Supply Chain Turmoil May Strike Ahead of GST

The trader’s community is in a bid to reduce the stocks ahead of GST in order to avoid certain losses in regard to the tax credit. The business fraternity is under de-stocking maniac as the product wise GST rates are to be decided after the end of June and the community is not sure about the refunds of the taxes. The issues on the acceptable losses which may arise in the mismatch of tax pay and tax refund after the GST is leading the traders to reduce the stock size.

As per the reports, the pharmaceuticals industry has already started to de-stock and also returned their stock to the supplier companies for that same reason. Also, the GST council has given that the daily necessary items would be in the lower category of tax which has hinted the traders to de-stock their already available stock within their premise.

The excise set-off on the inventory also the main cause for the disruption in the supply chain of the trading as it is somehow difficult. The very same reason is also making it for the traders to de-stock ahead of the GST. Edelweiss Securities Ltd channel check was conducted and it was assumed that sectors like building materials, agrochemicals, auto ancillaries, electrical equipment and FMCG were among those who have initiated to de-stock ahead of GST.

Read Also: How will GST Affect the Distributor/Wholesaler?

The Edelweiss report says that “Few cement dealers highlighted that closer to July 1, they will keep minimal inventory. Dedicated/sole dealers of large companies will not see any impact as they do not maintain any inventory. Wheel companies are trying to push sales via offers and discounts. Cash sales have been impacted by government’s cash limit rule of Rs 2 lakh. The June quarter will be a slow-growth quarter for agrochemical companies.”

An uncertainty has been arisen in the near term due to the lack of knowledge related to the e-filing, problems in acknowledging taxation laws of GST and the mismanagement within the community of the traders regarding the planning, as recorded from the reports taken from the distributors and dealers across the nation.

The major issues are on the verge of errors on the balance sheets while the margin of the sectors who have under-performed in the first quarter will be hampered. The impact on the revenue is also being justified but the early assumption would be of no use.