Malaysia is one the recent countries to have gone live with the implementation of goods and services tax (GST). Lorraine Parkin, APAC, Grant Thornton, who has closely worked with Malaysia in introducing the indirect tax regime, talks about the impact of GST on Indian businesses.
In an interview with CNBC-TV18, Parkin says businesses have to be mindful of strong IT and financial management platforms because implementation of GST drives everybody into latest generations of accounting software. It brings transparency with it.
She also said one of the enablers for the better implementation of GST is correct IT. It is also important to ensure that people with authority are actually involved in the project management.
"In order to do this kind of project alongside it you do need a degree of discipline and everybody needs a clear job specification," said Parkin.
Below is the transcript of Lorraine Parkin's interview to CNBC-TV18's Nisha Poddar.
Q: What are the key takeaways from the impact on Malaysian business of GST implementation vis-a-vis, what could be the impact on the Indian businesses as per your views?
A: One of the key things to state at the outset and I am sure many businesses have already becoming aware of this and that is, although GST is a catalyst for the change, this is part of a whole of business change, business transformation and it is just part of a much wider package that in effect is bringing black economy and gray economy into the transparent, legitimate economy.
The kind of things that businesses that are liable to register for a new GST need to be mindful of, is strong IT and financial management packages and platforms because the introduction of GST in effect drives everybody into latest generations and latest iterations of accounting software.
It brings transparency with it. There are some positives as you implement GST. As you implement GST you end up having to unpick the whole of your supply chain, so that is your purchase procurement chain and your sales chain as well.
In doing that as you start to look at your business activities within a state and inter-state and then imports and exports, you do actually have the opportunity to spot some logistics savings and different ways of organising your supply chain.
Q: What could be the enablers for a better implementation of this new indirect tax regime in India?
A: One of the enabler is correct IT, another is appreciating that the implementation even in a relatively small to medium size business needs very good project management, because it is a whole of business change - - it affects the people who are marketing, the people who are selling, people who are buying, it affects people even in HR for example if they are involved in doing things like staff benefits or gifts to clients.
It certainly affects IT, it affects legal in terms of contracting and the important thing to remember is because it so transformational it really is a boardroom issue, so one of the best enablers is to ensure that people with authority to take decisions are actually involved in the project management - - maybe in a strategic committee or an operational committee, because of course, whilst doing this transformation and implementation businesses have their daytime job as well. You are all still trying to run a business and you are trying to run a business for profit.
In order to do this kind of project alongside it you do need a degree of discipline and everybody needs a clear job specification, so that they know what their part is in making this transformation.
Q: So what global industry really thinks of a possibility of achieving April 2017 deadline in terms of the overall preparedness and current status of things as far as GST implementation in India is concerned?
A: That is a very good question I was heavily involved with the implementation of GST in Malaysia, which is one of the more recent countries to have gone live and transformed its indirect tax system. The businesses that we were advising there were medium to large size domestic, multinational and some government on average it took 8 months to do a transformation.
Now of course, we don't have 8 months left between now and April 1, so businesses those haven't started yet are probably going to find themselves doing some of their implementation post the go live date and therefore when they do their impact assessment of where the most material issues are in their business, whether likely to be most materially affected, they are probably going to have to start implementing by prioritising and doing certain parts of their systems before others.