Impact of GST on Business Processes

Far reaching impact of GST on business processes

By bringing businesses of various sizes under a uniform tax structure on a digital platform from inception will bring about changes of mammoth proportion on all business processes and have a far-reaching impact right from procurement to distribution and sales. While the benefits of GST implementation will be manifold, the impact on organisations can be broadly divided into three broad areas:

  • Tax planning
  • Change of operational processes
  • Training and change management

Tax planning


The first step to being GST ready is to understand the process of GST implementation. Knowing the basic structure of GST is a must. GST is a destination based tax that has been structured under the heads of Central GST, State GST and IGST for the purpose of interstate transactions. Businesses must, therefore, carry out an impact analysis of GST and understand key areas of impact. This would entail a re-look at the procurement procedures, manufacturing process, supply chain management, costing, pricing and working capital.

The impact analysis should lead to the preparation of different scenarios and choosing applications that would make GST compliance a hassle-free experience. An important part of GST preparation should involve identifying areas where there may be an adverse impact and prepare a contingency plan.


Change of operational process


GST brings about a sea change in tax compliance that must be enabled by efficient tax technology. IT will be the backbone of GST implementation in India, thus partnering with the right software solutions partner will play a critical role for any business to be GST ready. International experiences from the implementation of GST in countries like Malaysia has shown that there can be a plethora of hidden challenges in the areas of imports, exports, pricing and data collection.

It is evident that ERP and IT systems of businesses must play a key role in creating a compliance strategy according the new regime. Therefore, involvement from ERP and software partners from an early stage is a prudent strategy. New GST processes must be constructed, tested and validated. Carrying out pilot projects under the guidance of experts to remove the scope of errors under the new GST regime will ensure timely compliance once GST is implemented.


Training and change management

It is not going to be enough for IT and ERP systems of business organisations to be synchronised with the GST network. Some business heads are still under the impression that once an efficient tax technology is put to work, it will be enough to meet all compliance requirements. While it is true that choosing the right software or tax solution is half the battle won, the tectonic shifts in business processes will require training and management of vendors and operational staff at different levels in the organisation. Familiarising employees through workshops and interactions with tax, IT, legal and finance experts must play a key role in change management.

GST will have a far reaching and long term impact on the way businesses are run in India today. Early adoption to change at various levels of business processes will reduce teething problems considerably and give such corporations an edge in enhancing competitiveness.

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