"Currently, the sector is taxed at the normal rate for both excise and VAT and hence the overall duty burden is between 24% and 27%. As against this, if the GST rate for the standard rate of products for paints is 17-19%, there will be clearly an advantage," says Jayraj Sheth, Indirect Tax Partner, EY
In CNBC-TV18's special series — Hello GST — Menaka Doshi decodes the benefits of GST for the paint sector today. Jayraj Sheth, Indirect Tax Partner, EY, sees more advantages than disadvantages for the sector.
The first advantage being the rate structure, he says. "Currently, the sector is taxed at the normal rate for both excise and VAT and hence the overall duty burden is between 24 percent and 27 percent. As against this, if the GST rate for the standard rate of products for paints is 17-19 percent, there will be clearly an advantage." Ofcourse, it will have to be seen whether the benefits can be passed on to customers.
The second aspect is about the distribution model — there is a lot of VAT retention that happens currently on the distribution of goods by the manufacturers. Under the GST, any such VAT retention will not happen, he explains.
Third, he says, is the MRP-based valuation. This sector has MRP-based valuation, in a sense the transaction value mechanism which will be there in GST would be advantageous.
The only negative side is the petroleum sector as it will be out of GST, says Sheth. Hence, the raw material which this sector consumes will continue to have the cascading effect of that particular source of input.
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