Impact of GST

Sourcing

Inter-state procurement could prove viable

May open opportunities to consolidate suppliers/vendors

Additional duty/CVD and Special Additional duty components of customs duty to be replaced

Distribution

Changes in tax system could warrant changes in both procurement and distribution arrangements

Current arrangements for distribution of finished goods may no longer be optimal with the removal of the concept of excise duty on manufacturing

Current network structure and product flows may need review and possible alteration

Pricing and profitability

Tax savings resulting from the GST structure would require repricing of products

Margins or price mark-ups would also need to be re-examined

Cash flow

Removal of the concept of excise duty on manufacturing could result in improvement in cash flow and inventory costs as GST would now be paid at the time of sale/supply rather than at the time or removal of goods from the factory

System changes and transaction management

Potential changes to accounting and IT systems in areas of master data, supply chain transactions, system design

Existing open transactions and balances as on the cut-off date need to be migrated out to ensure smooth transition to GST

Changes to supply chain reports (e.g., purchase register, sales register, services register), other tax reports and forms (e.g., invoices, purchase orders) need review

Appropriate measures such as training of employees, compliance under GST, customer education, and tracking of inventory credit are needed to ensure smooth transition to the GST regime.

The key imperatives for companies are:

Understand key areas of impact in their business
Prepare different scenarios for the design and application of GST

Continually track policy development regarding GST and update prepared scenarios

Identify any areas of adverse impact and prepare contingency measures

Identify issues and concerns requiring representation to authorities and develop a strategy for effective advocacy

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