Managing the transition to a new tax regime – an on-the-ground view
Our ‘GST Day’ event saw participation of stakeholders from across industries. We met with (a) an indirect tax expert, (b) a participant from the tiles industry, (c) the CEO of Retailers Association of India, (d) an adhesives distributor and (e) a major distributor of the largest FMCG company in India to discuss their experience after India entered a new tax regime under the Goods and Services Tax (GST). Key takeaways from our discussions:
* GST is the single largest tax reform India has witnessed in its history, combining multiple taxes into one broad framework.
* For modern retail, GST is already proving to be a blessing. Longer-term prospects appear encouraging too.
* For manufacturers, the reform promises to be a longer-term positive. It should help crack down on India's vast informal economy, driving trade in favor of the organized segment. Categories where materials are imported or sourced from large suppliers should benefit more.
* However, any major reform is accompanied by some confusion in the initial months of rollout. In case of GST, there appears to be lack of clarity over (a) division of GST into CGST, IGST and SGST, (b) transition of credits, (c) route of return filing and (d) uploading of forms with a large number of line items.
GST – a paradigm shift in tax structure
We hosted Mr Dinesh Kanabar, founder of Dhruva Advisors, and Mr Ritesh Kanodia, partner at Dhruva Advisors, to understand their views on the Goods & Services Tax (GST) and their experience as India transitions to a new tax regime.
* GST is the single largest tax reform India has witnessed in its history, combining multiple taxes into one broad framework. However, the division of GST into three categories (CGST, IGST and SGST) appears to have created some confusion in the marketplace, according to the experts.
* The new structure requires all manufacturers, traders and service providers to comply with the tax norms at the state level. It facilitates complete fungibility of input tax credits, though.
Macroeconomic impact of GST
* GDP: GDP growth to reduce to 5.7% in June quarter. Economists believe that this is primarily due to GST, after effects of demonetization and INR appreciation against USD
* Inflation: Initial fears of inflation under GST; however, certain measures like antiprofiteering and rate parity helped keep inflation under check
70 days of GST journey – some teething issues witnessed…
* Unclear position in terms of law (e.g. cross charges between distinct entities, classification and GST rate)
* Complexities around place of supply and location of supplier (multiple registrations across India)
* Transition of credits/other transition issues
To Read Complete Report & Disclaimer Click Here
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412
Above views are of the author and not of the website kindly read disclaimer