What Are The Benefits Of GST?

Goods and Services Tax (GST) is an indirect tax reform which aims to remove tax barriers between
states and create a single market.
Goods and Services Tax (GST) is considered to be the big most awaited tax reforms of India. It is an
indirect tax reform which aims to remove tax barriers between states and create a single market. Under
GST, only value addition will be taxed and burden of the tax is to be borne by the final consumer.

Know the benefits of GST:

1. No more multiple taxes The major advantage of GST is an elimination of multiple indirect taxes. All
taxes that currently exist will not be levied after implementation of GST. Excise duty, octroi tax, sales
tax, CENVAT, Service tax, turnover tax etc will not be applicable if GST came into effect. This all
taxes will fall under GST only.

2. Easy business GST aiming at one country one tax concept. So every state will come under one tax
only. This will prevent unhealthy competitions among states. For those doing interstate business, this is
a good thing. GST helps people who want to open branches in other states.

3. Easy tax filing For many entrepreneurs and small scale business man, GST will be a blessing. The
complexity associated with taxing and documentation can be avoided after GST came into effect. No
multiple taxes means compliance and documentation will be easy. Return filing, tax payment, and
refund process will be hassle free after GST. As GST is a single tax, this will reduce tax evasion and
corruption, making the system more effective.

4. Reduction in cost By GST, the double charges will be eliminated. The VAT on produced goods of
FMCG like soaps, detergents, cosmetics, apart from excise currently exists. This will be eliminated
after GST. This will reduce the price of goods and services which help common man for saving more
money. The price of FMCG products, small cars, cinema tickets, electrical wires, paint products etc is
expected to reduce after GST. Also GST will bring advantage to businessman and consumer.

5. More Employment As GST will reduce the cost of product it is expected that demand for the product
will increase and to meet the demand, supply has to go up. The requirement of more supply will be
addressed by only increasing employment. GST will lead to an increase in GDP of at least 2 per cent,
which would lead to employment generation.

6. From input to output GST will be applicable at all stages, that is from manufacturing to
consumption. This will provide tax credit benefit at every stage in the chain. Now, at every stage from
production to consumption, the tax margin is added and tax is paid on the whole amount. After GST,
people will have tax credit benefits. The tax will be paid on margin amount only. This will reduce
cascading effect of tax. This also results in cost reduction.

7. Increase in GDP As demand will grow naturally production will grow. This will increase gross
domestic product. It is estimated that GDP will grow by 1-2% after GST. These Things Could Get
Cheaper After GST

8. Increase in Revenue GST operates under, one country one tax rule. It will replace all 17 indirect
taxes with a single tax. The increase in product demand will ultimately increase tax revenue for state
and central government.
These Things Could Get Cheaper After GST

The GST is to become a reality after the GST Bill after the GST Council on Thursday decided to fix a
four-tier rate structure for the reform touted to be the biggest after the economic liberalisation of 1991.
The tax structure is 5, 12, 18 and 28 per cent, apart from higher taxes on hig-end luxury goods and
tobacco. Here are some benefits for the common man.

Prices may drop There is generally a VAT that is charged on produced goods of FMCG like soaps,
detergents, cosmetics, apart from excise. The tax on tax would go after GST. FMCG companies will
benefit from this single tax and their warehousing costs would also reduce. If they pass on the benefits
to consumers, we may see lower prices of products like soap, toothpaste, detergents etc.

Electronic goods By the same logic, electronics goods should also come down. The hope is that the
GST benefits are passed onto the customer. Remember, that logistics costs and warehousing costs are
major cost for electronic manufacturers and these are expected to come down after GST is
implemented.

Small cars Small cars prices could come down, as the incidence of taxes will fall from 24 per cent to 18
per cent, if the GST tax rate is capped at 18 per cent. We wish to emphasize that prices will fall, if and
only if producers pass on the benefits of lower taxes to consumers. Or else, they might not change at
all.

Cinema tickets Entertainment tax is very high, which is why multiplexes charge very high rates for
tickets. If the GST rate is 18 per cent, entertainment tax would drop and ticket prices could be reduced.
This is if and only if companies reduce prices.

Paint products There is heavy competition for the organised sector from the unorganised sector in this
business where they tend to escape taxes. With these companies now coming under ambit of taxes after
the implementation of GST, it might allow larger companies to cut prices.

Various other prodct prices We may see some drop in costs for companies in products like electrical
wires, timber etc., as the unorganised sector would have to pay taxes. This may allow larger companies
to drop prices.

Employment generation GST will lead to an increase in GDP of at least 2 per cent, which would lead to
employment generation.

Lesser corruption GST is a single tax which will subsume various taxes, making the system efficient
with very little chances of corruption. A big boon for the common man.
 New GST Tax Structure: Here Is What Gets Cheaper And Expensive The GST Council recently
announced a new tax structure, which is 4-tier. Take a look at how it will affect you.

GST, India's most ambitious tax reform since Independence took a giant leap after Centre and States
agreed on the tax rate structure this week. At present, there are 15-20 tax slabs between the Centre and
states. Coal, luxury and sin goods like cigarettes and alcohol will attract cess in addition to the GST.

New GST Tax Structure: Here Is What Gets Cheaper And Expensive The GST Council had agreed to
zero-rating for nearly half the items in the consumer price index (CPI) basket as well as major food
grains, while goods of daily use would attract 5% GST, as against 6% proposed previously. Also, there
will be two standard rates of 12% and 18%; a move meant to blunt the demand for a standard 18% tax.
White goods and similar products will face 28% levy, instead of 26% suggested by the Centre earlier.
The cess on luxury and sin goods, and the clean energy cess on coal should aid the Centre to mop up
around Rs 50,000 crore to reimburse states for any revenue loss due to GST.

