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