Right, so here's what we have. The government has decided upon rolling out a four-tiered approach to the Goods and Services Tax (GST) reform.
The four GST slabs, as of now, are 5 percent, 12 percent, 18 percent and 28 percent. Now, automobiles are expected to be in the 28 percent slab, but smaller cars aimed at the aam aadmi may get a rebate.
What's got most folks cheering is that reworking the tax structure reduces the burden of inflation on our country.
What does it mean for Manufacturing, and why is it important?
Now the manufacturing sector, on the whole looks favourably upon GST, and why not? When a product (let's say a car) is manufactured in a certain state in India and exported to other states, the manufacturer has to shell out a two percent Central Sales Tax (CST).
With CST out of the picture, origin tax is eliminated, and therefore, the manufacturer can hope to see more market demand.
"In the manufacturing industry, there's a uniformity of taxes across states. Right now, there's a different pricing structure across different states. Now with CST and VAT going away, your purchase decisions can be faster. Also, we anticipate goods moving faster. In addition to this, we also see better sourcing opportunities," says Anil Kulkarni, GM-IT (ERP & PLM) at Larsen & Toubro Ltd.
Kulkarni added that there will be a spiralling effect on demand. It won't happen tomorrow. But he believes there will be an awkward impact on the economy, and the cost of logistics will come down.
From an IT infrastructure perspective, the implications are massive. The ERP will have to be remodelled and all those fields will have to be created in the ERP. "So we'll have to make the documentation process very streamlined. All the inputs going in for commercial processes have to be captured correctly, and human intervention completely removed," adds Kulkarni.
A major challenge though, Kulkarni believes, will be to file the data on a timely basis, because the returns have to match both the customers and the suppliers.
Clearing up the muck
"A lot of the 'under-hand' dealing will go away, and the system will become more transparent. So, the 'fair practices' of a lot of corporates are are going to be brought into the picture. It's like when you go to a shop and avail a 20 percent discount, you really don't know if you paid a fair price. The concept of parallel economy is going to be wiped out," explains Kulkarni.
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