 "Govt sanguine about GST passage minus Cong leg-up")
Almost 98% of Indian companies are not ready with software infrastructure, accounting systems and human resources training for the roll-out of Goods and Service Tax (GST) that the government is targeting to roll out from April 1 next year.
The game-changing indirect tax regime would require all companies, their suppliers/vendors, retailers, dealers and even shopkeepers/entertainment centres/restaurants to install computers, which could access the centralised GST network so that tax credits can be logged into the system. Besides, the CEOs said the actual GST rates are needed so that they can ready their internal systems within three months.
“The GST roll-out would not be a challenge for a large company like us and we would get sufficient transition time for the launch but it would be small companies and retailers who may face problems as they do not have any IT infrastructure at the front end,” said RC Bhargava, Chairman of India’s largest car maker, Maruti Suzuki India Ltd.
Read our full coverage on the GST Bill and its impact
Read our full coverage on the GST Bill and its impact
In many large companies like tyres, automobiles, fast moving durable goods, the IT systems are already in place across the supply chain but to implement the GST, some changes in the software would be required, CEOs said. Dr Arun Sharma, head of taxation at the RPG group said companies would need at least nine months to one year for complete readiness for GST. "We have already set up internal teams and external consultants for GST rollout. We expect to be ready for the rollout by next year," said he.
In the last few months, many large companies have hired consultants and advisors on the possible impact and likely changes based on their manufacturing location, size, and warehousing and current enterprise resource planning (ERP) systems. Any final action would depend upon the fine print of the new regulations and tax rules.
But CEOs need not worry as the actual GST roll-out is still some time away and it would be difficult for the government to meet the April 1 deadline as once the Parliament clears the GST Bill, half of the 29 States need to ratify it, which would be then followed by the assent of the President. The GST council would be constituted and the Empowered Committee would need to develop consensus on complex matters such as tax rates, exemptions, threshold limits, dual administration etc.
Besides, with the Uttar Pradesh elections expected by early next year, and GST roll-out expected to stoke price rise, the government is likely to delay the roll-out till voting is over. The most optimistic date for the GST roll out would be July 1 next year, CEOs said.
Amit Kumar Sarkar, Partner, Grant Thornton India, said 98% of Indian companies are not ready for the tax reform as a lot of accounting processes need to change. “We can’t actually blame the corporates as there were many false alarms on GST in the past and rates are still not available,” he said.
The work for the corporates is cut out in the coming months. As per the model GST law, every supplier will have to get registered under the GST Act, if the total aggregate turnover in a financial year exceeds Rs 9 lakhs. Also, a registered person will be required to pay tax under the GST if his aggregate turnover exceeds Rs 10 lakh. This should eventually push the informal economy towards a more formal one. In order to claim the input tax credit, firms will need to maintain proper documentation of the price at which the input was purchased. This will encourage firms to purchase inputs from the formal economy, where a proper paper trail can be maintained. Under the current system, as input tax crediting is not allowed in many cases, the incentives are not as strong, as per Nomura.
Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said it is unprecedented that in response to a tax reform of such magnanimous implications, Corporate India looks almost uninitiated. "Realignment of IT / ERP systems so as to be compatible with the record keeping requirements under GST regime would be critical action item in the GST transition work plan for almost all businesses irrespective of their scale and size. Medium to large scale organizations would also need to ensure that various function / process owners (finance, operations, treasury and logistics, in particular) including within the organization are well informed with respect to the impact of GST on the business and the challenges that GST may bring in to address them on timely basis rather than grappling with concerns around smooth running of business during the transition phase,” he said.
