Ignoring the Ripple effect of GST implementation could be detrimental for any company in any industry.Most of the Business activities are redefined under GST. Currently, the logistics decision of every service provider is based on avoiding state level tax. There would be changes in warehousing, pricing, working capital, stock transfer decisions to be made by every business, after implementation of GST.
Businesses as of now make their decisions of procuring the raw materials(suppliers) on the basis of the state level taxes and logistics cost.This practice is followed in order to lower their procurement cost and claiming maximum input tax credit. Manufacturers currently price the product around the average market price for a similar product.
Currently manufacturing decisions like expansion and make vs buy are made on the basis of the amount of taxes in the states and logistics cost for procurement.
There will be a significant reduction in the manufacturing cost, after the implementation of GST. Pricing of the product would need to be redefined due to the reduction in manufacturing cost and a better competitive market under the GST. Following are the key areas of a business to be looked under GST-:
*All the above-mentioned areas are key for a smooth transition to GST from the current tax laws.
Currently, the warehouses are kept by business in as many states as possible to avoid the CST levied by each state and the associated paperwork. Under GST, there is no need to keep a warehouse in every state as the CST would be subsumed and there will be a better integrated national market. Since the tax rates across states are envisaged to be uniform, state boundaries will no longer be an important parameter.
Every business should be proactive on the changes required after the successful implementation of GST. There should be a timeline prepared by each organization for completing the transition to new GST law. A proactive action on GST would help in improving your relationship with suppliers and customers.