Goods & Services Tax_Impact on Different Industries Part 5 of 5)

By: Suryansh Dhawan
Cleared CFA Level I (June, 2017)
Sem III, MBA-FA 2016-18
1International College of Financial Planning
From ‘What & How’ to ‘What Now & What Next’
MBA in Financial Analysis
Part 5 of 5

GST v/s Old Tax Structure Report Coverage
Journey So Far
Brief Introduction
Impact On Indian Economy
01
02
04
04
Impact on Different Industries
05
03

International College of Financial Planning 4MBA in Financial Analysis
GST Impact on Automobile Sector

International College of Financial Planning 5
“The small car segment could see escalation in taxes.
The entry segment is price sensitive and any such
escalation in taxes could pose challenges in India
developing as a manufacturing and export hub for small
cars.“
Segment Old Indirect Tax
Structure
GST Difference
Small Cars<1200cc 28% 18% 10%
Mid-Class from 1200-1500 cc 39% 18% 11%
Luxury Cars>1500cc 42% 28% 14%
SUV’s >1500cc, >170mm ground
clearance
45% 28% 17%
Rakesh Srivastava,
Director (Marketing & Sales)
Automobile Sector
The Auto buyers rejoices as car prices are
expected to come down under GST
regime. All automobiles (except tractors)
have been put under 28% or below. The
future of the industry looks rosy.

GST Impact on Cement Sector

"On a 50 kg bag of cement costing Rs 300, Rs 180
is tax plus cost of logistics. This is also an industry
which is very capital intensive with low margins.
GST was an opportunity to provide relief to the
industry but has been missed."He further added,
"While the industry is ailing, a lower tax rate on
cement would have reduced prices which in turn
could have benefited the housing segment the
biggest consumer.”
Shailendra Chouksey, Cement
Manufacturing Association President
Cement Sector
Type of
Customers
Type of
Packaging
Ad-Valorem Duty Specific Duty
₹/Metric Tonne
All Supplied in Bulk
Form
12% on Transaction
Value + Cess
Nil
Industrial
&Institutional
Sales
Supplied in
Packaging Form
12% on Transaction
Value + Cess
Nil
Trade Sale (Retail) Supplied in
Packaging Form-
MRP must be
mentioned
12% on MRP with
abatement of 30%
+ Cess
₹120/-
Complex old indirect
tax structure replaced
by a fixed rate of 28%.

GST Impact on Aviation Sector

Tickets Old Indirect Tax
Structure
GST Difference
Economy Class 5.6% 5% .6%
Business Class 8.4% 12% 3.6%
Fare/Charges Old Indirect Tax GST
Base Fare 2000 2000
Airlines Fuel
Charges
700 700
Cute Charges 50 50
Tax & Other
Charges
Passenger Service
Fees
239 239
User
Development
150 150
Airlines Service
Tax
154 137.5
Other Surcharge 12 12
Total Fare 3305 3288.5
Airlines Service Tax @5.6%
under Old Indirect Tax
Structure
Airlines Service Tax @5%
under GST
EconomyClass
The aviation sector is likely to face "teething problems"
for four to six months due to the implementation of the
Goods and Services Tax (GST).
Aviation Sector
Ajay Singh, Spice Jet CMD
Domestic air travel is clearly going to see a boost post
GST with air prices reducing. Budget travelers,
therefore, have a reason to cheer. On the other hand
the business class fares are going to cost higher. This
slight increase in travel prices is probably not enough
to deter business travelers from their travel plans.

GST Impact on Agriculture Sector

Goods Old Indirect
Tax
Structure
GST Difference
Seed, Organic
compost without
brand
0% 0% 0%
Head pump and its
parts
12.5% 5% 7.5%
Tractor 12.5% 12% .5%
chemical fertilizer 12% 5% 7%
Tractor Tire & Rim 12.5% 18% 5.5%
Other Tractor Parts 12.5% 18% 5.5%
Harvesters, Earth,
Graders, Parts
0% 12% 12%
Insecticides 5.5% 18% 11.5%
“Introduction of GST would welcome more
transparency in the system as there would
be a common market in the absence of CST
and entry tax.”
Vijay Setia, Basmati Rice Producer &
Former President of All India Rice
Exporters Association.
Agriculture Sector
An increase in the cost of few agricultural products is
anticipated due to the rise in inflation index for a brief
period. Though, post implementation of GST is going
to benefit a lot, the farmers/ distributors in the long
run as there will a single unified national agriculture
market.

