Indirect taxes are still a major source of revenue for the Central government. Now with the passing of the GST Bill, the country expects to have one uniform tax regime across India.
Due to multiplicity of taxes, every business structure is designed to avoid double taxes. The supply chain gets affected the most than any other business line. When the Goods and Services Tax (GST) will finally see the light of day, the way India does business will change, forever.
The following are not covered under the GST purview:
1.Petroleum products
2.Entertainment and amusement tax levied and collected by panchayat /municipality/district council
3.Tax on alcohol/liquor consumption
4.Stamp duty, customs duty
5.Tax on consumption and sale of electricity
Impact on Cement Sector
Currently, the tax on cement ranges between 27 per cent and 32 per cent.
- The tax rate for the cement sector is expected to decline to 18-20 per cent under the GST regime.
- This is expected to lead to savings in transportation costs, which currently comprise up to 20-25 per cent of total revenue.
- Overall realisations of cement companies will substantially improve post GST rollout.
The impact of GST will be positive, as companies in the cement sector will also be able to save on their logistics costs, due to rationalisation of warehouses and lower transportation costs (due to decline in transit time).
Supply chain management is expected to get a boost. Further, interstate trade barriers would reduce and eventually result in better interstate commerce. Consolidation of warehousing facilities is expected.
The anticipated 18 per cent GST rate is far lower than what cement companies are paying currently, and analysts expect cement makers to pass on the benefits to consumers as demand continues to remain weak. Whether this alone will help revive demand is another matter altogether.
(Information sourced from various news and analyst reports).