One key issue on which policy clarity is required, as regards the proposed GST (goods and services tax), is the seamless continuation of excise and tax holidays, and deferments, says M. D. Sudharsan, Vice President-Legal & Secretarial, CavinKare P Ltd, Chennai (http://bit.ly/F4TMDSudharsan). GST needs to ensure the continuation of business, without monetary loss, by units that are currently enjoying excise duty exemptions/ deferments, sales tax deferment or such other State/ Centre sponsored exemptions including those under SEZs (special economic zones), he adds, during a recent interaction with Business Line.
Excerpts from the interview.
What do you see as the top two areas in your industry that will be impacted the most by the proposed GST regime?
(1) Rationale for the location of each of the business segments: The GST regime is expected to bring in a sea change in the way the business is conducted, i.e., the location of each of the units of the business segment for procurement, production, job improvement, storage, and retail sale. This is necessitated due to the fact that the manner of levy of taxes/ duties under the GST regime would not be based on the stage-wise progression in the making of finished goods but would stand consolidated into a single point tax at the event of sale.
(2) Cost/ pricing economics for the finished goods: The GST regime would also make the industry rework the entire cost economics, as regards – (i) the taxation/ duty structure for procurement of raw materials; (ii) stage-wise levy of excise duty on production; (iii) service charge on job work; (iv) sales tax on interstate movement; (v) value added tax in the selling state; and (vi) input credit availment mechanism for excise duty/ VAT/ service tax etc. which would all stand abolished to give birth to a single-structured, self-adjusting GST, attracted on the eventuality of sale of finished goods.
This cost/ pricing economics would further stand corrected due to the taxation methods of stock transfer vs sale, reduced need for multiple compliance authorities/ formalities, need to refit a modified version of ERP tools, and adjustments in manpower/ supply chain management cost.
Your take on one priority that merits attention in enterprises, ahead of the GST roll-out.
Location of each segment of business enterprise is one priority, in my view, that merits the attention of all unit owners, especially those having pan-India presence. They would have to rewrite their business location economics: (a) as to the location of their procurement and manufacturing centres, keeping in mind the GST environment, as against the historical rationale of the source of raw-material/ skilled manpower/ demand zone etc.; (b) the location of the mother depots for raw materials/ finished goods/ billing and so on, given the fact that stock transfers would also attract GST with related implications on working capital management; (c) and the location of selling units would be determined based on the incentives offered by the States, considering that the GST benefits would flow more into the kitty of consuming states.
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