Soaps and oil may get cheap While tobacco presently attracts 65% tax, the current rate on aerated
drinks is around 40%. Also, some products such as soaps, oil and shaving sticks, which would have
gone into the 28% bracket, will now shift to the 18% slab. This will make them cheaper.

Mobile bill, insurance service charge and eating out to be expensive It is likely that services will be
pushed above the current 15% tax. In all likelihood it will move to the 18% bracket, which means
mobile bills, dining out and insurance services could all get more expensive. So, think and use services,
as these are likely to be higher.

Luxury Cars and SUVs don't get cheaper Luxury cars and big SUVs will not be cheaper with the
realization of GST. Though the crest rate of 28% under GST is lower than the taxes that bigger cars
currently pay, the additional cess will hike up the prices. Experts say that the level of tax on smaller
cars will have to be at a disparity to the sedans. India is a principally small-car market because of the
taxation structure and excise duty.

Currently, a small car evokes 12.5% excise duty. Highest excise of 30% is imposed on multi utility
vehicles (MUVs) and SUVs. In addition to excise, vehicles also attract value-added tax and road tax at
the state level that are higher on sedans, SUVs and luxury cars.

How will GST affect the Stock portfolios? Market insight on the impact of the Goods and Services Tax
(GST) is expected to see a marked shift after the government announced a four-tier rate structure on
Thursday. Market participants are likely to see the GST as a vital tax reform, rather than a demand
booster for many consumer elective products. The new structure is likely to bring efficiency gains,
lower logistics costs and higher compliance for companies which operate in largely unorganized
sectors.

Stocks that will benefit Besides these key sectors, there are some prominent companies which would
gain amply from the four-tier structure of GST. To name some, Exide Industries, Crompton Greaves,
Bata India, PVR, Supreme Industries, Greenply, Symphony, and Cera will remain the Beneficiaries.
These companies operate in the sectors with a large number of unorganized players.
Why These Stocks Could Be Big Gainers If GST Sails Through?

One thing is certain about the Goods and Services Tax (GST), is that it will sail through at some point
of time in the future. Most regional parties want the Bill passed, and so does the government. It is just a
matter of time, before the GST Bill is passed by the Rajya Sabha. When that happens we might see a
few companies improving business prospects and here are the likely gainers from the GST.

We are not recommending to buy these stocks, but, are merely stating that these stocks could be
beneficiaries. In terms of fundamentals, most of these stocks look over priced already.

VRL Logistics

What happens when there is a simplistic tax regime is that transporters like VRL, which have to be
inspected at ewvery check-post and pay tax accordingly, gain through lower checks and lower transit
time. This means optimizing on delivery and improved efficiency. Also, a logistic players like VRL
would be increasingly sought to manage hub-and-spoke supply chains. On the fundamentals front, the
company can report an improved EPS of Rs 15 for 2016-17, which translates into a p/e of 20 times.
Having said that the stock is not exactly cheap. If you want to make money, you would have to be a
long term holder in the stock.

Century Plyboards
The unorganised sector that are competitors for Century Plywood would come under the tax ambit after
GST. This would benefit Century Plyboards. It would help improve volumes and margins at the
company. Again, this is not a stock that is exactly cheap. The company reported losses for the quarter
ending Dec 31, 2015.

Inox Leisure

Inox Leisure is a company that is into the mutiplexes business. This is one business that is hit by very
high taxes, due to entertainment tax being as high as 50 per cent in certain states. With the
implementation of the GST, it is likely that there would be a lower incidence of tax and hence better
margins.

The management has reiterated at aggressive growth plans for over the next two to three years and
plans to reach 645 screens over the same time frame. The balance sheet looks healthy as well. Again,
like most beneficiaries of the GST, the stock does not look cheap at the current market price. At the
moment the GST Bill has to pass through the Rajya Sabha and than also approved by state legislative
assemblies. The Bill has the potential to boost GDP and this time many analysts are hopeful that it
would sail through.
Understanding GST In A Simple Way

Today, there are a number of taxes, that are levied in India. First, there are a host of central taxes and
then there are state related taxes. So, a manufacturer first pays taxes and then the consumer pays taxes,
resulting in the prices of goods becoming expensive.
The GST will do away with a host of taxes, resulting in a single tax.

What are the central taxes that are paid?

Among the central taxes that are today paid, include the excise duty, central sales tax, cenvat, octroi etc.
With the introduction of the GST this will be phased out.

What are the state taxes that are paid?

The states collect various taxes, to raise money for their own development. These include the value
added tax, sales tax, octroi, and state excise, apart from entry tax. These will now be subsumed with the
introduction of the GST.

What are the benefits of the GST?

The GST will stop wasting time over every check post and goods and services would move faster. It
would also reduce logistics and other costs for the manufacturer, who might pass on the benefit to
consumer. As there is a single tax, there is unlikely to worries over corruption at every possible check
post. It would cut down paper work and improve transparency in the system. It is likely to boost
exports. There are reports that it could boost GDP by as much as 2 per cent. But, such things are good
to write, but, difficult to ascertain.

How the GST works?

There will be three forms of GST. The first is the central GST (CGST), the second is the State GST and
the third is the integrated GST. For intra state transactions, the seller will ensure that he collects both
the CGST and SGST. On the other hand for inter-state transactions, the integrated GST will come into
the picture. We can see that with these 3 levies, there would be no VAT, excise duties, sales tax, octroi
and every other tax.