GST Impact on Real Estate Sector

Items Old Indirect
Tax
Structure
GST Difference
Cement 30% 28% 2%
Wallpaper 18.5% 28% 10.5%
Paints and varnishes 26% 28% 2%
Putty, wall fittings 26% 28% 2%
Plaster 26% 28% 2%
Ceramic tiles 26% 28% 2%
Sand lime bricks, fly ash bricks 6% 5% 1%
* Based on Maharashtra VAT; may vary from state to state.
“Due to multiple layers of taxation like
GST on land, raw materials and stamp
duty, the overall project cost might go up.
It has appealed that state governments
abolish stamp duty.” CONFEDERATION OF REAL ESTATE
DEVELOPERS' ASSOCIATIONS OF INDIA
Real Estate Sector It looks like a neutral impact from cost
perspective. Although the work contracts
attracts around 12% and most of the
construction material is under the 18% and 28%
slab, the availability of input tax credit should
neutralize the overall impact.

GST Impact on Telecom Sector

“The administrative work would increase as two
sets of accounts have to be maintained. That is
extra work for telecom companies. There has to
be simplicity on calculations.”
Sanjay Kapoor, Former CEO Bharti Airtel
Telecom Sector
Old Indirect
T ax
Structure
GST Difference
15% 18% 3%
Telecom companies, already weighed down by high taxes and
levies, now need to contend with an additional 3% tax with the
shift to GST. A service tax of 15% applied to telecom services
earlier. Post-paid subscribers will see a roughly 2.6% additional
to their gross bill. But incumbents such as Bharti Airtel Ltd and
Idea Cellular Ltd are likely to absorb the additional cost for
many of their pre-paid tariff packs. On the other hand, the
availability of input tax credit is expected to reduce operating
costs and capital expenditure. Thus, the impact on profit
margins could be small.

GST Impact on Media &
Entertainment Sector

State Entertainment Tax
Maharashtra 45%
Uttar Pradesh 60%
Jharkhand 110% (NIL for Jharkhand
Films)
Rajasthan, J&K,
Punjab, Himachal
Pradesh
0%
Assam 15% for ticket below ₹20
20% for ticket above ₹20
Old Indirect Tax Structure
Type GST Rate
Circus, Indian Classical Dance,
Theatre, Drama
18%
Cinema, Movie Festivals, Amusement
Park, Casinos, Any Sporting Event
28%
Impact under GST
GST is a welcome step. It will unify the indirect tax
administration in India and help the country in two
ways. First it will simplify and make it easy for the
consumers to understand. Second it will
significantly improve the ease of doing business in
India. Together it will help us, a direct-to-home
(DTH) operator, to be more efficient in our
business.
Anil Khera, CEO, Videocon d2h
Media & Entertainment Sector
The impact of GST on the entertainment industry can
be both positive and negative, depending on the state.
Owners of movie halls, parks etc. stand to gain under
GST thanks to the provision of input tax credit.
However, the effect of any additional local taxes (if
levied) needs to be seen.

