GST bill passed by Rajya Sabha: Here's how the industry reacted

NEW DELHI: The Rajya Sabha has passed the Goods and Services Tax (GST) Constitutional Amendment Bill which the Lok Sabha had already approved a year ago. The exact rate of the tax will only be decided in the weeks or months ahead.

GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

The bill was approved by the Rajya Sabha with 203 votes in favour and none against, in the 243-member House. The bill was passed after a after a seven-hour debate.

Here is what the industry leaders predict.

"Finally India gets united, which was living in a legacy of almost 30 different markets within the country. We were saddled with a plethora of diverse state-level taxes and levies of around 25-30% – or even higher in the case of some sectors. GST will ensure India finally emerges as one common market with an approximate tax rate of around 18%, with no double taxation and no cascading effect of multiple levies," said Narendra Bansal, Chairman & Managing Director of Intex Technologies.

"Being a manufacturing entity, Intex Technologies stands to benefit from a uniform tax regime because this will boost operational efficiencies, increase cost savings and make products more competitive. This will help in a major way to simplify the way we do business and will boost government initiatives on “ease of doing business in India”. The world will now recognise India’s potential and the government’s willingness to take bold steps to boost the economy," he added.

"As 1.3 billion consumers across India benefit from lower prices, GST will spur higher consumption and increase the tax base through better compliance with the held of information technology enablement. In the long run, these factors will raise India’s GDP growth by 1 or 2 points, generating millions of new jobs and driving greater prosperity," said Bansal.

"Today is a historic day as Parliament has passed Constitution Amendment Bill for introduction of GST which will make India a truly common economic market. It will accelerate economic growth. The impact on each sector however will be different. The real challenge now will be to have rational GST law and Rules to ensure that objective of GST is met. Equally important is that tax rate should be moderate to avoid inflation," said Nihal Kothari, Executive Director, Khaitan & Co..

"The existing indirect tax laws including VAT/CST, excise, and service taxes have not been able to accommodate the evolving e-commerce marketplace business model. The sector faces a tough time categorising offerings into goods or services to charge VAT/CST or service tax. It also has to grapple with problems related to permits and statutory forms for inter-state movement of goods. Few state governments have come up with additional taxes for e-commerce, which is burdening both customers and companies. There is basically a lack of clarity on e-commerce transactions under existing tax legislations. Once the GST Bill is passed, there will be a national-level GST which will be easy to follow. We are eagerly looking forward to it to tide over the current problems.," said Vishwavijay Singh, Co-Founder, Salebhai.com.

Atul Jain, COO Smart Devices said, “The implementation of a unified GST in India, will be one of the most significant reforms introduced in recent times. We believe that it will bring in much needed transparency in the taxation norms and a have an overall positive impact on the Indian economy. We at LeEco are still in a startup phase in India and therefore are very appreciative of the long term cost benefits that it will accrue to our Indian operations.  It will certainly ease our cost burden of logistics and benefits of reduced taxation can be passed on to our end consumers.”

Abidali Z. Neemuchwala, Chief Executive Officer and Member of the Board, Wipro Ltd., said, “We welcome the passing of the Constitutional Amendment Bill paving the way for implementation of GST in the country. We congratulate the Government on this significant milestone. We are sure that the implementation of the GST would go a long way in strengthening the economy as one common market for taxation as well as address key issues of transparency, ease of doing business and simplification of tax laws. In the process of implementing GST through legislations, we must collectively ensure there is no drifting away from the intent of the Bill and the cornerstone principles of this Government in improving Ease of Doing Business and reduced tax related litigation in India. I am sure the Government would engage meaningfully with the Industry on its concerns and arrive at an effective framework for implementation of GST.”

"The passage of Goods and Services Tax (GST) Bill is a historic moment, paving way for the biggest reform in India. The unified tax structure will not only help boost the Indian economy, but also going to be fruitful in the industrial revolution and attract investments. India will become a single country with GST optimizing cost, compliance and convenience. The timeline for 1st April 2017 rollout looks challenging, but doable with political support," said Sriram S, CEO, iValue Infosolutions.

