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India ready for GST rollout, experts weigh in on challenges, effects

By dailymail / Published on Friday, 30 Jun 2017 09:23 AM / No Comments


Girija Pande, executive chairman at Apex Avalon Consulting, told CNBC’s “Squawk Box” that it will be a challenge to implement the GST among small and medium businesses.

“Many of them were not even reporting their sales and revenue figures. I think some of them will be coming back into the tax net,” said Pande. “I think the challenge (of implementation) is that we have delayed the outreach. The training and the outreach should have been done for a scale of this project.”

Much of the tax processing and refund claims under GST will be done electronically, underpinning Prime Minister Narendra Modi‘s bid to digitize India. Businesses will have to align their existing software systems with the online tax portal that was rolled out by the GST Network — the company that has been set up to provide IT infrastructure and services for the GST roll-out — to process tax filings and input credit claims.

While critics have doubted the ability of the technical infrastructure to handle large volumes of traffic, local media reported the GST Network said over 6.6 million taxpayers had already enrolled onto the platform.

“The question is, many of these entities will have to get used to running an automated system, which they are probably not used to,” said Pande. “There is a training element here.”

Software providers such as SAP have undertaken initiatives to reach out to the scores of small-and-medium enterprises to familiarize them with the technical aspects of the GST rollout. SAP is also providing software to help companies become tax compliant and better manage their businesses.

SAP India’s president and managing director, Deb Deep Sengupta, told CNBC in a phone interview that “technology will be least of the problems” in the GST rollout and implementation.

“I think it’s a matter of creating the awareness on a continuous basis, working both with the policy makers as well as with the industry associations and the end consumers is something which is going to be, I would say, the biggest challenge and the opportunity,” Sengupta said.

Both Sengupta and Pande implied that the biggest hurdle will be to change the mindset and business practices for many of the smaller organizations. The GST implementation is set to open up a layer of transparency, something many companies operating in India’s untaxed economy, are not used to, they said.

Winners and losers

Pande said while large companies in the organized sectors are fully behind the rollout, it’s the smaller ones that do not regularly pay taxes that have to adjust.

“The ones who have never reported their taxation are the ones who are going to suffer. They will have to come in this era of transparency which is the government is pushing for. They will obviously have to learn to live with the new system.”

Sengupta explained the new tax scheme could benefit the consumer industry significantly by creating common markets, improving logistics, bringing down inventory costs and making manufacturing cheaper. Companies can consolidate their warehouses and move away from a hub-and-spoke model, he said.