Despite delay, cos prepare for GST

A cloud of uncertainty may be hanging over the roll out of goods and services tax (GST), but that is not deterring India Inc from drawing up strategies for its implementation to get a competitive edge over rivals in terms of cost and market share.

Most corporate clients of business consultancy firms like PricewaterhouseCoopers (PwC), Deloitte and Ernst and Young (EY) have already began working on it and made some headway.

Uday Pimprikar, tax partner at EY said since GST law, which will subsume all central and state indirect levies into one, is going to mandate business transformation rather than just tax changes, "evolved clients have already commenced work on it."

"Clients acknowledge the enormity of the activity GST will mandate. More evolved clients are looking at GST from two aspects: First, if they don't handle GST implementation well, there is a material business disruption risk. So, it was very important for them to do it well to gain competitive advantage. Second, if they started early, cost optimisation benefit will kick in faster and also put them in an advantageous position for market share expansion," Pimprikar said.

He said corporates would not have much lead time if they waited till the last minute.

The National Democratic Alliance (NDA) government has set a deadline of April 1, 2016 for the rollout of GST. However, the Constitutional Amendment Bill is stuck as the opposition has blocked its passage in the upper house. Government is looking at every way to ensure that it sees the light of the day.

Anurag Mathur, partner – advisory – PricewaterhouseCoopers Pvt Ltd, said by planning ahead corporates were trying to get a lead over their competitors.

"If you want to get some leeway, you have to take the step before your competitor. So, if you (companies) are able to do a lot of these negotiations (with suppliers, vendors and others), you can be more competitive in pricing and costs optimisation. Till the time competitors respond, you would have either made more profit or sales and clearly be in a better position competitively," he said.

Mathur, however, said an action plan would emerge only once the draft legislation for the Bill comes through and there is clarity on the GST Act and its rules. That will happen only after it is passed in both Houses and ratified by 50% of the state assemblies, followed by formation of GST council, which will come out with its rules.

"There has to be clarity on legislation visible to a company for them to take the action. But that said, the preparation is being done now," he said. According to him, there was "significant seriousness at the management committee and Board levels."

"Boards are already sponsoring initiative around it," said the PwC executive.

M S Mani, senior director – indirect tax, Deloitte India, said many of his clients began preparing business remodelling plan six months and were in the process of finalising it.

"Manufacturing and pharma companies started six months back and have moved significant distance while financial service, software and other services firms are going slow or are yet to start," he said.

The areas that most corporates were looking at were supply chain re-engineering, vendor remodelling, warehouse consolidation, information technology (IT) or enterprise-wide resource (ERP) system reconfiguration, among others.

Pimprikar said a large part of the corporate action was concentrated on training and education of internal – employees – and external – vendors, dealers, distributors, shareholders and others – stakeholders.

"Clients are currently in the process of understanding what is the requirement for the GST and are doing a gap analysis," he said.