Press Release: 06 October 2016
With GST bill companies now create a single unified market across India and allow free movement and supply of goods in every part of the country.
The GST will be a game changer for the fast growing Indian economy and will provide a boost to the Prime Minister’s ‘Make in India’ initiative. The GST, however, is not just a method for calculating taxes but also envisages the implementation of more streamlined processes related to taxation. It will beneficial for e-commerce companies, which are forefront in the startup boom in the country, the regime is likely to increase the compliance burden. GST will help create a single unified market across India and allow free movement and supply of goods in every part of the country.
Nonetheless to say that e-commerce companies should be indeed happy about the big tax reform. This is because their business can thrive only when there is seamless movement of goods. In India, e-commerce companies are still in its nascent stage among the traditional brick and mortar conglomerates. With the GST, it is hoped it will remove the mist about different taxes. GST combines many taxes including service tax, excise tax, VAT, luxury tax and others into one. Now, the companies have not to rush at the end of the month to ensure that all the tax works have completed in timely manner.
The GST may lead to great conformity for e-commerce players. Some of the benefits include:
- Removal of Cascading taxes: With the effect of GST, the e-commerce sector will gain significantly from the removal of restrictions on cross utilisation of credits. At present, traders are denied credit of service tax paid on input services such as warehousing, logistics, commission of marketplace and service providers are not allowed to claim credit of VAT paid on goods that are used for providing output services. Since, VAT is applicable on the output side, whereas most input costs are services.The GST model will therefore facilitate seamless credit across supply chains, with tax set offs available across the production value-chain, both for goods and services. At the end, it will bring down the overall cost of supplies. It is hoped that this cost benefit would be ultimately passed on to the customers or help in increasing the books of the companies.
- Combine tax rates: Currently, different states go for different VAT ratios for the same goods with further fragmentism of VAT rates. This has in the past resulted in classification disputes. However, GST rates at both the Central and State level are expected to be uniform and harmonised which would reduce disputes.
The government has already begun the process of amending the constitution and getting the necessary consensus from all the stake holders. GST offers a great opportunity to revisit your Supply Chain & Distribution strategy, and it will pave the way for improved service levels at lower cost in the overall supply chain.
For more information please visit: http://bit.ly/2cUdigF