VAT to GST: Implications to Food & Agro based food product Industries

Arunjunai Rajavel, B.Tech Mechanical Engineering; Faculty Advisor – Dr. M B Ragupathy, Department of Finance, SME

Changing over from Value Added Tax (VAT) based indirect tax structure to Goods and Services Tax (GST) attracts lot of attention on policy research, much before its proposed implementation. Most such studies, at least in India, were concerned with issues of Centre- State relationship, resource sharing and determination of the geographical location of actual tax incidence. There was really no effort spent on understanding the issues faced by certain group of industries, which were tax-exempt in the existing regime. Agriculture and Food processing is one such industry, that needs a detailed study, mainly because of its characteristics, such as, (a) most of the products belonging to this industry group are tax- exempt in many States and (b) ‘primary articles’ constitute 20.118%s weightage in the Whole Sale Price Index (WPI). Hence, this paper looked at the issue of GST on the following three parameters, viz, (a) impact on firm profitability (b) impact on product prices and (c) impact on inflation. On an average, the study estimated that there is 4% impact on firm profitability, 30% impact on the product prices, and about 3.01% impact on inflation. This work was presented in Third World Management Conference in IIM Indore, PAN IIM Indore in December 2015.