India in recent years has become a lucrative space to commit the business in, companies from around the world are flocking in resulting in a multitude of multinational companies on its land and like other home companies they will also be impacted by this much-awaited tax reform, the goods and services tax (GST)

In our last blog, we discussed the impact GST would have on startups and small businesses. Now, let’s look into the next chapter which is its impact on multinational companies.

THE POSITIVES

 

  • PLUNGE IN PRODUCTION COST

After GST the cost of production will take a slight dip as now the firms will be free to move and call goods from anywhere around the country without being charged anything extra than just the price of those goods and the cost incurred naturally in moving goods.

  • ECONOMIES OF SCALE

After GST the road to consolidated working is wide open as now the companies would want to operate from areas which offer the highest productivity which would create a cluster of companies operating from one place resulting in gains for them as they could enjoy economies of scale.

  • SHRINKING PRICE DIFFERENCE

After GST a lot of small companies those which were free from the tax panopticon will come in its view and will have to surrender. GST will make the escape harder for companies and will make them pay their share which will make it difficult for them to cut prices based on money saved from these escapes and benefit the multinationals as they’ll be somewhat on the same level where prices are concerned with a much broader and bigger reach and bank balance.

  • THE BULLISH STOCK

It’s been a major problem for businesses in India to manage their stocks. As companies are charged Central Sales Tax (CST) for interstate sales they usually keep separate warehouses sprawled in different states which save them this extra cost as stock transfers are not chargeable.

After GST this extra burden and smart playing will end as companies will get to focus on better service, productivity, and maximizing their profits as these interstate sales tax will end. Now, instead of opening small separate warehouses companies can open one large central warehouse to maximize their efficiency and minimize cost.

  • LOCATING PRODUCTIVELY

Companies until now have been deciding on their locations based on tax subsidies and incentives but after GST, finally, they can think beyond tax and factor the real major pointers for an apt location like productivity, efficiency, and commercial viability.

  • CHEAPER IMPORTS

Companies would be able to import goods at a cheaper price after GST as it will streamline the process consolidating the additional custom duties into it. So, imports will be taxed similar to interstate tax at the IGST and can also be claimed for input tax credit.

 

THE NEGATIVES

 

  • BECAUSE BUSINESSES DON’T RUN IN SOLITUDE

While GST would relax most businesses and will give them space to flex a muscle or two it will also saddle some like advisory, consulting, engineering etc with a higher rate and an additional burden. Businesses connected with these businesses will also get affected as their services will get slightly expensive.

  • DO YOU FALL UNDER TAX BRACKET?

With many sectors lying outside the ambit of GST it really doesn’t fix the core issue it was introduced for, the cascading of taxes. With petroleum being one of those beyond its proximity, companies won’t be able to claim the tax paid on petroleum products as input tax which deters the road to a tax-on-tax free dream.

  • CHAOS

The dealers would need to register in each and every state they do business in which will result in a chaotic situation as now the companies which have a pan India operation and are currently filing two semi-annual and 12 monthly return will have to file much more depending on the number of states they do transactions in.

  • THE SHIFT

Shifting to new systems or an upgraded version of the existing system will be time-consuming and frazzling. Also, for the employees to get accustomed to the new means will consume some of the crucial time which could have been invested in other important work.

 

We’ll Make The Transition Simple For You.

Transitioning to a new system, a new way of functioning can be an onerous task if not planned properly and when you have to do that in mid-year or after 3 months of complying with some other rules it’s even harder. But don’t worry we’ve got it figured out for you.

S.I.M.P.L.E has GST module which makes it super easy for you to be compliance-ready and adjust to the needs of the new system. Not only that its simple user interface and clean and crisp screens make it easier for you and your team to learn and start using the system as early as possible.

Moreover, it’s a complete system means you won’t need to stock a pile of systems but work on this single genius. It is a great replacement for ERP, CRM, HRM, POS, ECommerce, and Tally. It being micro-vertical specific assures you that you’ll get a system designed especially for you and no general types. To learn more and see how it will help you simplify your business take a free demo.

CONTACT US FOR ANY QUERIES.

Source: Frontier Strategy Group, GST expertise, The Wire, Rediff.

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