WEL­COME TO THE GST REGIME

GST is here but so are doubts, con­fu­sion and am­bi­gu­ity. Only time will tell how it elim­i­nates the pain points and fu­els the GDP growth

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The new tax regime is here and has be­come re­al­ity. We saw it on July 1, 2017 at the storke of mid­night when the In­dian Par­lia­ment was all awake to cel­e­brate the on­set of the new tax­a­tion pol­icy. But doubts, con­fu­sion and am­bi­gu­ity con­tin­ues to hang on in every­body’s mind. As we step into the new tax regime – GST (Goods and Ser­vices Tax), it is im­por­tant to note that busi­nesses will no longer be the same. With tech­nol­ogy as the back­bone, GST is aimed at bring­ing trans­parency, re­duce leak­ages and ra­tio­nal­ize the in­di­rect tax sys­tem.

GST has cast its spell on ev­ery­one—buy­ers, sell­ers and re­sellers of goods. It has be­gun to fetch in all traders, baniyas, dukaan­daars and kiryanawal­lahs, among oth­ers into the tax­a­tion sys­tem—some­thing which never hap­pened in this coun­try. The tax fil­ing is go­ing to be on­line and com­pul­sory. It is be­lieved that the pil­fer­ages in the tax fil­ing would be elim­i­nated. But only time will tell.

While GST is a trans­for­ma­tive move for buy­ers and sell­ers, it will not be easy to ad­just to the change im­me­di­ately. It is go­ing to take its course. A vol­ley of pain points is set to emerge in the first few months. The

govern­ment re­al­izes this and has an­nounced that it would be a little lax in the first three months for tax fil­ings. But it would be strict af­ter that and keep a con­stant watch on the fil­ings. Per­haps this is the rea­son why many of the en­ter­prises have em­barked upon to the com­pli­ance drive and added GST func­tion­al­ity to their ex­ist­ing sys­tems. Many top or­ga­ni­za­tions have re­vamped their IT ap­pli­ca­tions or adopted the GST-ready ones to in­sure that their busi­ness is not af­fected in the new regime.

GST has proved to be a boon to the IT in­dus­try which is reap­ing an early har­vest in the name of GST. Sev­eral ap­pli­ca­tion providers have run on a drive to pen­e­trate small, mid and big busi­nesses with their GST-ready ERP sys­tems. The govern­ment has en­listed GST Su­vidha Providers (GSPs) to help busi­nesses com­ply to GST.

GST TO DRIVE ECO­NOMIC GROWTH BY 0.5%

On the pos­i­tive note, GST will help all busi­nesses to em­bark upon the tech jour­ney. Ex­perts and re­ports sug­gest that GST will trig­ger eco­nomic growth by about 0.5%. “GST is ab­so­lutely go­ing to help the eco­nomic growth of the coun­try by ef­fi­cient tax col­lec­tion. A re­cent sur­vey by HSBC sug­gests that the eco­nomic growth will in­crease by 0.5% post the im­ple­men­ta­tion of GST. There is no doubt that this is a great step. We do not see a spe­cific im­pact in pric­ing of our ser­vices. For us, there has just been a mar­ginal in­crease of taxes from the cur­rent 15% to 18%, which in our case, does not mean a bur­den to our end-users,” said Ra­jku­mar Jalan CEO of In­dion­line.in.

ONE TAX PAN IN­DIA FOR BUY­ERS

Buy­ers will be pay­ing the same price for the same good bought in var­i­ous parts of the coun­try. It will help the e-com­merce com­pa­nies in a big way. Busi­nesses are bullish about the new tax­a­tion sys­tem as they be­lieve that there is go­ing to be trans­parency in the econ­omy. The busi­ness en­vi­ron­ment will also get a boost. “We see GST to bring in long term pos­i­tive im­pacts in the smart­phone fra­ter­nity and the e-com­merce zone as well. Though there will be an in­crease in the prices for a short term caus­ing dis­com­fort to ev­ery­one, nonethe­less, the far-sighted im­pact of GST will re­main pos­i­tive for us,” said Ash­win, CEO, iVOOMi on the im­pact of GST on e-com­merce and mo­bile phone in­dus­try.

Many of the com­pa­nies have al­ready started their cam­paigns to ed­u­cate busi­nesses about GST and its im­pli­ca­tions. Ama­zon.in has set up 16 ‘GST Cafés’ across 11 cities to help sell­ers un­der­stand the nu­ances of GST and tran­si­tion seam­lessly through the en­tire process. Th­ese cafés have been set up to train and em­power sell­ers on the im­pli­ca­tions of the new GST tax. Like­wise, as­so­ci­a­tions like ASSOCHAM and oth­ers have done work­shops in many parts of the coun­try to ed­u­cate busi­nesses, SMBs and sell­ers about GST.

GST will also test the econ­omy at large as the coun­try might wit­ness new trends and pat­tern which would be both good or bad and neg­a­tive or pos­i­tive. His­tor­i­cally change is not a pleas­ing thing for peo­ple or or­ga­ni­za­tions which are used to the sys­tem. “While some sec­tions of the trade may not be in a cel­e­bra­tory mood, we need to be cog­nizant of the fact that every stu­pen­dous change in his­tory has been met with strong re­sis­tance in one way or another. One can­not ex­pect that a mam­moth change like this will not make few peo­ple anx­ious or rest­less. It would also be ap­pro­pri­ate to keep in mind that any pol­icy or law that has come into be­ing is not per­fect and free from any la­cu­nas on day one of its com­ing into force. Sim­i­larly, with the joint ef­fort of the trade, leg­is­la­ture and bu­reau­cracy, even the GST law will evolve with time in a di­rec­tion which would hope­fully bring the coun­try closer to a per­fect GST,” said Rajeev Dimri, Leader, In­di­rect Tax, BMR & As­so­ci­ates LLP.

