On A Wing And A Prayer?

India Inc.’s tryst with GST begins. And firms both big and small will face the big migration test

- Clifford Alvares

ON THE EVE OF the implementation of the goods and service tax (GST), it is not business as usual. India is in the midst of its biggest indirect and structural tax overhaul in the world, which if it sails through will add 100200 bps to the GDP. But will the small companies be able to transition to the new environment? Will the new GST usher in a boom in business? Or will firms wind down their businesses?

System engineers, however, consider GST a mid-level complex problem. Which means that it can still be cracked without too much coding. But as some of the grey areas in the GST system are still being ironed out; with GST rates still being finalised; clarifications still being issued; GST registrations still being done, invoicing systems still being reworked, this biggest migration exercise is turning out to be a can of worms for corporate India, both large and small — in particular, the small firms.

The Winners

Clearly the winner is the formal sector. In a survey conducted by BW Businessworld, 58 per cent of the respondents in the MSME space were either neutral or disagreed that GST would benefit them. By contrast, 90 per cent of the large firms agreed that GST would benefit large firms.

Such big divergence speaks volumes of the huge divide that grips the new GST landscape. Firms that are large and can deploy new IT networks will see, at most, a flutter in their operations till the systems stabilise. The small and fringe players and those that have not been tax compliant either face the challenges of incurring huge costs to become tax compliant or go the dinosaur way.