As policymakers huddle, India Inc is still not ready for GST

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New Delhi: Large companies have begun their ground work, but small and medium enterprises don't seem ready for the new tax regime

It is virtually a race against time for India Inc as the April 1 deadline for the Goods and Services (GST) Tax rollout stares at them. While companies have appointed consultants to advise them on GST, nothing much has moved beyond that especially with small and medium enterprises. Large companies, however, say they can meet the April 1 deadline. Conversations with multiple tax experts reveal that not more than 40-50 per cent of large companies are ready for a GST rollout on April 1.

"Manufacturing companies in categories such as consumer goods, auto, auto ancillaries etc were conscious of GST early on and did begin their groundwork in time. But, the services sector such as banking, insurance, media and entertainment are not quite ready for an April 1 rollout," says Sachin Menon, partner and head of indirect tax at KPMG.

Retail majors such as Future Group and Shoppers Stop say that they have kicked off the process of being GST-compliant and can meet the April 1 deadline.


Nihal Kothari, executive director, Khaitan & Co, says one of the reasons for the slow pace of work on the part of companies is on account of the ongoing talks and deliberations between the Centre and states pertaining to GST.

"The dual control of assessees (tax payers) has not been resolved yet. This is a crucial issue. The GST Council meeting earlier this month was inconclusive because of this. The hope is that it will get resolved with the latest round of meetings this week," he says.

The GST Council, chaired by the Union finance minister and comprising all state finance ministers, is meeting on Monday and Tuesday to iron out the differences on GST. It is only after this, say tax experts, that the government can get the GST Bill into Parliament for it to be cleared.

With nothing conclusive yet following the four-tier rate structure that was announced in November, company executives say it is difficult for them to move forward. "The basic framework is there, but the software will have to be put in place and our suppliers and distributors will have to be made aware of the need to move to GST. All this requires time," says Sumit Malhotra, managing director, Bajaj Corp, the maker of Bajaj Almond Drops hair oil.

Anjana Ghosh, director, Bisleri International, says, "I am not sure whether the industry is actually prepared for GST by April. The ones who started early may have an advantage, but there are many who don't have anything in place even now. One reason for going slow is because the (GST) Bill is still under discussion. My guess is that the fence-sitters will get serious the moment the Bill is cleared in Parliament."

The big challenge is that the tax implications in the GST regime have to be wired into the enterprise resource planning (ERP) systems of companies, which is only possible when the final law is out. "All this has to be coded into the software. Without the final law, it is impossible to compute what the tax implication of various transactions will be," says Suresh Nair, partner, indirect tax, EY.

There are more parts, Nair explains, to the jigsaw puzzle, such as "who will assess you, which slab your product will fall under, what is your jurisdiction etc. Once the final law is in place, then only can companies make the next leap in terms of their GST preparedness".

Despite the challenges, some companies remain optimistic. "I had the benefit of shifting to India last year from Malaysia, which happens to be the last country to have moved to GST," says Roland Folger, managing director and CEO of Mercedes-Benz India. "Since October last year, we have been preparing ourselves. We have an external partner helping us to be GST-ready. Our component suppliers and dealers are also getting ready. We are conducting training sessions for them."

Ajay Seth, chief financial officer, Maruti Suzuki, says the company has an internal cross-functional team that has been working on various aspects of GST compliance. "We are configuring our business processes, IT and ERP solutions based on clarity available on GST. A rollout plan for migrating to GST has been prepared, which includes an impact study, managing transition, changes required in IT network and training, etc."

G N Gauba, chief financial officer at Motherson Sumi, says: "Most of our tier-II and -III suppliers follow similar systems like us and, therefore, should not have a problem to migrate to GST even as we do it. We have a group-owned IT company with which we have been working on the IT aspects of GST."

Posted By: DD          Views: 1274                  

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