Goods and Services Tax (GST), which is being pitched as the biggest tax reform in India since independence, will bring a sweeping change to a lot of business parameters. Now the time has come for all businesses to consider the impact of the new tax reform. It is important on the part of taxpayers to keep a check on their readiness for a smooth transition into GST regime, ensuring that their businesses are not hampered. With GST likely to be implemented w.e.f. July 01, 2017, there is only little time left to analyse, plan, implement and prepare for the change in taxation that is going to take place.

GST will have a far reaching impact virtually on all parameters of supply chain operations including contractual agreements, pricing, supply models, information technology, human resource, tax compliances, etc. Complete awareness and proactive preparation is of paramount importance in handling this huge tax reform effectively.

In Malaysia, when GST was implemented it was experienced that the rollout was far from seamless because of the lack of awareness and preparedness of the tax reform; it led to business disruption, operational issues and delayed compliance for many. One of the reasons for the lack of preparedness was that GST had long been discussed and repeatedly delayed, just as in the case of India. Because of this, the businesses deferred when taking necessary actions until it was too late.

In fact, the need for preparedness may be even greater in India than in Malaysia because Indian GST will be unique and far more complex, with a dual GST regime, with two tax administrative authorities—Centre and States—which would have the powers to levy tax on each transaction concurrently.

Impact on printing sector

Following the Union Cabinet chaired by PM Narendra Modi gave its approval to the four GST Bills—Central GST Bill, Integrated GST Bill, Union Territory GST Bill and GST (Compensation to the States) Bill, everyone in the Indian printing industry is keeping their fingers crossed and hoping for things to turn out positively. Multiple taxes and taxation points in the present regime are badly affecting the growth of this sector. GST will bring single-point taxation in the country and also simplify taxation system. Hopefully, things will be more efficient and manageable with the implementation of GST.

It is expected that seamless flow of input credit, under the GST regime, would benefit the printing industry which currently faces issues of blocked working capital due to large accumulated CENVAT Credit balances. GST is expected to substantially overcome the gaps which are present in the existing indirect tax regime by eliminating cascading effect of taxes and duties which are not getting full input set off.

GST would also promote wider tax net as it would be beneficial to be GST compliant. It would remove cost inefficiencies arising due to current levy of Central Sales Tax, Octroi or Local Body Taxes and physical interstate tax barriers.

Under the GST regime, the cost competitiveness of the printing industry would improve with the unification of fragmented domestic market along with the reduction in cost associated with tax compliance, inventory and logistics.

Looking towards imports, GST law states that imports would be considered as supplies in the course of inter-state trade or commerce. Imports would be subject to Basic Custom Duty plus IGST (Integrated GST). Under the GST regime, full input tax credit shall be available on such IGST paid on imports. Let’s take an example, say newspaper printing sector—it is recognised that in the present regime the sector is excluded from the burden of taxes. However, the exemption list under GST is not available in the public domain till date. Nevertheless, according to the GST Council, necessities would be taxed at zero percent.

In principle, GST will have an overall positive impact on the printing industry. The real impact of GST on the industry can only be assessed after the effective rate is finalised, especially for raw wood and pulp materials. Transportation, logistics cost and taxes on input materials would also affect the businesses.

Some key features of GST

• GST will bring a larger portion of the unorganised sector into the mainstream, which will change the business dynamics for several industrial sectors.
• Under GST, the threshold limit and exemption list would be significantly pruned. So many goods/services outside the tax ambit under the present regime could be subject to GST.
• With the concept of single/separate registration for each state, there is likely to be an increase in tax compliance obligations. To give an indication, the number of returns would go up to around 37 in a year for a single registration.
• The matching concept under GST where the taxpayers would have to reconcile their procurement with the sales of their vendors and supply of goods and services with their purchasers on a monthly basis in order to avoid denial of input tax credit could be cumbersome.
• Although credit of GST paid on inputs at every stage of value addition would be available for the discharge of GST liability on the output, separate credit pools for all three different types of GST – CGST (Central GST Bill)/SGST (State GST)/IGST(Integrated GST) would have to be maintained for each state.
• The transitional provisions under the GST law entail a list of credits that can be carried forward into the GST regime, on fulfillment of certain conditions.

The need of the hour is to gear up and initiate the process of identifying the potential issues that might emerge while transitioning to GST. Now it’s obvious that businesses that are proactive in preparing and planning in the GST early can gain a real competitive advantage. Early planning and timely execution is necessary to leverage this advantage. It will help avoid disruption along with being 100 percent compliant of all legal and procedural requirements under the new law, and manage opportunities effectively as the GST approaches.

As GST is likely to implement in July 2017, it’s time to comprehend for this change coming our way and take full advantage of this historic tax reformation. (Views expressed by the author in this article are personal. She does not make any representations or warranties, express or imply, as to the accuracy or completeness of such information. Readers should conduct and rely upon their own examination, investigation and analysis.)