Investors and GST

A lot has been written on the impact of GST and reasons why it should be implemented, postponed, or modified. The inevitability is here. On the midnight of 30thJune India will be liberated from multiple taxes as many as 15+ taxes will be combined into a single tax called Goods and services Tax or GST as it is popularly known. The brand ambassador of GST ace badminton player P.V Sindhu says we will break from the shackles of multiple taxes. However, little does she know that for the Indian investors are one of the worst affected class in the GST scheme of things. Let me elaborate this.

The first damage is increase in the rate or tax. The service tax was 15% it has now been increased to 18% GST. Investors do not get any setoff, hence being the end user this is a charge which will increase the cost of transaction. No setoff benefits are available to retail investors since they are not registered to pass on this service to any other entity.

The investor continues to pay Stamp duty and Securities transaction tax (STT). Different states have different rates of Stamp duty and there is huge discrimination amongst the investors. The stamp duty must be abolished or if at all it remains it should be standard across the country. As regards STT it is beneficial only if you have long term capital gain. There is no STT rebate available in income tax that you pay. Hence STT is an item of increased cost. Lot of investors trade in intraday and short term wherein STT is a big cost, in fact more than brokerage and transaction tax.

There are other charges like Depository maintenance and transaction charges which will also be subject to increase in tax from 15% to 18%. This is again an increase without any additional benefit.

Delayed payment charges, which were essentially an interest on using brokers money or money funded by NBFC will now be subject to GST. The cost of this charge will be an increase of 18% on the interest amount

Till now we just made available the client id to the exchange. Of course, the system had the details of the customer. Now with Aadhar being made mandatory for all financial transactions the transparency in the system will go up substantially. Good recording keeping of all your transactions will be the need of the hour.

The biggest benefit cited by government is it will benefit industry since multiple taxes will be eliminated. We expect increase in GDP by at least 2-3%. This should improve the bottom lines of companies listed on the stock markets. We have seen a big bull run and we hope to continue to see it going forward. The GST boost should improve your portfolio values. We hope this increase cost of 3% will be fully absorbed in the increase in share prices and we will not feel the pinch of upward revision

 

Happy investing!

Deena Mehta

Managing Director

Asit C Mehta Investment Interrmediates Ltd

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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