According to a report by broking firm Bank of America Merrill Lynch BofA-ML, says that, India is set to enter into biggest tax reform today midnight, people who are running small and medium enterprises (SME) still have no idea how the Goods and Service Tax (GST) regime impact their business or product prices.
“We spoke with managers and storekeepers of several retail outlets in Mumbai – none seem to have any idea of how the GST will impact their businesses or product prices. Most are still waiting to be guided by ‘senior/company management’; many are using the GST to urge consumers to buy ahead of the change. This indicates corporates still need time to: a) understand the GST themselves, and b) then communicate the impact/change to end chain of staff,” the report by Sanjay Mookim, India equity strategist at Bank of America Merrill Lynch, said.
According to BofA-ML report, this shows that industries still require more time for understanding the concept of GST regime and communicate the impact and changes with staff. “With help, most will learn the new filing system. The current destocking is likely to create an interesting effect later in the year,” the note says, adding that a combination of festive season sales, re-stocking post GST, better consumer appetite (because of monsoons and farm loan waivers) and the base effect of the demonetization quarter could result in strong year-on-year growth numbers in the December quarter.
The note says that the lack of preparation can lead to time and money costs but these should be for the temporary period. “Our interactions with dealers, manufacturers, and GST facilitators suggest that the SME (Small and Medium Enterprises) segment is not only struggling for preparedness but also staring at rising manpower and compliance costs which could disrupt their business and impact cash flows,” said the June 27 report titled GST: Get, Set, Go.
