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Management

Startups often remind us that management principles are bookish, when it comes to execution

Entrepreneurship - A blog  ››   Management

2 blogs
  • 22 Jun 2017
    History was created on 13th April 2017, when President Pranab Mukherjee signed and ratified independent India’s biggest tax reform – Goods & Services Tax.  The bill comes into effect on 1st of July 2017 and promises to unite India as a Union with one tax rate, thereby simplifying transactions across the country. GST Act subsumes several indirect taxes such as custom duty, excise duty, value added tax, service tax, central sales tax, octroi, entry tax, purchase tax etc. and brings them into one common umbrella called GST.   Businesses across the world are excited as they plan to set up their shop in the fastest growing economy in the world. Past three months have seen surge in startups being launched to help businesses and media shows and newspaper articles making people aware of the change. It is also a good time for the accounting firms and tax consultants as they see an opportunity that’s win-win in several ways for them and their clients, however, many are skeptical of the real gains and the complexity of implementation. Businesses are getting new software in place, while smaller players remain concerned about increased compliance requirements.  Let us take a look at some of the common points spoken for and against the bill.   It is generally believed that GST will reduce the administrative and compliance cost drastically for the supply of goods and services by merging around 17 indirect taxes in the value chain. Building consensus for the passage of the GST bill was always difficult in the democratic India.  Alcohol Electricity and Petroleum products are not covered under GST and will continue to be taxed as per the old system. It is a compromise. The challenge in itself was so big that the final outcome in many ways is no better than the existing framework of multiple taxes.  The GST is divided into three parts i.e. CGST, SGST and IGST, which will require businesses to file 3 returns per month or 36 returns per year.  Sounds Like the old wine in new bottle – isn’t it? Now consider this on top of it - A service provider such as an insurer will need registration under each state of operation for SGST.  Now compare it with the existing service tax charged by the center. The services industry in particular is unhappy about the increased burden of compliance.    The biggest beneficiary of the new regime will be the manufacturing and retail industry. While the manufacturers will gain by avoiding multiple taxes and a lower tax rate (approx. 10% lower), retailers who operate PAN India will be saved from the trouble of double taxation. Since goods will move freely from the point of dispatch to the consignee without bureaucratic taxes, corruption and the delays thereof, businesses will be able to plan their inventory and further reduce input costs.    While manufacturing in general will gain, SME’s who were exempted from custom & excise duties will have to bear the full burden of tax and this will lead to increase in the prices of the certain products.  Since the tax advantage available to SME’s will be off, it is likely that the larger players in those sectors will play dominant and will result in closure of many small units.   GST benefits e-commerce in a big way. The industry in the past faced several issues landing goods across states with tedious paperwork that deprived customers in some states of the products available in other states. With no entry tax, logistical issues for the industry are sorted completely and vendors will be able to ship across the country.   The make in India will get the boost with many foreign companies making the much awaited move to set up plants in the country. This will bring foreign capital and improve rupee value and employment conditions. It is anticipated that implementation of GST alone will add 2% to the GDP.  It is a Diwali for the end consumers, who will enjoy savings of at least 10% on their spend on goods.   GST tracks the value chain, collects tax at the point of consumption and provides credit for the taxes paid at the previous milestone. With the multiple stakeholders from the base to end consumer, government will be able to track the channels used for tax evasions. This will bring transparency in the system.  Most critics have talked about the flaw when a particular supplier has failed to comply; its customers will not be able avail input credit. Now this has been done to ensure that system enforces compliances, however, with little and no control and information of the counterparty, this will likely lead to misinformation and confusion.   With some Chief Ministers, voicing their discontent, even before implementation of GST, it is evident that there will be conflicts between the states and the center. With no incentive for fiscal discipline, states will invariably show budget deficits, making center responsible for every nuance in the state machinery.     Change is never easy. Let us bite the bullet as GST is a great start in the positive direction. While the debate is on, only time and experience will help us evolve. For a start, it is good to know that 1st of July, India will operate as a single market and that the stock markets are already on Bull Run anticipating growth. The stage is all set and everyone is bound to get a share of it. The headline on Economic Times today reads “unity among political parties and rollout to be showcased as the unifying force”. The key now is to be GST ready.
