Manufacturing in India has caught everyone’s attention and is becoming a major area of focus for economic progress, for pushing the nation forward. Initiatives like Make In India further drive that mission to its desired destination. With many things happening and a sudden invigorating spell of strewed potential being realized by the Indian market, GST is sure expected to further shake things up a bit, for good or bad, only time will tell. But we can always reckon and learn from the leaders who have made their predictions. So, let’s move ahead with the possible effects of GST on the manufacturing sector.

So far we have discussed the effects of GST on small businesses and startups and also its effects on multinational companies. Now, let’s discuss the effect it will have on the manufacturing sector.

The Positives

Change Can Be Empowering!


Up until now the indirect tax structure of the Indian system is bewildering and filled with difficult calculations and myriad classifications. Different products are charged different rates with some being exempt from the tax bracket causing a ruckus in the mind of the payer making for a difficult compliance day.

But after GST things are expected to change. It is expected to be a simplified tax structure with minimal or absolutely no variation in terms of charge, product, or place and also with minimum exemptions reducing the drama that revolves around different rates and classification of products.


Manufacturing companies in India have long suffered from this unjust tax practice where they are charged multiple times which results in the innocent customer-facing the brunt in form of raised prices. After GST it is expected that this practice will be eliminated completely or will depreciate to the minimum as a result of a seamless tax structure across various channels.


Today while companies are vying on multiple parameters there’s one which particularly stands out, more of a combination that is, high quality and low prices, this combo is as lucrative as it sounds and is enough to decoy a slew of customers flocking in and knocking the door of your business. But while it guarantees traffic it is a difficult space to reach with the current system our businesses are running in.  

But after GST as we mentioned in the previous point cascading of taxes is expected to end while the credit is expected to rise, now the manufacturers will be eligible to claim credit on state taxes over central/union taxes and vice-versa which will result in cost saving and a possible price reduction.


Carlos Santana once said, “one day there will be no borders, no boundaries, no flags, and no countries and the only passport will be the heart.” While that seems like a distant dream, a really far one but something though not of similar stature but of a happy effect will be happening for the goods mover in our country, they’ll feel it. After living a life of pause and play on the road they’ll finally, hopefully, will load without any buffer.

The implementation of GST is expected to change these dynamics as it will unify the market causing a seamless flow of transactions and goods across the country.


The current tax filing process involves lots of documentation that needs to be done manually using paper like the initial declaration, numbering of invoices and much more. After GST the country is going green and simple, minimizing the paper waste and time consumption of companies by having the process done on electronically.


So far businesses have been deciding on their warehouses on the basis of tax efficiencies, a location with maximum tax benefits which probably is not the most productive way of locating one’s business. After GST, it’s expected that this phenomenon will end and manufacturers will finally locate on the basis of productivity, economic efficiency, and other direct and influential advantages that a particular location has on offer.


The Downfalls


To back a business, it’s everyday transaction you need suffice cash flowing in all directions, while it already was an important factor it becomes even more so after the GST. Under the current tax policy stock transfers are not treated as taxable transactions but after GST they will be treated as supplies and so will be charged a fair amount.

Although, as a relief, the manufacturers will get input tax credit which will be realized at the end of the supply chain.


Samples so far have been traveling free of cost, shielded from taxes but not anymore. The current tax regime doesn’t call for a tax on free samples send out for testing or for any other purpose but under GST things are different. The freebies going out without any fear of meeting VAT on the way will meet GST instead (ahh almost escaped) because now these will also be treated as supplies and hence, taxed.


While the idea behind GST is to create a unified environment for taxpayers, it seems some steps are derailing from the track as we see some items lying outside the purview of GST like these five petroleum products – aviation turbine fuel, natural gas, motor spirit, high-speed diesel, and petroleum crude.  These will continue to be charged with the existing excise duty and VAT. Manufacturing units those dependent on these petroleum products will suffer the brunt as the tax on these won’t be credited.


After GST the compliance is getting tighter leaving little to no space for anyone to slip through which will result in the manufacturers having to fulfill greater requirements for complying with this new rule which can result in the reshuffling of the existing ways of dealing with tax obligations to match the beats of those that serve the newcomer.


Time is a fleeting resource and it’s passing quicker than ever, today you’ll sleep and tomorrow it’s the day GST is really happening. That’s how quickly things are working out. To not be in a panic at the last moment prepare today.

Don’t worry though you don’t have to do that alone, we’ll walk with you.

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