GST and its impact on Corporate India

GST is a tax on goods and services with comprehensive and continuous chain of
set-of benefits from the producers point and service providers point up to the
retailers level. It is essentially a tax only on value addition at each stage, and a
supplier at each stage is permitted to set-of, through a tax credit mechanism,
the GST paid on the purchase of goods and services.
In my opinion, implementation of a comprehensive GST in India is expected to
lead to efficient allocation of factors of production thus leading to gains in GDP
and exports. This would translate into enhanced economic welfare and higher
returns to the factors of production, viz. land, labour and capital.
Once GST gets introduced, exporters would be able to take full credit of non-ofset
components of the net indirect taxes (NIT) paid by them. This would make
exports zero rated i.e. subject to zero tax rates. GST would thus provide
competitive advantage to India. GST is expected to bring about, if not in the near
term but in the medium to long term, a reduction in the prices of goods and
services. The expectation is that the dealers would start passing on the benefit
of the reduced tax incidence to the customers by way of reduced prices. The
overall price level would go down. Efficient allocation of productive resources
and providing full tax ofsets is expected to result in gains for GDP, returns to
the factors of production and exports of the economy. The sectors of
manufacturing would benefit from economies of scale.
GST is also expected to result in a reduction in inventory costs. Dealers would be
able to claim a credit for the tax paid on their inventories, leading to improved cash
flows. The GST will lead to the creation of a unified market for facilitating seamless
movement of goods across states. This is expected to reduce the transaction cost of
business

The DTH industry will benefit indirectly from GST as the tax evasion in the cable
industry will decrease leading to increase in tarifs in the sector. Also FMCG firms are
likely to benefit from the lower warehouse costs and reduction in the inventory. The
GST rate is likely to be lower than the current excise plus VAT rate which will indeed
benefit the auto sector. The entertainment sector is also likely to benefit from the
implementation of GST which it will pass in to the consumers by lowering the overall
prices.

On the whole implementation of GST is likely to bring about a revolution in the

Indian Economy. Most of the corporations are going to benefit from it due to the
higher returns to the factor of production, lower inventory cost. Also the
manufacturing sector is likely to reap the benefits due to economies of scale. GST is
likely to boost up the Corporate Sector owing to its both direct and indirect benefits.