By- Praveen William
The government has undoubtedly done a stupendous job – more importantly from August 2016 till date, in constituting the Goods and Services Tax (GST) Council and having an unprecedented 16 meetings in a time span of eight-and-a-half months. This led to the publishing of GST laws, their passage in both the houses and also the release of various GST related rules. Almost all goods and services have been bucketed between the five slab rates in a fairly acceptable manner. While we do have a verbal deadline of 1 July 2017 – this oft-repeated date awaits an official confirmation. The more charitable among us would point to the government’s Twitter handle which ‘confirmed’ the official deadline. Even in the new millennium, it still remains exceedingly hard to accept a tweet as ‘official communication’.
To appreciate the difficulties, uncertainty generates, it is worthwhile to review the extensive list of activities businesses need to plan and schedule, to gear up for ‘Going Live’. These include:
1. Tax credits are based on goods lying in stock on the appointed date. These could be at various locations, viz., factory, warehouses, agents, etc. Proper segregation/identification, correlation with corresponding duty paying documents is being worked on.
2. The Transition Rules prescribe a different treatment of tax credits if corresponding documents are not available. Such credits need to be passed on to buyers as well. Billing systems are being configured accordingly.
3. IT systems/billing modules are being configured and designed, including allocation of resources for cutover plans and blackout periods, to ensure businesses are minimally affected.
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4. Product and tax rate masters are being aligned based on the applicable GST rates for goods and services.
5. Open purchase orders and contracts are being negotiated and aligned with revised tax implications.
6. Collection of pending Form ‘F’, Form ‘C’ is receiving special attention with focussed efforts for fast-tracking.
7. Parallel runs of IT systems and switching over to GST-compliant models from the go-live date are being scheduled.
The above activities are preparatory in nature. However, the effect of GST rollout extends much further, affecting even the core activity of procurement and sales. A noticeable trend in the market currently is an active deferment of all new procurements in the marketplace, with an aim to downsize existing stock. Trade is slowing down with an objective to reduce the effort associated with the transition.
The converse – discount sales and end of season sales are also being advanced. The underlying rationale is to clear all stocks prior to the rollout of GST. This could ostensibly occur for many reasons, including a divergence in tax rates. Businesses ultimately wish to achieve a clean transition to the new regime without being saddled with transition issues, aiming for a ‘fresh start’ with GST. If stocks are cleared before 1 July only to learn about further deferment of the date of introduction, the entire ‘clearance’ exercise would be meaningless.
Change, which is largely resisted, is grudgingly accepted when it is absolutely impossible to avoid. Each one of us should shun complacence and move forward resolutely. In the pre-existing tax regime, there was legroom to manage processes manually. This was a common recourse for many small businesses, who still operate in the analog rather than the digital world. However, in the strictly online system of GST, errors and non-compliances have far greater ramifications. There is a need to be 100 per cent ready from the get go.
Trade and even administration would mutually benefit going forward, with certainty on the deadline date. The recent news regarding IT systems not being ready for a 1 July rollout and apprehensions voiced by various GST Suvidha Providers (GSPs) has created a cloud of confusion over the entire exercise. This poses as a roadblock considering all the progress made thus far.
At this critical juncture, it is necessary for the government to hoist the sails of a ship on unsteady waters. While we are largely a ‘half past eleventh hour’ culture, we still manage to do all that is required to ‘not miss the bus’. Considering the scale of the reform, an official and final confirmation of the date of implementation of GST is much needed. Be it 1 July or 1 September, this would go a long way towards averting unnecessary chaos. An early announcement is eagerly solicited. The government needs to Go Loud on the GST Go – Live Date!
(The author is Partner-Indirect Tax, KPMG in India. The views and opinions expressed herein are those of the author and do not reflect the views and opinions of KPMG in India.)