One of the biggest tax reforms of the century is knocking on the doors of board rooms of large and small organisations today. The approval granted by Parliament to the GST Constitutional Amendment Bill has paved the way for radical changes in the tax structure of the country.
GST will bring with it several positives for various industries, such as the cross credit of input taxes paid between goods and services, availability of all input taxes paid (barring a few restricted items), etc. This will thereby reduce the cost on businesses due to the cascading effect of taxes, bring clarity as to what transactions will be treated as supply of services, subsume a majority of taxes, and avoid multiplicity of taxes, etc.
GST will have differing impact on various sectors, most progressive and some negative. The trading industry (including distributors and retailers) would benefit under the GST regime substantially, since credits of all input taxes paid by them on all procurements, whether on supply of goods or services, will be available. The manufacturing sector will also be positively impacted by the implementation of GST in many cases.
This development may be viewed as a tax reform but is actually a business transformation. GST will not only impact the tax payments of a company and eligibility of input taxes, but will also affect several aspects of business as well, IT transformation being the biggest. The ERP package used by any corporate will have to undergo a change to capture taxes as per the requirements of the new law.
The modular kitchen industry, which is unorganised to a large extent, will be significantly impacted once the tax regime becomes operational next year. That’s because only those entrepreneurs who are willing to change according to the new business environment will sustain, as all interaction with the Goods and Services Tax Network (GSTN) would be solely electronic. Besides, the emergence of a common Indian market will enable businessmen to think in terms of larger, national presence.
While there are apprehensions about teething problems, the future seems bright. Transparency in transactions will help in the development of the economy, which may in turn result in overall growth by reduction in administration and compliance costs, taxation rates, infrastructural developments, and increase in skill development and global business opportunities. It will make manufacturing efficient and boost the ease of doing business. It will impact the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilisation and reporting, all leading to a complete overhaul of the current indirect tax system.
All areas of business operations including IT, finance, marketing, HR, and procurement are expected to be impacted by the advent of GST. These areas need to be project-managed to ensure smooth transition. Thus, businesses should make full use of time available to organise themselves to be GST ready. Starting the GST process early will help them leverage the opportunities that the new system offers, ensure timely compliance, and avoid disruption and panic at later stages as the G-day approaches