    422 Posted by Expert Advisor
  • History was created on 13th April 2017, when President Pranab Mukherjee signed and ratified independent India’s biggest tax reform – Goods & Services Tax.  The bill comes into effect on 1st of July 2017 and promises to unite India as a Union with one tax rate, thereby simplifying transactions across the country. GST Act subsumes several indirect taxes such as custom duty, excise duty, value added tax, service tax, central sales tax, octroi, entry tax, purchase tax etc. and brings them into one common umbrella called GST.   Businesses across the world are excited as they plan to set up their shop in the fastest growing economy in the world. Past three months have seen surge in startups being launched to help businesses and media shows and newspaper articles making people aware of the change. It is also a good time for the accounting firms and tax consultants as they see an opportunity that’s win-win in several ways for them and their clients, however, many are skeptical of the real gains and the complexity of implementation. Businesses are getting new software in place, while smaller players remain concerned about increased compliance requirements.  Let us take a look at some of the common points spoken for and against the bill.   It is generally believed that GST will reduce the administrative and compliance cost drastically for the supply of goods and services by merging around 17 indirect taxes in the value chain. Building consensus for the passage of the GST bill was always difficult in the democratic India.  Alcohol Electricity and Petroleum products are not covered under GST and will continue to be taxed as per the old system. It is a compromise. The challenge in itself was so big that the final outcome in many ways is no better than the existing framework of multiple taxes.  The GST is divided into three parts i.e. CGST, SGST and IGST, which will require businesses to file 3 returns per month or 36 returns per year.  Sounds Like the old wine in new bottle – isn’t it? Now consider this on top of it - A service provider such as an insurer will need registration under each state of operation for SGST.  Now compare it with the existing service tax charged by the center. The services industry in particular is unhappy about the increased burden of compliance.    The biggest beneficiary of the new regime will be the manufacturing and retail industry. While the manufacturers will gain by avoiding multiple taxes and a lower tax rate (approx. 10% lower), retailers who operate PAN India will be saved from the trouble of double taxation. Since goods will move freely from the point of dispatch to the consignee without bureaucratic taxes, corruption and the delays thereof, businesses will be able to plan their inventory and further reduce input costs.    While manufacturing in general will gain, SME’s who were exempted from custom & excise duties will have to bear the full burden of tax and this will lead to increase in the prices of the certain products.  Since the tax advantage available to SME’s will be off, it is likely that the larger players in those sectors will play dominant and will result in closure of many small units.   GST benefits e-commerce in a big way. The industry in the past faced several issues landing goods across states with tedious paperwork that deprived customers in some states of the products available in other states. With no entry tax, logistical issues for the industry are sorted completely and vendors will be able to ship across the country.   The make in India will get the boost with many foreign companies making the much awaited move to set up plants in the country. This will bring foreign capital and improve rupee value and employment conditions. It is anticipated that implementation of GST alone will add 2% to the GDP.  It is a Diwali for the end consumers, who will enjoy savings of at least 10% on their spend on goods.   GST tracks the value chain, collects tax at the point of consumption and provides credit for the taxes paid at the previous milestone. With the multiple stakeholders from the base to end consumer, government will be able to track the channels used for tax evasions. This will bring transparency in the system.  Most critics have talked about the flaw when a particular supplier has failed to comply; its customers will not be able avail input credit. Now this has been done to ensure that system enforces compliances, however, with little and no control and information of the counterparty, this will likely lead to misinformation and confusion.   With some Chief Ministers, voicing their discontent, even before implementation of GST, it is evident that there will be conflicts between the states and the center. With no incentive for fiscal discipline, states will invariably show budget deficits, making center responsible for every nuance in the state machinery.     Change is never easy. Let us bite the bullet as GST is a great start in the positive direction. While the debate is on, only time and experience will help us evolve. For a start, it is good to know that 1st of July, India will operate as a single market and that the stock markets are already on Bull Run anticipating growth. The stage is all set and everyone is bound to get a share of it. The headline on Economic Times today reads “unity among political parties and rollout to be showcased as the unifying force”. The key now is to be GST ready.