Oliver Mirza, Managing Director & CEO, Dr. Oetker India, “We are pleased that the much awaited Goods and Services Tax (GST) Bill was passed in Rajya Sabha yesterday and are hopeful of it being implemented by next financial year. The implementation of GST will positively impact the FMCG industry, which is on a growth trajectory. The sector is sure to avail significant benefits in transport, logistics and warehousing apart from other input costs. It will be beneficial not only for the players in the sector but will also have a positive impact on the economy at large. The GST would entail a unified tax regime to increase transparency and fair trade.”

“The IT/ITeS and telecom industry has its own share of benefits and challenges under the GST – with more challenges than benefits, purely on account of the nature and manner of taxation of services under the present laws," said Mahesh Jaising, Partner, BMR & Associates LLP focusing on the IT and Telecom sector.

"Presently, the IT industry is plagued with dual taxation in respect of supply of software electronically, AMC contracts, etc – this would get sorted out under GST. IT/ Telecom service providers were ineligible to avail VAT credits on purchase of goods used for provision of services and with seamless flow and fungibility of credit offered under GST, tax cost in the system will be reduced to a great extent," he added.

"Centralised billing and accounting for service transactions with respect to pan India contracts under the present regime ensured that taxation of services is simple and clear . However, with decentralised basis of taxation of services, the likely requirement of state-wise segregation of contracts/ billing may prove a huge challenge for the industry. GST may also prove to be a nightmare for service exporter having pan India export units, especially in a case where the service providers are forced to apply for refunds in each state where such services are consumed," said Jaising, Partner.

"The Government over last two years has been providing impetus to ‘Make in India’ and has provided concessions for making India as a manufacturing hub. Lucrative incentives such as lower rate of excise duty for mobile phones, tablets and Consumer premise equipment were offered. However, whether such incentives would be continued or not and if continued, the form and manner of continuing such incentives needs to be closely monitored," he said.

Sharat Dhall, President, Yatra.com says, “The passing of the GST bill is a great step forward and establishes a uniform tax structure which will allow the free flow of goods across the country and should have a positive economic impact. However the Government will need to make an exception for the airline sector as the current service tax ranges from 5.6% to 9% of the base fare, which is considerably less than the GST rate that is being spoken about, of 15-18%.”

"GST is overall good for economy as it will eliminate various complicated taxes between states and the Centre. Being a technology company, I don’t think it will have any direct impact as most technology companies in India are B2B. The major outcome of GST will be based on how it is impacting the corresponding business partners of that technology company. In general, it may add an extra burden to those tech companies which are having their pan India presence as they have to bifurcate services and bill the customer state-wise," said Atul Rai, Co-Founder and CEO of Staqu.

"From a startup's point of view, I would say it will have a good cascading effect, as it will attract and encourage more investors from around the globe for Asia’s third largest economy with a clear and transparent tax regime," he added.

“The GST tax reform can clearly be termed as a landmark and India's biggest tax reform since independence with the aim to streamline India’s fragmented tax system with a single levy. The passing of the GST bill is clearly good news for Indian businesses and will provide a huge fillip to the SME sector," said R. Narayan, Founder and CEO, Power2SME.

"With a goal to create one single market, the GST bill will boost economic growth with some optimistic estimates suggesting an added 2 %. The GST regime will bring uniformity in the market creating a consolidated national-market-space. The distinction between goods and services will not apply, thereby, ensuring ease in tax compliances by ensuring one unified tax levy," he added.

"This will also help SMEs avail the complete tax incentives paid on procurement of all input goods as well as services from various sources such as import, inter-state purchases, and local purchases and services like power, telephone etc. With the unified taxation system proposed, issues relating to regulatory uncertainty will be resolved and e-commerce shipment costs will reduce resulting in business growth for the organizations in this sector. In absence of multiple taxes such as; VAT, Excise, ST, CST, the SMEs will have a smoother and efficient inventory led model to operate, which will greatly enhance the ease of doing business. This tax system has been applied by most of the developed countries, as it helps protect businesses against multiple taxation," said Narayan.

