Are Businesses GST Ready?
While there are just few days left in this reform, a question that is frequently asked is – Whether the businesses are GST ready?
Goods and Services Tax, popularly known as GST is already at the verge of implementation. The tax that is one of the India's biggest reformative tax legislatures will soon come in implementation from 1 July, 2017. While there are just few days left in this reform, a question that is frequently asked is – Whether the businesses are GST ready?
The answer to this question cannot be given in plain "Yes" or "No" as there are many factors worth consideration. Some of the factors that can throw light to this matter are –
Survey Results – A survey was carried out by EasemyGST, an ERP portal by Ginesys, which was taken by about 1000 manufacturers, wholesalers, and retailers. The results are however not favorable to this new tax reform. According to the numbers published after this survey, almost 68% of businesses were not ready or had only limited readiness to implement GST. Moreover, 18% were having only basic knowledge of GST that is not enough to implement this tax reform. Only 14% of the total businesses were GST ready and looking forward to implement this new tax system. Hence, if these numbers are to be believed then not much of the businesses are GST ready, which may be a big obstacle for the implementation of tax legislature.
Implementation at each level – Big corporate would surely implement this new tax structure by introducing necessary changes in their financial system and the same would make things easier for their immediate suppliers too. The real problem lies in implementing the same at all levels, especially small vendors who would probably supply the goods to these corporate suppliers.
Can't be GST ready until product-specific tax known – The main hurdle felt by the businesses till now is the ignorance! Yes, ignorance about the tax structure and product-specific tax, it is difficult for small sized businesses to get GST ready. Experts believe that implementing this tax system would be much easier once all the technicalities are known. However, this would mean some delay in implementation of GST as product-specific tax would be known only when the tax legislature is formally implemented, which means the businesses will get GST ready only after 1 July, 2017 when this tax structure actually comes under implementation. It would be more like wait and watch!
Above factors surely indicates that businesses are not completely GST ready and there is a long way to go, but at the same time there are several benefits of this new tax system, which may justify the system amendments to large extent.
Implementation of GST is step towards automation of entire supply chain. The paper invoices will be replaced completely with electronic invoices. Sales would be on records and tax department would be able to tally the same and this will check the instances of tax fraud. Another advantage of automation would be in terms of demand forecasting and inventory management. Electronic record and automation would lead to smoother processes in warehousing and taxation.
Hence, GST would not just benefit the tax department in tax calculation and tracking of sales, but it would also help businesses in long run and that may result into increased efficiency for their suppliers as well.
GST is a big change to the current tax system and will require both time and efforts to make the businesses GST ready, especially at all levels of supply chain. However, if long term results are considered then all these time and efforts are justified. If businesses are not GST ready today then they will surely be tomorrow as any change has to undergo the transition period and this time it's for GST!