    Jun 22, 2017 422
  • 27 May 2016
    It is a myth that most of our corporate czars and west-inspired policy wonks love to perpetuate: India’s growth story is best scripted by its corporate sector – the big boys of domestic and foreign yolk. Here’s a reality check propounded with much passion by noted Swadeshi ideology S Gurumurthy, strangely (?) shunned by the Ivy League and Davos type economic shenanigans. The much touted and feted corporate sector has contributed a miserly 15% to India’s GDP. This too, after milking away a whopping Rs 18 lac crore credit from Banks/FIs. The story gets murkier. Its contribution to job creation is only around 2.8 million jobs.   To understand the big corporate sector’s utterly underwhelming performance – a story waiting to be told – we should remember that India needs to create about one million jobs a month. Moving ahead, the question arises? So where are the remaining 90% jobs coming from? It is the unsung, unheralded and unrecognized informal sector – one of the world’s largest conglomerate of small businesses. For avid readers of India’s pink press, all this might sound like some wayside teashop chatter. But that’s where the penny drops. These are actually the findings of a study done by Credit Suisse Asia Pacific India Equity Research Investment Strategy in July 2013. The study goes on to narrate in detail how the formal sector was pampered with $550 billion of foreign investment by debt and equity, apart from Rs 18 lakh crore bank credit for over 2 decades, and yet, its share to the GDP inched ahead by a mere 3%!   It’s revelations about India’s non-corporate sector is a story that has been for reasons best known to it, not broken by the Indian media. Consider: It is the unheralded non-corporate sector, i.e. the conglomerate of small businesses that has generated nearly 90% of the total 474 million jobs. It is this sector that contributes nearly half the national GDP too.   The international community is now slowly veering round to the view that India is a domestically driven economy, riding on its entrepreneurial capital which is one of the largest in the world. But this is not really a new revelation. Even as early as 14 years back, the the Global Entrepreneur Monitor Study (2002) had found that India (18 per cent) was ahead of China (12 per cent) and US (11 per cent) in entrepreneurship. The World Bank influenced economists prefer to air their pronouncements from their air-conditioned pulpits when even a pit-stop tour of India’s small industry hubs can disabuse them of their notions. A small town like Tiruppur for instance has an economy that is bigger than the thousands of crores of rupees being sunk into one mega project that can yield merely a few thousand jobs while Tiruppur provides at least ten times that.   In the current context where business runs on the power of an idea and value creation begins with an individual, Small is Big. The global market celebrates disruption. And disruption is best understood when you see the example of a giant monolith like Britannia Encyclopedia being felled by a little know upstart. That happened more than a decade ago. The Indian market is still young, but it has the experience of being an economy which has traditionally been built by small businesses. In India Small was always Big, even before the world discovered it, and no matter that our intellectuals wittingly or otherwise didn’t face up to it.
    375 Posted by Expert Advisor
  • It is a myth that most of our corporate czars and west-inspired policy wonks love to perpetuate: India’s growth story is best scripted by its corporate sector – the big boys of domestic and foreign yolk. Here’s a reality check propounded with much passion by noted Swadeshi ideology S Gurumurthy, strangely (?) shunned by the Ivy League and Davos type economic shenanigans. The much touted and feted corporate sector has contributed a miserly 15% to India’s GDP. This too, after milking away a whopping Rs 18 lac crore credit from Banks/FIs. The story gets murkier. Its contribution to job creation is only around 2.8 million jobs.   To understand the big corporate sector’s utterly underwhelming performance – a story waiting to be told – we should remember that India needs to create about one million jobs a month. Moving ahead, the question arises? So where are the remaining 90% jobs coming from? It is the unsung, unheralded and unrecognized informal sector – one of the world’s largest conglomerate of small businesses. For avid readers of India’s pink press, all this might sound like some wayside teashop chatter. But that’s where the penny drops. These are actually the findings of a study done by Credit Suisse Asia Pacific India Equity Research Investment Strategy in July 2013. The study goes on to narrate in detail how the formal sector was pampered with $550 billion of foreign investment by debt and equity, apart from Rs 18 lakh crore bank credit for over 2 decades, and yet, its share to the GDP inched ahead by a mere 3%!   It’s revelations about India’s non-corporate sector is a story that has been for reasons best known to it, not broken by the Indian media. Consider: It is the unheralded non-corporate sector, i.e. the conglomerate of small businesses that has generated nearly 90% of the total 474 million jobs. It is this sector that contributes nearly half the national GDP too.   The international community is now slowly veering round to the view that India is a domestically driven economy, riding on its entrepreneurial capital which is one of the largest in the world. But this is not really a new revelation. Even as early as 14 years back, the the Global Entrepreneur Monitor Study (2002) had found that India (18 per cent) was ahead of China (12 per cent) and US (11 per cent) in entrepreneurship. The World Bank influenced economists prefer to air their pronouncements from their air-conditioned pulpits when even a pit-stop tour of India’s small industry hubs can disabuse them of their notions. A small town like Tiruppur for instance has an economy that is bigger than the thousands of crores of rupees being sunk into one mega project that can yield merely a few thousand jobs while Tiruppur provides at least ten times that.   In the current context where business runs on the power of an idea and value creation begins with an individual, Small is Big. The global market celebrates disruption. And disruption is best understood when you see the example of a giant monolith like Britannia Encyclopedia being felled by a little know upstart. That happened more than a decade ago. The Indian market is still young, but it has the experience of being an economy which has traditionally been built by small businesses. In India Small was always Big, even before the world discovered it, and no matter that our intellectuals wittingly or otherwise didn’t face up to it.
    May 27, 2016 375