"The start-ups and SMEs have more reason to rejoice as this GST structure will provide higher exemptions to new business, businesses with turnover between Rs 10 and 50 lakh will be taxed at a lower rates. The GST will also ensure that there is reduction in logistics costs bringing great relief to manufacturing SME sector," he siad.

"We need to see the impact of GST on services and trading businesses. Some of these businesses are very cost sensitive and even 10% difference due to added price can result in negative growth for the industry. Charter trading is one such sector that is likely to impacted by the GST bill, and not in a good way. BAOA needs to find ways to represent the industry and highlight its concerns to get some relief, otherwise we will have negative impact of this policy. We must also emphasis on positives - charter industry reflects the state of the economy, if inflation comes down and Indian businesses start performing better, it will bring in positive sentiment as a whole. Let us also check the impact on ground handling , airport charges and MRO to take holistic view of our industry.” said Rajeev Wadhwa, Group Chief Executive Officer and Chairman, Baron Aviation.

“From the point of e-commerce there are two points in which we are awaiting clarity. First being mechanics of GST across each state as online orders are not location dependent. Secondly, as a fashion e- commerce player we are eagerly waiting to see whether apparel continues to be in the necessity category and hence attracts a lower GST than the standard rate,” said Dhiraj Agarwal, Co-Founder, Campus Sutra.

“While the telecom service will become costlier as the rate of GST will be higher than the present service tax, a lot of cost will also accrue on account of difficult place of supply rules, decentralized and multiple compliances and credit blockages. The law, procedures and administration mechanisms need to be simplified to allow the prices of the mobile service to be low in the hands of the consumer,"said Bipin Sapra, Tax Partner, Telecom Practice, EY.

“The adoption of GST is certainly a bold step after the economic liberalization and will follow it in working wonders for the overall economic development of our nation. The telecom sector, particularly from the Network Services perspective, is also expected to benefit under a uniform tax regime since streamlining of resources and financial planning can be managed in a more efficient way under GST. It will also outdo the multiple taxes applicable on the telecom sector and will help in driving further the interests of internet services for the common man," said G.V. Kumar, Founder, CEO & Managing Director, XIUS, the telecom subsidiary of Megasoft Limited.

"The GST bill should be able to simplify the indirect tax structure. E-commerce start-ups have faced the dire effects of cascading taxes. While being beneficial to the entire value chain GST will lead to a uniform, seamless market across the country. As a start-up this will be helpful in simpler business operations and lesser tax burdens. With a more friendly eco-system the nation can witness a boost in start-ups and generating employment opportunities," said Amit Singh, Founder & CEO, Allsupermart.

“With a million thing that a start up worries about, GST would make it one less. Taxes & accounting is an area probably many founders fuss about, seek expert help and still don’t get the correct structure. GST would definitely make the whole process much simpler," said  Rahul Aggarwal, Co-Founder, COO, Just Like New.

“India’s indirect tax system has historically been complex. With Goods and Services Tax (GST) - a single tax head, India will now become 'one market' and the ease of doing business will improve immensely. Large Enterprises, SMEs & end consumers, everyone will benefit from a simplified tax regime," said Samay Kohli, Co- Founder and CEO, GreyOrange, on the implications of GST for India Inc.

"The maximum impact of a GST rollout will be on the supply chain, as this will enable companies to finally optimize their supply chain networks based on scientific principals and logic, instead of disparate tax structures across the country which has been the case so far.

We look forward to partnering with enterprises in helping them realize the maximum benefits of large scale automated warehouses," he added.

"The passage of the Goods and Services Tax (GST) Bill in the Rajya Sabha is a progressive measure as it can facilitate seamless movement of goods across inter-state borders enabling better efficiency and spurring growth of the (eCommerce) sector. However, like every regulation, it needs to be implemented correctly, and should not make lives of eCommerce players even more complicated by burdening them with more administrative hassles," said K Ganesh, Serial Entrepreneur, Partner - GrowthStory and Promoter of sector leaders such as BigBasket, Bluestone, FreshMenu, Housejoy, Homelane, Portea etc.

