Working capital costs set to rise due to GST issues

With payments getting blocked at various levels in the value chain, manufacturers find it difficult to claim input tax credit

Contrary to earlier expectations, the goods and services tax (GST) will lead to higher working capital costs for companies as payments are getting blocked at various levels in the value chain and it is becoming difficult for manufacturers to get input tax credit. 

The pain is more severe for second- and third-tier vendors as large corporate buyers or original equipment manufacturers hold up payments due to the uncertainty about the tax liability and the tax set-off for the supplied goods and services. 

“My receivables have tripled since the GST roll-out. Customers have been holding back payments for over two months