Larger companies, especially those with annual revenue of Rs 500 crore or more, may be ready for the July 1 roll-out of the Goods and Services Tax (GST).
Larger companies, especially those with annual revenue of Rs 500 crore or more, may be ready for the July 1 roll-out of the Goods and Services Tax (GST), but they are still concerned about the preparedness of their supplier ecosystem.
If all players in the transaction chain are not compliant with the GST system, there won’t be a seamless flow of input tax credit (ITC) across it, they said. If ITC flows are not streamlined in the early days of the new tax regime, businesses could face cash flow problems.
FE spoke to prominent accounting technology providers in India, including those that supply enterprise resource planning (ERP) software to ascertain the industry’s GST preparedness. These companies have had constant interactions with large companies for nearly a year on how to best prepare their clients for GST.
Prashant Pillai, director of corporate segment at Thomson Reuters, said if the suppliers aren’t clear about filing returns under GST, it could create major liquidity crunch for many firms. “For example, if input credit is not available for a company, it would not only block its cash flow but would also require it to arrange additional funds to run its business. So, there has to be a cash flow management challenge as well for certain types of corporations depending on the complexity of the suppliers,” Pillai said.
Thomson Reuters provides software solutions that work as ‘bolt-on’ to make different ERPs compatible with GST.
According to some of these companies, there is a sense of impending chaos in the early days. This has prompted a lot of big firms to engage with their suppliers to educate them on GST, specifically on filing proper returns. The aim for these businesses is to get most of their suppliers at the same level of evolution with regards to GST.
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“GST being a transaction-based system, businesses are also working with their suppliers and customers — so that the complete supply chain process becomes seamless according to GST laws,” Srikumar Mukherjee, adviser, applications, Oracle India, said. He added that the primary source of anxiety for the company and its clients was a seamless transition to GST. To counter the uncertainty about suppliers, some businesses have made representations to the government, saying that filing monthly return under GST be deferred by a couple of months initially to allow settling period of all stakeholders in the new system.
Although businesses are concerned about suppliers, especially those that have started preparing for GST late, they are reasonably comfortable about their own preparedness and changes required to be made before July 1.
“Businesses are now tackling multiple factors to align themselves with the changes in the model laws of GST. Having said that, I still feel that bringing in the new tax regime from July 1 is possible with support from the government,” Mukherjee said.