Gearing up for GST –Impact on the printing industry

After being stuck in the corridors of power and countering around sixteen years of uncertainty, GST is finally going to see the light of the day. Sabeena Vasudeva shares her views on the impact of GST on the printing industry.

GST, which is being pitched as the biggest tax reform since Independence, will bring sweeping changes to a lot of business practices that the industry has comfortably settled into.

The time has come for all businesses to consider the impact of GST – a mammoth change which is knocking at their doors and start to prepare for its rollout.

It is very important on the part of the taxpayers to keep a check on their readiness for a smooth transition into GST regime along with ensuring that their businesses are not hampered. With GST likely to be implemented w.e.f. July 1st, 2017 there is only little time left to analyze, plan, implement and prepare for the change that is going to take place, once GST is implemented.

GST will have a far reaching impact on virtually all aspects of operations supply chain processes including contractual agreements, pricing, supply chain model, information technology, human resource, tax compliances.

Complete awareness and proactive preparation is of paramount importance in handling this huge tax reform effectively. In Malaysia during implementation of GST, it was experienced that the rollout was far from seamless because of lack of awareness and preparedness; it led to business disruption, operational issues and delayed compliance for many.\

One of the reasons for lack of preparedness was that GST had long been discussed and repeatedly delayed, just as in the case of India. Because of this, the businesses deferred taking necessary actions until it was too late.

In fact the need for preparedness may be even greater in India than in Malaysia because Indian GST will be unique and far more complex, with a dual GST regime, with two tax administrative authorities – the Centre and the State – which would have the powers to levy tax on each transaction concurrently.

Impact on printing industry

The Indian printing industry is keeping its fingers crossed and is hoping things would turn out for better after the implementation of GST. Multiple taxes and taxation points in the present regime are badly affecting the growth of this sector. GST will bring single-point taxation in the country and also simplify taxation system. Hopefully, things will be more efficient and manageable with implementation of GST.

It is expected that seamless flow of input credit, under the GST regime, would benefit the printing industry which presently faces the issue of blocked working capital due to large accumulated Cenvat Credit balances. GST is expected to substantially overcome the gaps which are present in the existing indirect tax regime by eliminating cascading effect of taxes and duties which are not getting full input set off. GST would also promote wider tax net as it would be beneficial to be GST compliant. It would remove cost inefficiencies arising due to current levy of Central Sales Tax, Octroi or Local Body Taxes and physical interstate tax barriers.

Under GST regime, the cost competitiveness of the printing industry would improve with the unification of fragmented domestic market along with the reduction in cost associated with tax compliance, inventory and logistics.

Looking towards imports, GST law states that imports would be considered as supplies in the course of inter-state trade or commerce. Imports would be subject to Basic Custom Duty plus IGST. Under GST regime, full input tax credit shall be available on such IGST paid on imports. Focusing on newspaper printing, it is recognized that in present regime, it is excluded from the burden of taxes. However, the exemption list under GST is not available in the public domain till date. Nevertheless, according to the GST Council necessities would be taxed at zero percent.

In principle, GST will have an overall positive impact on the printing industry. The real impact of GST on the industry can only be assessed after the effective rate is finalized, especially for raw material wood and pulp. Transportation, logistics cost and taxes on input material would also affect the businesses.

Some of the key features of the GST that need mention:

• GST will bring a larger portion of the unorganized sector into the mainstream which will change the business dynamics for several industry segments.
• Under GST the threshold limit and the exemption list would be significantly pruned. So many goods/services outside the tax ambit under the present regime could be subject to GST.
• With the concept of single/separate registration for each state, there is likely to be an increase in tax compliance obligations. To give an indication, the number of returns would go up to around 37 in a year for a single registration.
• The matching concept under GST where the taxpayers would have to reconcile their procurement with the sales of their vendors and supply of goods and services with their purchasers on a monthly basis in order to avoid denial of input tax credit, could be cumbersome.
• Although credit of GST paid on inputs at every stage of value addition would be available for the discharge of GST liability on the output, separate credit pools for all three different types of GST – CGST / SGST / IGST would have to be maintained for each state.
• The transitional provisions under the GST law entail a list of credits that can be carried forward into the GST regime, on fulfillment of certain conditions.

The need of the hour is to gear up and initiate the process of identifying the potential issues that might emerge while transitioning to GST.

It is obvious from the above that the businesses that are proactive in preparing and planning in the GST early can gain a real competitive advantage. Early planning and timely execution is necessary to leverage this advantage. It will help avoid disruption along with being 100% compliant of all legal and procedural requirements under the new law, and manage opportunities effectively as the GST approaches.

GST implementation looks certain during July 2017. The time is now to comprehend and gear up for this huge change coming our way and to take full advantage of this transition period.

(Author is a partner at Dewan P.N Chopra & Co. and can be contacted at sabeena3071@gmail.com)

The Contents of this article are views expressed by author in her personal capacity and to the best of her knowledge. She does not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. Readers should conduct and rely upon their own examination, investigation and analysis and are advised to seek their own professional advice. The information and data contained herein is not a substitute for the reader’s independent valuation and analysis. This document is not an offer, invitation, advice or solicitation of any kind. She accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss howsoever caused or sustained, by the person who relies on it.