Tax experts state that the present practice is of tax on tax
that is; VAT is charged on the cost of production. Additionally, VAT is also
charged on the excise duty added at the gate of the factory making the cost go
up. This tax on tax would get eliminated after the Top GST Consultant In India implementation of the
GST. The result of this would be the reduction in the cost of many products.
These products range from FMCG to the garments.
As per the tax experts the essential services like the
cultural activities, the Ambulance, pilgrimages and the events of the
sports would become expensive as the present rate is 14.5 percent and this rate
would get enhanced to 18-22 per cent.Hence,the cost of traveling,
eating out, banking, hiring cabs, watching movies, buying branded jewelery,
watching IPL would all rise.
The present
taxation system that is based on the production would undergo a change and
would become a consumption based system. Since the VAT and the excise duty
would reduce from 25-26 percent therefore, the manufactured consumer goods
would become cheaper. The cost of the services would increase from the present
level of 15 percent.
At present, about 25 to 26 percent of the cost above the
cost of the production is being paid by the consumer. This is because of the
value added services (VAT) and the excise duty (about 12.5 per cent). Though
there is no indication of the changes to be brought because of the GST Accounting Audit Service yet tax
experts state that it’ll be somewhere between 18 to 22 percent. This,
considering all the possibilities, would bring down the cost of the basic
goods. Certain items that are considered to be essential are not taxed today
and are expected to remain out of the bracket of the tax even under the GST.
The
manufacturing hubs of FMCG products get impacted because of the state/excise schemes.
Under GST, there are possibilities of the manufacturing locations to get
readjusted because of the commercial perspective and this readjustment might
impact the prices of the goods. An excise duty of 12.5 percent and a VAT of
12.5 to 15 percent are attracted by the goods depending on the state. Further,
there are varied taxes like the input tax credit retention, CST, entry tax,
Octroi, etc. till the product reaches the consumer.
After the implementation of the GST, the overall indirect
cost would get reduced extensively and the credit flow Ind AS Implementation In India would increase for the manufacturers.
This might reduce the cost of the production and increase the profits of the
base line. This would provide room for the reduction of the prices for the end
users.
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