The hype of announcement of GST (Goods and Services Tax) has already taken our economy by storm. In July 2017, the Indian Government has committed to replace and subsume current indirect taxes by implementing this new GST Law. GST in the words of the BJP and the Congress may actually improve “ease of doing business” and “unleash the animal spirit” of entrepreneurs.
GST will have a far-reaching impact on almost all the businesses in the country and their various aspects and operations. Let’s see what will change in your organisation with GST roll-out in the country.
Managing Data: Having huge chunk of data is normal for any business but managing them to your benefit is an art. One of the biggest challenge that you will face with this new law is how to migrate tons of data to the new system seamlessly. Once your IT system gets updated, managing data will be easy as many loopholes will we terminated. GST is a comprehensive indirect tax and the system to comply with it will be much less complicated than it is now. Supply Chain set up will be now based on your business and not based on different sort of taxes at all levels!
Comprehensive, not convoluted IT system: GST is a single comprehensive tax on the supply of goods and services. Many current taxes will get replaced and subsumed and so there will ease in tax calculations too. GST is a move towards a system of proof that marks a new start in operational ease and greater transparency. Though Tax credit will be available only if all the purchases are uploaded properly on GSTN website and match with their respective criteria.
Financing the new Tax Process: GST is a big change in the economy and it calls for changes in businesses’ process & IT system too. With the advent of technology, most businesses are now waking up to the need to adopt and utilize information technology resources to the fullest to effectively manage the changes; and ERP is the most ideal tool to drive the changes in a manner most suitable to an organization. Such businesses just need to migrate to the new system or updates and they are almost ready to continue their daily processes. Though migration costs are involved, it is minimal as compared to those of the businesses who are still doing the work manually.
Prepare your people too: GST would bring in significant change in doing business in India. Not only advocating best practices in the organization but also training your teams and preparing them for this change is imperative. This requires proactive planning with a time-bound action plan.
Pricing and Profitability: You will need to change the pricing of your products and services as GST structure would result in reducing cascading tax effects and ultimately your tax burdens. Margins or price mark-ups would also need to be re-examined. This will affect your profitability in the end, depending upon your operations, geography and business size.
Cash flow: Your cash flow will increase as cascading effect of current taxes will get terminated. This will also reduce working capital cycle of your business. Reduction in inventory cost will be another benefit of this single tax.
Treat GST as a strategic opportunity and let it strengthen competitive advantage, leverage profitability and increase efficiencies of your business.
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