GST Impact on Iron & Steel Sector

Old Indirect Tax Structure
Excise Duty 12%
VAT 5%
CST 2%
Goods and Service Tax
Sewing Needles, Animal shoe nails, Mathematical boxes, geometry boxes,
and colour boxes, pencil sharpeners, Utensils, Kerosene burners or stoves,
wood burning stoves made of iron or steel, Table or kitchen or other
household articles of iron or steel
12%
All kind of structures used in building bridges, lock gates, roofing and
window frameworks, pillars of iron or steel, Barbed wires used for fencing,
cables, ropes made of iron or steel ,All kinds of tubes and pipes made of cast
iron and other various tubes and pipes including circular across section the
external diameter of which exceeds 406.4mm made of iron or steel, All kinds
of iron and steel used in Railway or tramway tracks ,Reservoir, tanks, casks,
drums, cans made of iron or steel, Sewing needles, knitting needles.
18%
Sanitary ware and parts thereof made of iron or steel Ranges, grates,
cookers, barbecues, braziers, gas-rings, plate warmers and similar
nonelectric domestic appliances and parts thereof, of iron or steel, Radiators
used in a central heating system and parts thereof made of iron or steel
28%
H.Shivramkrishnan
(Director)
“We expect the requirement of working capital to go up in the
immediate future. But going forward, GST will have a beneficial
impact on the steel sector and the economy”.
Iron & Steel Sector Iron and steel industry would initially have a higher cost due
to transition and increase in working capital requirement but in
the long run will be beneficial in light of the expected reduction in
logistics and lower tax on inputs under GST.

GST Impact on Textile Sector

“We are happy with the government’s
decision to keep fabric under 5 per cent
and apparel under 12 per cent.”
R K Dalmia,
President,
Century Textiles.
Textile Sector
Items Old Indirect
Tax Structure
GST Diff.
Cotton Fibre, Yarn
and Fabric
Nil 5% 5%
Silk and Jute Nil Nil Nil
Man Made
or Synthetic Fibre
Yarn
12.5%(excise
duty)
+5% (VAT)
18% .5%
Apparels ₹1000 or
below
6-7% 5% 1-2%
Apparels above
₹1000
6-7% 12% 6-5%
There may be a few drawbacks for the
textile industry due to the higher tax rate
and removal of benefits under cotton value
chain, but it is safe to say that GST will help
this industry in the long run by getting
more registered taxpayers under a well-
regulated system. It can also be hoped that
GST will help the textile industry to get
more competitive in both the global and
domestic markets and create opportunities
for sustainable, long-term growth.

GST Impact on Oil & Gas Sector

“This is a very positive move
for the energy sector. Also,
natural gas being a clean and
environment-friendly
hydrocarbon should be
brought under the GST at 5%
at the earliest in order to
enhance domestic production
and consumption. This will
also help in achieving
reduction in the import of
LNG.”
Prashant Modi,
Chief Executive Officer and Managing
Director
Oil and Gas Sector
Oil and Gas Industry will be affected adversely as the sector have to
comply with both the old indirect tax regime and GST which will lead to
double compliance cost because 5 petroleum products viz crude oil,
natural gas, motor spirit, high-speed diesel and aviation turbine fuel have
been excluded from GST and LPG, naphtha, kerosene, fuel oil etc. are
included.
Oil and Gas Company will pay the GST procurement of plant, machinery
and services and will be unable to get credit on sale of the finished
product as the input GST would not be credible against the excise duty
and value added tax levied on these fuels.
In the gas utilities segment, the report warned that gas marketers will
face complexities as they will pay the GST on transmission tariffs, while
sale of natural gas is outside the purview of GST.
Further, the piped natural gas (PNG) in industrial and commercial sectors
is likely to become less attractive as fuel, because effective tax rate on
competing liquid fuels has been reduced from 26-28% to 18% and
consumers paying VAT on PNG will not be able to get input tax credit as
most of their finished goods would fall under the GST regime. Thus, PNG
sales could get adversely impacted.

By: Suryansh Dhawan
Cleared CFA Level I (June, 2017)
Sem III, MBA-FA 2016-18,
International College of Financial Planning.
E-Mail: suryansh.dhawan17@gmail.com
+918860040559
https://www.linkedin.com/in/suryansh-dhawan-289a35107/
Twitter: @DhawanSuryansh
Bibliography/Reference
• cleartax.com
• gstindia.com
• cbec.gov.in
• caknowledge.com
• gstseva.com
• indiatoday.intoday.in
• 99acres.com
International College of Financial Planning 24International College of Financial Planning 24MBA in Financial Analysis

Goods & Services Tax_Impact on Different Industries Part 5 of 5)

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