Impact of GST on the Technology Manufacturing Sector

Chandrahas Panigrahi, Business Head & CMO, Acer IndiaFor a developing country like India, the manufacturing sector is the major economic driver. However, unlike others, India’s manufacturing industry is still scrambling with the others and the performance is been lacklustre. India since the past few months, has been dealing with the issue of uniform taxes, GST and its implementation. The new GST model will trigger a transformational change from a complex multi-structured indirect taxation system to a unified indirect taxation system. The idea behind the GST regime is to eradicate the current empowerment by the central government and state government to levy excise duty on manufacturing plus service tax on the supply of goods.

New GST regime will present plentiful opportunities for the manufacturing sector to grow and prosper. Organizations will have to revamp themselves, which would involve realigning supply chain, transforming administration and compliance, reforming production and logistics, finding new partners and developing synergies, etc. Given the paucity of time, being at the cutting edge of technology could be the only way out to achieve this humongous task. The IT and Electronics manufacturing sector especially has been excited to finally have the GST implemented as it would provide a comprehensive tax structure.

A Transition from a Complex Tax Structure to a Unified GST Regime

For years now Indian manufacturing sector(read over all), has been going through
the operational nightmare of keeping a tab of numerous forms under VAT, CST, excise, and service tax along with innumerable annexures. State based tariff incentives would be done away with and businesses would be carried under a uniform tax. The cascading effect of taxes would be removed, as the manufacturers would be able to get input credit even for inter-state procurement. This would lead to reduction in cost of production eventually boosting demand across the value chain.

Keeping in mind the fact that GST will eliminate multiple levies, it would become easier for players to import raw materials, allowing deeper penetration of digital services

A Common Market

In the absence of CST and entry tax, there will be a common market. At present, goods are being sold mostly within the state, to avoid paying CST. However, with the GST being implemented, goods manufactured in one corner of the country can be sold to the farthest corner in the country, without the fear of CST and entry tax. For the tech-manufacturing sector, it will become easier to deal with expensive parts, without having to worry about the inter-state taxes.

Benefits for the Sector

This recent move is definitely a boon for the tech-manufacturing sector. This sector has been playing low since the very beginning, with very little opportunities in terms of materials and the availability of right skill. Keeping in mind the fact that GST will eliminate multiple levies, it would become easier for players to import raw materials, allowing deeper penetration of digital services. Reorganized manufacturing plants and warehouses would reduce the primary freight charges. GST would eliminate the existing penalties on interstate sales transactions and facilitate the consolidation of vendors and suppliers.

But for tech-manufacturing to become a norm in our country, it would take some more time as the initial hurdles have to be overcome and made sure that the right opportunities are available. The current government has already commenced certain initiatives, which will further fuel growth, there by leading to a complete unified system of doing business in India. No more will players worry about the sky rocketing prices of goods, which need to be sent across from one state to the other. The country would rather become a single market for ease of the manufacturing industry.