"For the consumer, the price points of many products should come down or remain at the current levels (depending on the GST rates) as there will be free flow of credits since the total indirect tax cost embedded in the price (of products) is likely to decrease," he added.

"Total tax on software is 15% service tax and 5.5% vat totaling about 21.24% on base rate. This will come down to 18% GST. Software is taxed twice as service tax and VAT. Now it will be single tax. We feel that GST will simplify compliance and will free up resources to concentrate on business expansion. Though, implementation will be done only after things are in place, companies need to start planning for future," said Rushabh Shah, President, TAIT.

"Passing of the GST bill offers quantum of promises to lift the rising Indian economy and unifying it as a single competitive market. A fresh air will be breadth into the business sectors as GST will substitute Central Excise Duty, Service tax, VAT, octroy etc. As cascading of tax will be eliminated by GST, prices will reduce and propel the GDP of India to new heights," said K.R. Sreenivasan,Founder, Director at Infoholic Research.

"Foreign players that were jittery in expanding pan India owing to non-uniform tax system will find great relief and venture out to all states. Same thing goes for Make in India and Start up India as companies will get equal opportunity based in every state or region of the country," he added.

"However, various sectors currently operating in India are going to get impacted that is for sure. The industries that will benefit are Auto Media & Entertainment and Consumer Staples. Meanwhile, taxes on Banking sector, Consumer discretionary, Telecom and Pharma sector will go up and this might have some effect in consumers. Sectors like cement, metals and transportation will not see any major bearing as change in the rate of tax is minimal even after GST in these industry segments," said Sreenivasan.

"At last like the European Common Market, India has got now one market and one tax regime which will infuse into our economy the much needed buoyancy and help significantly.For the startups and healthcare service providers it is a shot in their arms.They will see a lower tax burden and higher incentives to expand their operations across the country. A new dawn has been born to increase our growth , job opportunities, efficiency and promptitude in service delivery. For the healthcare industry here is a golden opportunity to take their services far and wide and offer medicines and medications at affordable cost. Our industry wholeheartedly welcomes GST. I would say that we have to celebrate August 3, 2016 as the Indian(Economic) Renaissance or Rejuvenation Day," said Vipin Pathak, CEO & Cofounder, Care24, on impact of the home healthcare startups.

"The passage of the Goods and Services Tax (GST) Bill in the Rajya Sabha is a progressive reform, and we welcome it. If implemented correctly, it will bring relief from one of the key issues faced in the e-commerce segment - cascading taxes. We are hopeful that in the long-run the creation of a unified marketplace will reduce the tax burden, inventory cost and logistical issues; and ensure seamless movement of goods across the country. This will help bring efficiency, transparency and boost profitability and growth of the sector," said Hari Menon, CEO, BigBasket.

“The GST bill is a landmark initiative expected to facilitate ease of doing business as well as benefit the general populace. Due to its centralized structure and inclusive model, certain undertaxed sectors are bound to witness an increase and some overtaxed sectors will find relief through a decrease in taxation. Although the key to its success lies in its final structure, which is yet to be formalized as various states need to come to a consensus and also its effective implementation. Government bodies at centre and state will need to formalize an ingenious plan for it to achieve its true potential and bring a systematic order to the existing cumbersome taxation system, eradicate multiple compliance structures and create a healthy revenue bank for governments to operate effectively," said Rakesh Deshmukh, CEO and Co-Founder, Indus OS.

"For the telecom sector, even though costs are expected to increase, it is less likely to hamper the momentum at which smartphone penetration is growing in India as it is not driven purely by cost but the need for increased connectivity. Two other key aspects of the GST for the telecom sector that government needs to carefully scrutinize are the accrual of tax credits and distinct place-of-supply rules," he added.