The implementation of nationwide GST replacing the plethora of taxes under the current regime is a historic and transformational reform. The benefits of GST are immense for the manufacturing sector and some of the significant changes are summarized below:
- Before GST, the manufacturers are required to apply and obtain multiple registrations (unit wise for factory, depot), service tax, VAT, CST. With GST providing for a single GSTIN at a State level, there is simplification of not only the registration but also permits the input credits to be pooled and utilized at TIN level as opposed to factory level for excise duties.
- While the manufacturers being generally within the value chain could claim the input tax credit on most central/ State taxes, there were cascading taxes as well as costs in the form of CST, trading related reversals, etc. With GST, the cascading of taxes is eliminated while the reversals/ adjustments also reduce significantly.
- It is important for the manufacturers to look at their supply chain and plan for further efficiencies where possible. A relook at the depot structure/ consolidation and setting up of new factories on sound business logic could be facilitated in the GST regime.
- Clarity is awaited on the mechanism for excise exempt units set up under the area based exemption.
- While the existing credits are permitted to transition to the GST regime, clarity is required on the balances lying in Account Current (such as PLA, Advance Octroi deposit, etc.).
- The per day exemption granted for purchase from unregistered dealers is impractical from a tracking and monitoring perspective and could perhaps be simplified to provide an overall monthly limit and GST payable beyond such limit.