With less than 50 days left to the rollout of goods and services tax (GST), businesses are on edge about their preparedness. The bigger ones have to worry about the GST-compliance of all their suppliers and distributors, as even one laggard in the chain can trip them up.

Bengaluru-based garment manufacturer Sanjay Kriplani has got a registration number from GST Network – the IT platform for GST – and is awaiting an enterprise resource planning (ERP) software for which he placed an order “4-5 months ago”, but he is unsure about the preparedness of his vendors and distributors.

It is a widespread concern, as a survey of about 1,000 retailers, wholesalers and manufacturers by EasemyGST, a portal set up by ERP solution provider Ginesys, showed that 68 per cent of businesses had limited or no GST-readiness, 18 per cent had a basic understanding, while only 14 per cent were working towards GST adoption.

The cost of adoption is a hurdle for small businesses.

“Everyone will need a computer, a spreadsheet and connectivity for basic accounting and filing. A lot of small businesses don’t have that and need to invest at least Rs 50,000, which they have not budgeted for,” said EasemyGST Founder Ashish Mittal, who is helping Kriplani with ERP.

Most small and medium businesses are at sea.

“There is absence of understanding, and therefore readiness,” said Bharat Goenka, Managing Director of Tally Solutions that is making the accounts of thousands of companies GST-ready.

Automation under GST will check tax fraud. Consultants say it will replace paper invoices with electronic invoices that can be tallied by the tax department.

“The entire supply chain is being automated and it will result in massive changes in demand forecasting, inventory management, warehousing and several other aspects of business,” said Neeraj Athalye, who leads the GST adoption drive at SAP, the global software firm that provides ERP and technical support.

Even some large companies, such as the Rs 1,900-crore Somany Ceramics, haven’t fully comprehended the change that is in the offing.

“We have appointed KPMG and we are working on ERP. But we don’t anticipate major changes apart from accounting,” said MD Abhishek Somany while acknowledging that their bigger vendors are preparing for the transition.

Compliance work could speed up after product-specific tax rates are out, but consultants warn that will mean postponing things too close to the July 1 deadline.

The larger players from ITC and Pepsi to Dabur, Mother Dairy and Maruti are bracing for the change and expect turbulence for three-six months.

“We have been working on it for one and-a-half years but we need to ensure that everyone from the beginning to the end of the chain is geared up,” said Dabur CFO Lalit Malik.

Around a fortnight ago, 93 per cent of the company’s vendors had registered for GST and 90 per cent of the distributors too complied with the requirement.

Bringing every single vendor and distributor on board is crucial for everyone in the chain to get credit for taxes that have been paid.

“My vendor base controls my ability to be GST-compliant,” said SAP’s Athalye.

While the immediate vendors of a corporate are expected to comply, their own suppliers may not be prepared for the transition.

“The real challenge will be smaller vendors. Internally, we are monitoring tier-2 vendors and a majority are registered. The next level is to see that there is IT preparedness, which we are monitoring. We hope to be ready by May-end,” said Maruti Suzuki CFO Ajay Seth.

While a large section of industry says the July 1 deadline may not be easy to meet, officials said the government is working to meet the target.

“Even if it is postponed, everyone will not be ready,” said a senior officer at the Centre.

Source: Times of India