Retail Trends

Openbravo Helps Retailers Implement India’s New GST

India has benefited from economic stability and regulatory reforms aimed at making it easier to do business. As the fastest-growing and third-largest global emerging market (after China and Brazil), India´s retail market is expected to reach $1.3trillion by 2020.

However, India’s current tax system is staggeringly complex, forcing retailers to wrestle with cascading tax rates that vary across 38 states and require them to file multiple tax returns. This system is far too cumbersome to keep up in a market the size of India´s without some significant simplification.

The new Goods and Services Tax framework, which was passed by parliament and scheduled to go live in September, aims to do just that. It will also require nearly 7.5 million businesses to register and demonstrate compliance under the new GST framework.

Back to Basics

Nearly ten years in the making, India aims to simplify their tax jungle with the most significant tax reform ever attempted since their independence. The new GST framework aims to consolidate many former taxes under three types: Central taxes, which will include excise duties, service tax, and customs duties; State-level taxes, which include VAT/sales tax, purchase tax, entertainment tax, luxury tax; and Interstate transport taxes.

India has also committed to a four-tier tax structure, which scales rates into four product categories: 5 percent for goods of mass consumption; 28 percent for consumer durables, such as tobacco and cars; and 12 percent and 18 percent for most other goods and services.

Far-reaching Benefits

The new GST promises to deliver a range of benefits, including lower operating costs for retailers which can ultimately be passed on as savings to its 1.3bn consumers and beyond. It is worth noting that the government will also benefit from an additional $15bn in revenue. Clearer rules for foreign direct investment, particularly in the retail sector, have increased India’s attractiveness. The new GST will undoubtedly increase stability and ease of business with India, domestically and internationally.

GST will be a game-changer for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the tax structure, indirect taxes, computation, payment, credit utilization and reporting. It will also have a far-reaching impact on business operations including the pricing, supply chain optimization, IT, accounting, and tax compliance systems.

GST Compliance Made Easier with Integrated IT Solutions

Software platforms such as Openbravo´s Commerce Suite can save retailers time and money by allowing them to easily set up tax rates for different product categories and implement the changes across multiple stores in hours, instead of weeks. Openbravo has worked closely with their partners and clients in India to develop a GST-compliant version with plenty of time for full implementation before the new GST is scheduled to go live in September 2017.

For more information on Openbravo´s start-to-finish solution for making IT systems GST-compliant and an introduction to the local partners who can support retailers throughout the process, please register our upcoming webinar, Rise to the GST Challenge, on January 31, 2017 at 11:30 AM (EST).

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