The Government of India has embarked on a revolutionary mission to unify the goods and services tax system under one roof w.e.f July 1.
In general, the GST will simplify the process of taxation, which currently happens at multiple levels as the product reaches from producers to customers through a network of supply chain agents. Â As part of the GST drive, the Government has lowered the taxes of some select goods, in order to reduce the burden on common man.
The introduction of GST will work to the advantage of the power sector on the whole, says Hartek Singh, CMD, Hartek Group. The decision to bring coal under the 5 percent tax slab as against 11.7 percent earlier will lead to a reduction in tariffs, which will eventually be passed on to the consumers.
A single tax on capital goods chargeable at 18 percent will help power project developers reduce their costs and have a favourable impact on project finances. Previously, power generating companies were paying 2-3 percent central sales tax and differential VAT over and above the 12 percent excise duty.
The GST Council has also done well by bringing down the tax on solar modules, which so far enjoyed tax exemption, from 18 percent to 5 percent. A GST of 18 percent would have restricted the flourishing solar industry by resulting in a steep 10-12 percent increase in solar project costs, Singh said.
Companies like Hartek Group will gain from the new GST drive, he added. These firms, which were being charged both excise duty and service tax, will now be required pay a single tax in the form of GST as a result of uniformity in all works contract-related aspects. Considering the urgent need to upgrade T&D infrastructure, the service tax exemption enjoyed by the T&D industry should continue.
Rajani Baburajan