Is India Inc prepared for GST rollout?

Business Standard spoke to market experts on the likely impact on economy and corporate profits

With less than a fortnight to go for the roll out of goods and services tax (GST) bill, there have been conflicting views on the preparedness of the corporates. While the Confederation of Indian Industry (CII) has reiterated that corporate India is ready for the one nation, one tax reform, the other industry body, Assocham, has demanded postponing GST implementation. 

The GST Council, on its part, has relaxed return filing rules for businesses in the first two months. In the run up to July 1 when the GST comes into force, Business Standard spoke to leading market experts on their views about the GST, its implementation and the likely impact on the economy, corporate profits and markets.

Here’s what they said:

FY18 Earnings can dip to single digit if GST pain prolongs, says ANDREW HOLLAND, chief executive officer, Avendus Capital Alternate Strategies

I don’t think India Inc is ready for GST. When we meet the big companies, they seem ready for the transition. It is the small companies and PSBs that are not ready. Even if the government delays implementation, companies will never be fully prepared for the impact. Therefore, it is better to implement it from July 1. CLICK HERE TO READ MORE

The compliance burden will be felt far more keenly by small and medium enterprises, says SAURABH MUKHERJEA, chief executive officer, Ambit Capital

I don’t think anybody or any company can truly prepare properly for GST, beyond implementing the relevant systems and processes. Nobody that I have met can fully comprehend the impact of GST on working capital cycles and pricing. Clearly, the compliance burden will be felt far more keenly by small and medium enterprises (SMEs) which don’t have large finance and IT teams to deal with a scale of this magnitude. CLICK HERE FOR THE FULL INTERVIEW

Investors are willing to bear GST pain for long-term gains, says MAHESH NANDURKAR, executive director and India Strategist at CLSA

The June quarter numbers will see an elevated impact. What we hear and understand is that a lot of companies, traders, distributors and dealers are de-stocking inventory. This will have an impact on the June quarter reported earnings and revenues, which can possibly remain in the September quarter as well. The situation, however, will normalise. Investors are now looking beyond FY18; and from that perspective, the near-term disturbances that will be caused by the GST will only have a small impact on the investor sentiment. CLICK HERE FOR MORE

GST can be positive for fiscal deficit; help lower rates, says NEELKANTH MISHRA, managing director, equity research at Credit Suisse

The analysis for companies needs to be equally nuanced. One needs to factor in not just the change in the headline tax, but also changes to tax rates for the companies' customers and suppliers, and the bargaining power the firm has with each. CLICK HERE TO READ MORE

The Indian story is solid; there are no big threats to stability, says JAN DEHN, head of research at London-based Ashmore Investment Management

The GST is an excellent step and much needed modernisation of the Indian tax code, which will have long-term positive benefits, including raising India's trend growth rate. CLICK HERE FOR MORE

GST implementation can add almost one percentage to GDP growth, says SUNIL SINGHANIA, chief investment officer – equity investments at Reliance Mutual Fund

The GST rates are more or less in line with expectations. The government has ensured minimum deviation from the existing rates. In every country where GST has been implemented, there were challenges for one–two quarters. In India, too, this is expected. But over the medium-to long-term, there is no doubt that GST is a most awaited reform and can add almost one percentage to GDP (gross domestic product) growth. CLICK HERE FOR THE FULL INTERVIEW

GST Council took a safe approach while deciding rates, feels JIGAR SHAH, chief executive officer, Maybank Kim Eng Securities

Other than procedural changes and some adjustment time required for that, there isn’t a major disruption, on the face of it. This is because the GST Council took a safe approach of keeping multiple rates, making the exercise revenue neutral and anti-inflation. FY19 will be the year to watch in terms of impact on tax receipts and corporate earnings. CLICK HERE FOR THE INTERVIEW