The passage of the Constitutional Amendment Bill on GST has paved the way for introduction of GST in India, likely in H1FY18. The need for GST has been felt because under the current indirect tax structure, tax barriers have fragmented the Indian market, and complex multiple taxes have raised cost of compliance. Moreover, cascading effects of taxes on cost have made indigenous manufacture less attractive.
It is too early to say how it will impact the security products, solutions and services. We are waiting for the new tax structure in products and services to be introduced. Security Promotion Group of India has made multiple representations and recently filed a petition to our Hon’ble Prime Minister Sh. Narendra Modi to include Security Products and Services under “Merit” list so that they can be included in 5% GST category.
At present, in most of the states most of the Security Products are under 12.5% to 15.5% VAT, 4% Differential Excise on CCTV without Input credit and 12.5% excise with input credit for remaining products and 15 percent for services. Tax on Software always has been a debateable issue. In most cases, we need to pay VAT as well as Service Tax on it so after implementation of GST, it would be a single tax, whatever it maybe. Similar would be the case for Services, whether installation, repairs or AMC, we are liable to pay VAT, Service Tax and in most states Work Contract Tax (WCT), only GST will be paid.
Moreover, there will be less complexities when we sell products from one state to the other as we don’t have to pay multiple taxes like CST, Entry Tax, Octroi, etc. which would be helpful in expanding market nationally. Things will become less complicated. There will be less compliant and regulatory issues. Overall, it will help the entire economy.
If our industry demand of inclusion of Security Products and Services in “Merit” list is accepted, it would be a major boon for the industry. If it is not included in Merit List, it may go to 18% Category with most of the Consumer products. If it comes in Merit list, the cost of products and service would go down by almost 15%, which will make them affordable and more people going for it.
Also Read: The Union Budget 2017
The biggest challenge GST is going to offer is payment of GST at the time of removal of stocks from the factory even in the case of Branch Transfers. It is going to add pressure on working capital requirements, which is always a major issue for manufacturers.
GST will turn India into one common market, leading to greater ease of doing business and big savings in logistics costs. Brands are also likely to pass on to consumers cost benefits they will get from consolidating their warehouses and efficiently managing inventory. GST will bring in ease of doing business as they may no longer need to set up state specific entities and transfer stocks to them and invest heavily into logistics of creating warehouses in each state across the country.
