The implementation of the Goods and Services Tax (GST) may seem like another change in the tax structure. However, the new GST regime is expected to have a multifaceted impact on all sectors across the nation.
GST is not simply a modification of the present tax structure. It is a huge change and will impact businesses significantly. At the outset, the new tax regime will affect logistics, pricing, supply change, taxation, finance and accounts, procurement, and other elements of any business.
Here are three positive impacts GST is expected to have on the nation.
1. Promotion of organized trade
The different taxes levied by different states make the entire procedure complex and cumbersome. Since the existing tax structure is skewed where the Central Sales Tax (CST) credit is not available, the burden is directly passed on to the recipients. This results in price wars due to the intense competition resulting in lower profit margins. GST will eliminate CST ensuring seamless credit flow between states. Furthermore, the IGST tax credit will be nationally available providing equal opportunities to businesses across the country. The new opportunities will impact business loans as demand for institutional funding increases to meet these growth possibilities.
In the present tax structure, traders often indulge in unorganized trades to avoid CST levy on their transactions. However, after the implementation of GST, traders would not be able to avail IGST tax credit without valid invoices. As a result, organized trades will see a positive growth in the new era.
2. Warehouse re-engineering and supply chain restructuring
Most goods pass through multiple layers of value chains between the manufacturers and end users. The typical value chain includes the manufacturer, wholesaler, retailer, and the consumer. Within this chain, warehousing initiates branch transfer among states to avoid the CST levy.
The input tax credit availability eliminates the need for companies to maintain warehouses in different states to avoid tax liabilities. Large organizations have the option of consolidating smaller warehouses in different states to more strategically located facilities.
3. Improved productivity and efficiency
GST implementation will eliminate state border checkpoints that increase the transit times of trucks. The new indirect tax regime is expected to unify the entire Indian market through the seamless flow of goods within the nation. Although all checkpoints may not be eliminated, the lesser compliance requirements will reduce transit times. As businesses gear up for improved efficiencies and greater opportunities, commercial loan providers also expect to witness a growth in the demand for funding. Such loans help businesses to acquire funds to expand their operations and meet working capital requirements. Borrowers may opt for flexi installment schedules based on the expected cash flows of their operations. Such flexibility ensures companies face no difficulties in servicing the business loan amount. The entire procedure is hassle free and is completed within a few days. All businesses will be able to advantage of the opportunities offered by GST.