Global ratings agency Fitch Ratings in its latest report on impact of Goods and Services Tax (GST) on different sectors, has said that the new indirect tax regime is likely to be beneficial for auto, cement and organised retail sectors, but will have a negative impact on oil and gas, and SME sectors. It further said that the impact would be broadly neutral for property, electricity, telecom, pharmaceutical and fertiliser sectors.
Fitch though said that GST is unlikely to lead to rating changes for any of its internationally rated corporates despite being negative for certain sectors, and added 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.
The rating agency pointed that under the Indian GST regime, a corporate will only be able to apply GST input tax credits after its supplier of goods or services has first settled its GST payment with the government. This means that the burden of non-compliance by the supplier will rest with the purchaser and not the government, it further added that GST tax truancy by financially weak and non-compliant companies lower down the supply chain could limit the amount of input tax credits available for the larger and financially strong corporate.