Only a few days are left for the actual implementation of Goods and Service Tax Regime (GST) and will be launching on midnight of 30th June across the country. Some analysts are indicating for caution.
The new GST Regime will replace certain taxes including service tax, VAT and several other local levies. It is anticipated that the new regime broadens the tax base and will improve Gross Domestic Product (GDP) of the country nearly by 2 percent.
The new indirect taxation structure has several positive factors for the industry but it can lead to some confusion or disturbance initially for few months (short term) after the implementation of GST regime.
Arvind Sanger, Managing Partner, Geosphere Capital Management said in an interview with CNBC that “In the short term, I am little cautious about GST which will be lot messier than many of us have feared. There could be several months of major dislocation in terms of companies managing and stretched out payments.”
He further added that “The near term bad news could trigger profit booking. There is a little bit of uncertainty which is priced in. But, at the end of the day, we don’t know what this is going to look like because there is no precedent.”
Last Month the GST Council has announced the taxation rates nearly for 1,200 Goods and 500 Services and categorize in four slab rates i.e., 5, 12, 18 and 28 percent. The Government is ensuring that the new GST Regime will keep up smooth functioning to businesses units.
Just four days before the implementation of GST Regime, the government has postponed the Tax Deducted at Source (TDS) and Tax Collection at Source (TCS) compliances along with small businesses who are supplying goods or services on e- commerce platform is exempted from registration.
Market experts think that the new regime can provide some benefits or correction in the market. A correction that can be prepared during the implementation of GST several businesses have a cautious view given lack of preparedness and knowledge.
Vinod Nair, Head of Research, Geojit Financial Services said, “Some industries have a view that they need some more time to understand and implement this new system while some have a view that rates are higher.”
He further added that “The true impact will be known only when the new procedure starts, it could have some hiccups in the supply chain, changes in inventory/revenue and inflationary impact.” Nair also said that GST can lead to unpredictability in between June to September (quarterly results) and also influence the future earnings that are expected to increase from the financial year 2018.
The new GST regime has created disturbance and confusion across the world and India is not considered as an exception. The industry and markets are well known about this and it is factored in the price.
Dhiraj Relli, Managing Director and Chief Executive Officer of HDFC Securities told Moneycontrol. “If there is chaos beyond what is factored in, the markets may slip. But, it is definite that by the time investors realize that the GST implementation has overcome its initial hiccups, the recovery in the markets will be so swift that the Nifty could zoom past the 10K mark in a jiffy.”
He further added that “Anyone with more than a one-year horizon should confidently buy on dips. Some of the global investment banks raised their target for Nifty for December 2017, but it is not that large, which leaves limited room for upside.”
