siliconindia | | May 20189greater cost efficiencies. Larger con-signment size will change the trans-portation game since it will become more viable now for the transporters to operate trucks and lorry with higher-tonnage and larger container carrying capacity. Elimination of check posts is already contributing to a reduc-tion in transportation time by almost 30 percent further adding to supply chain efficiencies.Reduction and rationalization of in-put costs since the cascading tax effect will get eliminated in the GST regime. In addition, pre GST, the input costs were higher due to non-availability of inter-state VAT set off and CST impact on inter-state purchases. Counter veil-ing and additional import duties have now got replaced by IGST and input set off can be claimed by importers where earlier this also used to be a part of cost for some businesses. Procure-ment strategy can be based on strate-gic decisions on economies of scale rather than the need for proximity of suppliers. Consolidation of supplier base will now become meaningful and enable improved quality parameters since they will operate on larger scale. Organized sector will benefit and the unorganized segments will be under pressure to get aligned with the main stream. Transactional interlinkages between suppliers and recipients will force the entire eco system to report their trade transactions seamlessly in order to claim input tax credits. Surge in registrations by around two million within just few days of GST launch is a clear data point indicating expansion of the registered tax payer base. Once the suppliers get registered, ability for tax evasions will get checked.Expansion of tax payer base should eventually result in higher tax rev-enues and gradually move towards fewer and lower bands of GST rates, some of which is already visible. Link-age of GST registration number with the Income Tax PAN will enable direct tax authorities to validate the level of revenue and realistic profits declared in the income tax returns. This will also help boost direct tax collections. Operating efficiencies will go up. In the erstwhile regime an army of op-erating and commercial teams used to perpetually be engaged in the maze of C, F, H, I forms and substantial amount of non-value contributing time was lost in collecting these forms and reconciling them at the time of assess-ments. Availability of input tax credit for both goods and services means that a significant amount of VAT and ser-vice tax burn in the earlier regime will no longer be there and therefore would reduce costs and help profitability and viability of businesses Input tax credit set off on capital goods will encourage businesses to go for capacity enhance-ment thereby support investments and expansion plans. Digitization and automation em-phasis will help improve transparency of commercial transactions between suppliers and customers. The accounts payable and receivable processes should get automated, digitized and streamlined. Transactional confirma-tions will happen on a monthly basis and the chances of future disputes will be lower, also reducing avoidable liti-gation. Since the payments to suppli-ers need to be made within 180 days of the invoice date in order for input tax credits to be valid, the discipline of releasing payments against supplies will improve helping working capital cycle become more efficient. Trans-action velocity should go up once the GST systems settle down and enable scale and business volumes to increase across sectors over time. This should impact employment generation posi-tively over a longer term.In conclusion, the transition has just started and it will take some time before the dust settles down. The chal-lenges will be humongous and busi-ness paradigms will get challenged. However, in a country of the scale and size as India, it is indeed commendable that a transformation of this magnitude has been attempted. This does indicate resilience of the constituents of coun-try's economy and an ability to em-brace change. Consolidation of supplier base will now become meaningful and enable improved quality parameters since they will operate on larger scaleNeeraj Basur
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