GST to hurt some sectors, no rating changes now – Fitch

Fitch Ratings said the new Goods and Services Tax regime will hurt the oil & gas, pop-and-mom retail and small and medium enterprise segments, while benefiting auto, cement and organised retail sectors.

However, it said it won’t revise it ratings due to this at this point.

In a report titled “Varying Impact of India’s GST Across Corporate Sectors”, the ratings agency also said that it would not have any big impact of sectors such as property, electricity, telecoms, pharmaceutical and fertilizer.

India introduced the GST on the first of this month to simplify its tax code.

“The new GST regime, which came into effect on 1 July 2017 and will replace a vast array of indirect state taxes and the national service tax, is unlikely to lead to rating changes for any of Fitch’s internationally rated corporates despite being negative for certain sectors,” Fitch said.

“Nevertheless, the agency cautions that implementation risks will remain over the next 12 months due to the complexities of adopting the new system amid a culture of poor compliance, particularly among the traditional retail and SME sectors,” it added.

GST, while making it simpler for enterprises and companies to deal with taxation, has also changed the total effective tax rates on several sectors and items.

Tax on daily items such as soaps, toothpaste, tea, sweets and so on have been lowered, while those on shampoo, cold drinks, refrigerators, televisions, furniture, telecom and so on have been increased.