with the BJP so that they can clear the Bill in the Rajya Sabha without any hurdles,” said promoter of a large manufacturing company of asking not to be quoted. “At present, both the parties want to take the credit for the reform, which is delaying a breakthrough,” he said.

Analysts said the roll-out of GST would be a big bonanza for Indian private companies, as it would simplify and rationalise taxes, shift trade from the unorganised to the organised segment and improve efficiency in the system. “This is likely to benefit sectors like fast moving consumer goods, automobiles, cement, light electrical, multiplexes, retail and logistics. However, commercial vehicles, print media, cigarette and jewellery companies would be adversely impacted,” said a Motilal Oswal Financial Services analyst. The logistics sector will also benefit from the removal of inefficiencies in interstate taxation and at check posts. The services sector may see a negative impact from a higher tax under the GST, compared to 15 per cent currently, according to global bank HSBC.

The real value of GST would be seen in the area of tax governance, where a system, plagued with a plethora of discretionary and ad-hoc taxes, would move toward a ruled-based, transparent and stable tax regime. This would make the tax system fairer by ensuring ‘neutrality’ across players, products or services, locations or business cycles, say analysts.

The GST roll-out would help the Indian manufacturing companies to revive its fortunes after suffering from four consecutive years of slowdown. According to a report by the CMIE, the private sector companies have announced 2,856 new projects worth ~11.33 lakh crore between FY14 and FY16, but of this, only a third are under implementation so far. This was mainly due to low capacity utilisation, low demand and high interest rates.