India's new Goods and Services Tax (GST) is likely to have a beneficial impact on India's auto, cement and organised retail sectors, but a negative impact on the oil & gas, traditional retail and SME sectors, according to Fitch Ratings' latest Special Report, published today. In contrast, the agency views the impact as broadly neutral for the property, electricity, telecoms, pharmaceutical and fertiliser sectors.
The new GST regime, which came into effect on July 1, 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.
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.
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