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06 May, 2017

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GST Pulse: Have you taken a re-look at your finances?

It has been said time and again that GST is not merely a tax change but a business change. We saw in the previous article how GST would impact the various facets of business including supply chain, IT and other processes.

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A key facet of any business is its finances and every business keenly focuses on improving its bottom line by generating top-line growth and cutting through cost inefficiencies. Which also means that it is time for businesses to assess the possible impact of GST on its finances in detail.

 

In general, GST is expected to have a positive impact on corporate bottom lines considering that it is likely to usher in a seamless credit of taxes paid on most goods or services resulting in a reduction of costs. This can provide flexibility in product pricing, headroom for margin expansion and impetus to the company’s bottom line.

 

Further, the distinction between manufacturers, service providers and traders is likely to disappear under GST and so could the current restrictions on credit.

 

Today, VAT credit is not available to most service providers and Service tax credit is not available to traders which is expected to be corrected under GST.

 

It is expected that in some cases there may be an increase in tax rates under GST like in case of services, As a result, the working capital/cash flow could be impacted negatively leading to additional interest costs. Also, some of the current exemptions especially under Central Excise law are likely to face the axe under GST, which may have a favourable or a negative impact on operations.

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