India Inc – its time to gear up for GST!

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With the ongoing political debate in the Upper House of the Parliament, passage of the Constitution (100th Amendment) Bill, 2015 is still a step away from reality. Nonetheless, the central government seems positive and expects significant movement on GST in the coming days. It is visibly working in a constructive manner to have the Bill passed in the latter half of the Budget session of the Parliament. As far as creating the ecosystem is concerned, even there the government does not seem to be putting its foot off the pedal.  Absent any official extension of the April 2016 timeline as yet, the bureaucracy as well as all agencies responsible to assist the government in GST implementation including the Goods and Service Tax Network (‘GSTN’) team are working tirelessly to meet their respective timelines. Gauging the unstoppable approach of the central government even the state governments have also initiated some ground level preparatory work.

All this action, however, does not seem to excite India Inc enough, which continues to hold very meagre hopes of GST seeing the light of the day anytime soon. The fact that the Indian government has failed to deliver GST on multiple committed timelines has led to an unforeseen scenario wherein the government seems fully geared to implement GST but the industry at large continues to be in slumber.

While the official announcement is likely to come only with the announcement of Union Budget 2016 next month, the government is likely to make serious attempt to bring in GST in October 2016 or latest by April 2017. In either case, time with the industry to get ready for GST is perceptibly very limited. Within this time frame, businesses need to be prepared to switch over to new indirect tax regime. This calls for undertaking a host of activities such as training of people, aligning the indirect tax compliance processes, understanding the impact on business, updating accounting and information technology systems and taking other suitable measures to ensure a smooth transition.

As GST is envisaged to be driven on an online platform with real time updation of data on the GSTN portal, a robust information technology (IT) infrastructure would be required to meet the voluminous reporting and compliance requirements under GST. ERP systems would need to be revamped and developed stringently to capture the additional information which is not captured presently. For instance, state of supply on the invoices for goods and services, HSN/ accounting codes for the goods or services, segregation of B2B and B2C supplies etcmay be required under the GST regime. Compliances and record keeping at the warehouses mayalso become equally important for manufacturers. As evident, IT teams wouldrequire significant time to update all ERPs and to realign their process flows. Transitional accounting features and facilitation of audit trail in the accounting systems are crucial to avoid any last minute glitches.

Depending on the size, scale and complexities of the business, the process of implementation of GST by corporate tax payers may need constitution of a dedicated steering committee involving various process owners for effective implementation of transition to the new indirect tax landscape. Meticulous training of all stakeholders as well as overhauling the tax compliance processes are other important dimensions in preparing for the impending change in indirect taxation system.

Over the past couple of months, several reports have been issued by the Joint Committee discussing several aspects such as registration, return, payments and refunds. Further, the draft GST laws are also expected to be released soon in the public domain for comments. Considering the information available in the public domain, it is possible to map the broad contours of the proposed GST regime.

This information would help businesses to undertake the impact analysis and other necessary steps for a smooth shift to the GST regime. Such steps would further facilitate a SWOT analysis based on which they may harness the strengths and minimize the weaknesses while identifying the various opportunities and threats for the business under GST regime. The process of readying the business teams for transition to GST would also help in identification of areas of advocacy.  Interaction with the government by making representation through forums and industry chambers ahead of the official GST rollout could also be a very relevant exercise at this stage.

The government’s continued action on GST is a strong wake up call for India Incto now gear up and get rolling. The additional time on account of delay in passage of the Bill is in fact a buffer for the businesses to make preparations for shifting to GST regime which is a undeniably a mammoth task. As someone said “if you fail to plan, you are planning to fail”.

- By Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP with inputs from Poonam Harjani and Siddharth Tandon

The thoughts and opinions shared here are of the author.