As Indian Economy Goes Into Overdrive For GST Industry Witnesses Great Traction

With the introduction of the GST Bill in

Parliament, the government has made

significant headway into the realization

of the once arduous timeline of July 1 for

the implementation of the game-changing

indirect tax reform—the Goods and Services Tax (GST). As

the Indian economy goes into overdrive

to prepare for GST with a little over three

months to go, the industry has witnessed

great traction and the ambiguity that

surrounded the implementation of the

new indirect tax legislation is slowly

diminishing. In order to ensure the

smooth passage of GST, the government

has set up 10 working groups under

the guidance of senior tax officials to

examine concerns of industries such as

banking; the financial and insurance

sector; telecommunication; information

technology; transport & logistics;

exports; textile; oil & gas; gems &

jewelry; government services; micro,

small, and medium enterprises and to

submit a report on April 10, 2017.

While key focus areas outlined for

review by the GST working group are

procedural complexities and rate structures, this forum

has the capability to also address industry objections to IT

system preparedness, cost of compliance (including increase

in workforce), and end-to-end matching of invoices, which

are not limited to the industries that have formed part of

these working committees. This is a welcome initiative as

several industries have found representation within these

working groups. However, other key industries such as

FMCG, industrial products, real estate, pharmaceuticals,

and automobiles, wherein businesses will undergo a huge

shift from current practices, should be provided the same

prospect.

Several key players from the FMCG and packaged

goods industry have already incurred huge costs owing

to the assessment of impact of GST regime on their

businesses, conducted internally as well as through

external consultants. The sectors where products move

through several channels before reaching the end consumer,

leading to input credits being built up

at depots, warehouses, are looking

to the government to provide them

adequate support in the form of larger

compliance windows to claim input

credits; re-negotiate margins with

channel partners, distributors; and

upgrade their IT systems to become

GST compliant, amongst other critical

aspects.

Other key industries dealing with

“luxury” products or products to be

taxed at a higher rate, such as aerated

drinks, tobacco, luxury cars, and

luxury goods, have also not found

representation within these coveted

working groups. The government

needs to provide a platform to these

industries to open a dialogue on the

impact of high tax rates on their

business strategies, which will need to undergo a significant

change.

There is also a sense of ambiguity within industries

that were so far exempt from the purview of indirect taxes

in the country, such as private education, healthcare,

and the power sector. Certainly, if the government could

form more such working groups and provide an equal

opportunity for excluded sectors to make representation

and table their specific peculiarities, the transition to the

revolutionary indirect tax reform will be greeted with more

enthusiasm.

With inputs from Meeta Chopra and Chavi Sawhney.
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature. The article was first published in The Financial Express on March 30, 2017.