Accounting Research and Audit Practices | Journals

The IUP Journal of Accounting Research and Audit Practices:

Effect of GST on the Financial Performance of Selected Manufacturing Companies in India: A DuPont Model Analysis

Article Details

Pub. Date	: October, 2023
Product Name	: The IUP Journal of Accounting Research and Audit Practices
Product Type	: Article
Product Code	: IJARAP011023
Author Name	: Krishna Ashutoshbhai Vyas
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 9

Price

Download

Abstract

In India, Goods and Services Tax (GST), introduced on July 1, 2017, has immensely affected the functioning and financial performance of different manufacturing companies. DuPont analysis model is used in this paper for scrutinizing the essential financial performance of such companies. It is an expedient system for decomposing the different drivers of Return on Equity (ROE) that help investors to focus on the key financial aspects, demonstrating the strengths and weaknesses of different companies. The study empirically analyzes the impact of GST on the financial performance of selected manufacturing companies in India, using five-step DuPont model, whereby the Net Income Margin has been brokendown to demonstrate how tax and interest affect ROE, considering financial performance before and after implementation of GST. Moreover, statistical tools like mean, standard deviation, paired correlation, matrix paired t-test and ANOVA test have been used to analyze the data and justify the objectives of the study.

Description

Goods and Services Tax (GST) the major tax reform in India since independence has also brought with it a host of questions from different industrial sectors in India. The impact of GST has been as diverse as the demographics of India. The effect of GST on the manufacturing sector has been mostly positive. It has helped in easing the cost of production and streamlined the entire tax system. Under the previous tax regime, manufacturers were obligated to pay around 25-26% more owing to cascading tax effect. GST has eradicated this tax-on-tax regime, enabling manufacturers to pay a single, unified tax. This means that a large number of goods have got cheaper, leading to more sales.