Investors and fund managers may come under pressure in the Goods and Services Tax (GST) regime as cost of investing is likely to go up.
“GST will increase cost of investing. This means investors and fund managers will have to revisit their portfolios and strive for better returns, which implies that brokerage stocks might come under pressure,” K R Choksey Shares and Securities said in a research report.
The current service tax is 15 per cent while post GST it is expected to go up to 18 per cent, which makes implementation of GST negative for the sector as consumers will end up paying more taxes. “Since services constitute a larger share in the consumption basket than in Consumer Price Index (CPI), Indian consumers are likely to feel the pinch of higher prices of services post implementation of GST,” K R Choksey Shares and Securities has said.
The brokerage house says banks and other lenders may have to rework their product features after the implementation of the GST from April 1, 2017, as financial services, including banking and insurance, may come under stress.
The brokerage house says that GST will also have impact on insurance services as the annual fees would move higher.
“Lenders will have to re-look banking transaction and products newly that would fall under the ambit of GST and ascertain the changes post the new tax implementation. Lenders might have to train their staff, roll out systems in different branches and validate transactions. An important area to look at would be to ascertain how fee-based activities are treated, as currently they are generally liable to service tax. With GST being an all-encompassing levy, it may apply to all services, albeit with a list of exclusions,” it said.
The GST Bill was passed in the Rajya Sabha on Wednesday which clears the way for a simpler tax regime and unified common market.