Implementation of Goods and Services Tax (GST) on 1 July 2017, it has placed subtle, small and medium enterprises (MSME) at the place of bother. Together with monetization, GST changes the market dynamics for these units.
In the previous tax regime, companies having annual turnover of Rs 1.5 crore were exempted from the excise duty. For most states under GST, the threshold has been reduced to Rs 20 lakh. In addition, Job Work Units, which were previously not responsible for paying taxes, were brought under the GST net, such as a disruptive effect on industries like textiles and gems and jewelery, where workers are an integral part of the supply chain.
The government has given Rs. Tried to reduce the burden of adherence to small units by allowing units with turnover of 1.5 crores.
The government has to pay Rs. For the formation plan (which can pay the flat rate of tax on its turnover). The upper limit of turnover for 1 crore (Rs. 75 lakhs) has also been increased, although it will not be able to choose from the manufacturers, traders, and restaurant selection companies, the input tax credits (ITC) and interstate supply units are not eligible for the scheme.
Crisil Research's interactions suggest that many MSME organizations will hesitate to choose the plan because they are worried that big players will stop buying from them.
Two other provisions of the damage to MSME are the reverse charge mechanism, which is responsible for paying the tax on the tax received from the suppliers without the buyer and can be claimed in the matching principle when the purchase invoice purchased by the buyer's supplier matches the invoices and the GST paid by the supplier. is coming.
This adversely affects the cash flow of MSME, however, MSME will have a little more time to make the necessary adjustments with the responsibility of paying tax under the Reverse Charge Mechanism suspended until March 2018.
However, the negative impact will be partly compensated on all inputs used or used for the promotion of ITC through the availability of ITC. This provision indicates that businesses are GST Payments over overhead such as repairs and maintenance, printing and frozen, etc., which were not previously allowed.
Our assessment suggests that MSME's cash flows and construction sector in synthetic textiles will become intense in the medium term due to effective tax component and / or change in credit term. However, in the near term, however, MSME feels Pitch because most businesses have delayed payment to small suppliers in many cases as they try and manage cash flows under GST.
Concern is also on MSME's ability to compete with large corporates in post-GST era. According to Crisil Research, MSME competitiveness will be determined by the extent of tax arbitrage, their status in the value chain, labor cost arbitrage, product offering, local market knowledge, and proximity to customers. Based on tax evasion, most of the existing sectors, such as steel sector, plywood sector and small units of merchant units, can find tough reasons for that.
GST can lead to structural changes in industry value chains, over a period of time.
For example, FMCG (Fast Moving Consumer Goods) companies can increase the reliance on distribution, as opposed to reaching retailers through a wholesaler. The business case has improved for direct distribution of high volumes at the end of retailers.
In addition, FMCG players forwarded on direct distribution as a result of liquidity freeze in subsequent exchange of wholesale channels. GST will make the reconstruction and integration of wholesale channels faster in FMCG sector.
In textile, taxation is imposed on value assessments in each stage of the manufacturing process, as well as job work, organized, integrated players are likely to take the same activity at the expense of decentralized units.
However, once the dust is stagnant, organized MSMEs will stand to benefit from the unified Pan-India market thrown by GST. They can also get market share from players competing based on tax avoidance. Boost profitability in the medium term to help eliminate the taxing effectiveness of tax and efficiency from logistics.
It will be able to achieve efficiency for MSME procurement across the board, as ITC can be claimed where procurement is available. MSMEs can start looking out of their existing markets because taxation will end in consideration.
The most important thing is that, the participant MSME will increase the transparency after post-GST, making it easier to secure formal funding at a competitive rate.
However, Corporates and MSME can do the introduction of E-Valley Bill with clarity on the road map, logical
In the previous tax regime, companies having annual turnover of Rs 1.5 crore were exempted from the excise duty. For most states under GST, the threshold has been reduced to Rs 20 lakh. In addition, Job Work Units, which were previously not responsible for paying taxes, were brought under the GST net, such as a disruptive effect on industries like textiles and gems and jewelery, where workers are an integral part of the supply chain.
The government has given Rs. Tried to reduce the burden of adherence to small units by allowing units with turnover of 1.5 crores.
The government has to pay Rs. For the formation plan (which can pay the flat rate of tax on its turnover). The upper limit of turnover for 1 crore (Rs. 75 lakhs) has also been increased, although it will not be able to choose from the manufacturers, traders, and restaurant selection companies, the input tax credits (ITC) and interstate supply units are not eligible for the scheme.
Crisil Research's interactions suggest that many MSME organizations will hesitate to choose the plan because they are worried that big players will stop buying from them.
Two other provisions of the damage to MSME are the reverse charge mechanism, which is responsible for paying the tax on the tax received from the suppliers without the buyer and can be claimed in the matching principle when the purchase invoice purchased by the buyer's supplier matches the invoices and the GST paid by the supplier. is coming.
This adversely affects the cash flow of MSME, however, MSME will have a little more time to make the necessary adjustments with the responsibility of paying tax under the Reverse Charge Mechanism suspended until March 2018.
However, the negative impact will be partly compensated on all inputs used or used for the promotion of ITC through the availability of ITC. This provision indicates that businesses are GST Payments over overhead such as repairs and maintenance, printing and frozen, etc., which were not previously allowed.
Our assessment suggests that MSME's cash flows and construction sector in synthetic textiles will become intense in the medium term due to effective tax component and / or change in credit term. However, in the near term, however, MSME feels Pitch because most businesses have delayed payment to small suppliers in many cases as they try and manage cash flows under GST.
Concern is also on MSME's ability to compete with large corporates in post-GST era. According to Crisil Research, MSME competitiveness will be determined by the extent of tax arbitrage, their status in the value chain, labor cost arbitrage, product offering, local market knowledge, and proximity to customers. Based on tax evasion, most of the existing sectors, such as steel sector, plywood sector and small units of merchant units, can find tough reasons for that.
GST can lead to structural changes in industry value chains, over a period of time.
For example, FMCG (Fast Moving Consumer Goods) companies can increase the reliance on distribution, as opposed to reaching retailers through a wholesaler. The business case has improved for direct distribution of high volumes at the end of retailers.
In addition, FMCG players forwarded on direct distribution as a result of liquidity freeze in subsequent exchange of wholesale channels. GST will make the reconstruction and integration of wholesale channels faster in FMCG sector.
In textile, taxation is imposed on value assessments in each stage of the manufacturing process, as well as job work, organized, integrated players are likely to take the same activity at the expense of decentralized units.
However, once the dust is stagnant, organized MSMEs will stand to benefit from the unified Pan-India market thrown by GST. They can also get market share from players competing based on tax avoidance. Boost profitability in the medium term to help eliminate the taxing effectiveness of tax and efficiency from logistics.
It will be able to achieve efficiency for MSME procurement across the board, as ITC can be claimed where procurement is available. MSMEs can start looking out of their existing markets because taxation will end in consideration.
The most important thing is that, the participant MSME will increase the transparency after post-GST, making it easier to secure formal funding at a competitive rate.
However, Corporates and MSME can do the introduction of E-Valley Bill with clarity on the road map, logical
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