“With GST, PC adop­tion is ex­pected to ac­cel­er­ate as they will play a piv­otal role in en­abling com­pli­ance and adop­tion of the new regime. As a long­stand­ing part­ner in In­dia’s dig­i­tal trans­for­ma­tion, HP con­tin­ues to sup­port the govern­ment and all stake­hold­ers in en­abling this re­form and we are also of­fer­ing an in­te­grated GST so­lu­tion that al­lows traders and MSMEs to make a smooth tran­si­tion,” opined Sumeer Chan­dra, MD, HP Inc. In­dia on GST.

“mjunc­tion does not have any ma­jor con­cern with re­gards to di­rect im­pact of tax since we are into B2B e-com­merce ser­vices. Our vol­ume of sales is very less com­pared to the ser­vices com­po­nent. GST is not go­ing to have any ma­jor im­pact on the B2B e-com­merce sec­tor. In the long run it is go­ing to help our ecosys­tem as it will bring growth and flex­i­bil­ity in delivery of goods and ser­vices. At mjunc­tion we have al­ready eval­u­ated the im­pact on our sys­tems and pro­cesses, so we are well pre­pared to ad­dress any oper­a­tional is­sues which might rise post im­ple­men­ta­tion of GST,” said Amit Ku­mar Khan, CIO of mjunc­tion ser­vices lim­ited.

SEC­TOR- SPE­CIFIC WHIMS AND FAN­CIES

How­ever, the GST has led to a lot of con­fu­sion and doubts for busi­nesses op­er­at­ing in many sec­tors. While there is good news for a few, oth­ers are ru­ing the higher taxes an­nounced by the govern­ment. One such sec­tor is tele­com, which has been kept un­der the 18% tax slab. The

in­dus­try bod­ies such as COAI have al­ready con­veyed it to the govern­ment that the tax slab will fur­ther jeop­ar­dize the sec­tor which is fac­ing chal­lenges such as bank loans and de­creas­ing ARPU. “Ac­cord­ing to the Es­sen­tial Ser­vices Main­te­nance Act, Tele­com is one of the es­sen­tial-cumemer­gency ser­vices availed by masses of every sec­tion of the so­ci­ety to­day and with the new amend­ments that our govern­ment has passed, the tax levied on the tele­com ser­vice user has in­creased to 18%. Even though the tax on mo­bile hand­sets has been de­creased, but the con­sumer would now have to pay a higher amount on a monthly ba­sis on mo­bile bills and recharges,” said Mr.Ozair Yasin, MD, 10digi.

In In­dia, lo­gis­tics sec­tor has paid the heav­i­est price in the cur­rent tax regime where lo­gis­tic com­pa­nies would pay taxes in dif­fer­ent states. It used the af­fect of prices on goods and de­lay in delivery and trans­porta­tion. This sec­tor sup­ports all other sec­tors and con­sti­tutes ap­prox­i­mately 13-14% of the na­tion’s GDP. The roll out of GST ef­fec­tive is be­lieved to have a pos­i­tive im­pact on this sec­tor. With the new GST reg­u­la­tion in place, lo­gis­tics com­pa­nies can now adapt the hub-based ware­house sys­tem as op­posed to hav­ing ware­houses in all ma­jor con­sumer states. This will bring down the in­ven­tory costs and im­prove oper­a­tional ef­fi­ciency along with fuel sav­ings. “In­te­grat­ing with IT providers will drive the de­sign­ing and ex­e­cu­tion of com­plex Sup­ply Chain cy­cles, project man­age­ment and in­ven­tory re­duc­tion in ad­di­tion to on-time delivery. Com­plete in­te­gra­tion with IT in­creases vis­i­bil­ity and cost cut­ting by al­most 22%,” added Kushal Na­hata, Co-founder & CEO, FarEye.

JOB CRE­ATION

GST has also sparked dis­cus­sions about jobs in the mar­ket. Ex­perts be­lieve that GST will bol­ster the job mar­ket in In­dia. “GST will have a pos­i­tive im­pact on job cre­ation and staffing ac­tiv­i­ties. Ad­di­tional jobs are likely to be cre­ated across all the sec­tors per­tain­ing to tax­a­tion, ac­count­ing, soft­ware and back end pro­cesses. More than 100,000 ad­di­tional jobs are likely to be cre­ated dur­ing the ini­tial phase of im­ple­men­ta­tion and this num­ber will go up sub­se­quently as the ecosys­tem re­lated to GST so­lu­tions ma­tures,” said Sid­harth Agar­wal, Co-founder, Spec­trum Tal­ent Man­age­ment.

“From a macro-eco­nomic im­pact, GST should have a trans­for­ma­tional im­pact on GDP-tax ra­tio and en­able ef­fi­cient busi­nesses to tran­scend state bound­aries and also com­pete in states which till now had high in­di­rect taxes. This will lead to emer­gence of big­ger and more ef­fi­cient busi­nesses im­prov­ing the over­all health of in­dus­tries. In the con­text of On­line lend­ing, in­dus­try will ben­e­fit from the on­line avail­abil­ity of GST data to as­sess busi­ness health and as­so­ci­ated risks, en­abling On­line lenders to make bet­ter and faster lend­ing de­ci­sions and driv­ing flow of ef­fi­cient cap­i­tal to de­serv­ing busi­nesses and heathy growth of On­line lenders as well in the long run.” said Mr. Amit Sachdev- CEO & CO-Founder, CoinTribe Tech­nolo­gies.

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