The ease of evading a sizeable portion of direct and indirect taxes makes the unorganised sector offer goods and services at cheaper prices compared with their organised counterpart. After the implementation of GST, the price advantage of the unorganised sector is expected to wane as integration of government departments will make tax evasion difficult. As a result, buyers may find prices of products from mid-sized companies with established brands and dominant market share more attractive.
Total indirect taxes paid by companies in the organised space is in the range of 23-24%. If a GST rate of 18% is assumed, total indirect taxes paid by companies in the organised sector would be lower by 4-5%. This may prompt companies to pass on some or all of the benefit to consumers, which may support demand. Majority of these companies operate in sectors where the unorganised sector’s share is fairly high between 40% and 70%.
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