A country’s prosperity is evaluated using multiple parameters, that take into account the positioning and performance of the various sectors the country thrives on. While agriculture and infrastructure development have been the two vital pillars of the developing India, there is another sector that is surging to become the main driver of the Indian economy. The manufacturing sector has been at the forefront of the nation, despite its scrambling performance. With a geographic and demographic advantage, India has almost everything to make it the nucleus of its booming economy. While the complex taxation system has been responsible for its lackluster performance over the years, the same cannot be said right now with the introduction of the unified tax slabs in the form of the Goods & Service Tax.
To explain the process with an example, let us consider the case of a pair of shoes that goes through three stages before reaching the consumer. If the earlier taxation was taken into consideration, tax implications were evident across all the levels, from the manufacturer to the wholesaler to the retailer, making it increasingly difficult for individuals to carry out businesses and erratically expensive for the consumers to procure the products.
With the introduction of the GST, the manufacturer, wholesaler and retailer do not imply the same tax slab at every level, making it seamless for every individual. To sum it up, with the unified tax slab, the tax levied on products will be inclusive of the preceding ones in the previous stage, thereby reducing the burden greatly on manufacturers, wholesalers, retailers, and consumers.
With a 16% share in the Indian economy over the last two decades, the introduction of the GST is bound to instigate a myriad of changes. Here’s how the implementation of GST can have a positive impact on the manufacturing industry:
• Removal of multiple valuations will spearhead an era where transaction based valuation will make it much simpler for the manufacturer and the consumer.
• The subsuming of entry tax will overall reduce the cost of production.
• Improved cash flows for SME’s & manufacturers.
• Simplifying the registration process by initiating single registration for all manufacturing bodies within the state.
• Restructuring the supply chain system which has remained stagnant for the last few decades.
While the manufacturing sector is bound to see an unprecedented growth with the introduction of a unified tax system, the situation in the present hour is not what was promised in the books. With more than half the organizations across the country functioning outside the ambit of the regulatory framework, it is evident that a healthy reform too will have its share of implications. Keeping aside the implications, the introduction of GST has given the Indian economy the opportunity to move towards a global indirect tax system that allows appropriate assessment, is fully automated and is malleable to allow any changes in the tax procedures or rates. To facilitate this transition, organizations can turn their focus towards installing a modern, complete accounting and operations platform that makes use of a seamless interface that is embedded with the requisite analytics and tools to help organizations sail through the at-the-moment rough GST waves.
With the introduction of GST, it is imperative for every organization to overhaul their accounting system with the requisite compliant software. By forecasting appropriately, organizations across the country are offering GST compliant accounting software that manages reports and analyzes their accounts efficiently. During these changing times, one cannot stress on the impetus of moving forward with the change, as it is evident that the flagbearers of this change are the ones who will stay afloat in the present dynamic business environment.