GST chaos sets in, shortages a possibility in first week

By Masood Hussain

SRINAGAR: In the afternoon “discussion” on GST with the media persons, Finance Minister Dr Haseeb Drabu foresaw a “wholesale chaos” for a few months because the new tax regime is a major “policy disruption” that intends to change the business is transacted in India. He anticipation serious crisis for the state, he leads in the GST Council, in case J&K does not join the new tax regime that state’s main rather only market is adopting.

But Drabu is perhaps unaware e that in J&K chaos has already set in, even at a time when the coalition government is still “evolving a consensus” to avoid “hush hush extension” of the new tax system. Major FMCG players are facing severe crises as they will be running short of supplies in the very first week of July. GST is being rolled out across India by midnight of last day of June, excepting J&K.

“Nobody understands our problem,” a senior executive of a major MNC told this correspondent. “There has been no billing across India from our offices since June 21 because we wanted to exhaust the stocks in all states so that new systems are implemented and started on July 1.” The executive talked on the condition that he is not quoted because he is not authorised to talk.

This was done under the presumption that all the states in India will have a single tax system from July 1. “All the MNCs in India had already created the billing software that adopts the GST system and it is currently being tested in all the companies,” the executive said. “We also got the new SAP patches but we are unable to understand how to manage a state where things have not changed, not till date.”

MNC like ITC, Britannia, Hindustan Unilever Ltd, Nestle, GPI, PNG, Narico, Recket Bankizer and many others are the major players in India’s FMCG. They all are facing the same problem. “We lack experience to manage a system in which we buy from one market and sell in another market having two different tax systems,” the executive explained. “In absence of GST we may not be able to get the input tax to the suppliers we work with. So what to do?”

All the local area executives of these companies are in touch with each other and exploring ways and means to keep the pipeline open. “We have exhausted almost entire stocks in Ladakh and in Kashmir we may last for 10 days if we somehow manage some supplies in next 24 hours,” the executive said. “Then what do we do?”

In absence of GST, the companies are facing added pressure from their sales centre to supply more. Hoarding supplies is a tradition that has been culturally used in Kashmir to mange crises, and earn a bit more (read profiteering).

Finance Minister Dr Haseeb Drabu talking to media in Srinagar on GST. Photo: J&K Government

But this is not the issue about consumption side alone. Even the manufacturing side has a serious problem. All the major companies that have manufacturing facilities in J&K (read Jammu, Samba and Kathua) will continue production but will not be able to ship it to the market outside J&K. Insider in the manufacturing sector said even facilities that produce for themselves cannot bill it because GST is still not in vogue in J&K. This remains to be seen if these facilities will add to their inventories and stock or would simply stop production for a few days.

Interestingly, some of the major MNCs having some manufacturing facilities in Jammu too. But these are product specific facilities where volumes are so huge that J&K cannot consume even 10 percent in one year.

The government is busy evolving a consensus and the APC (all party consultative) group under former finance minister Muzaffar Hussain Baig is meeting for the third time on Thursday. The opposition is seeking clear drafting of what government is going to do but the government says they will assure the concerns are addressed but the actual drafting is the property of the house. Everybody participated in the first APC as NC and Congress stayed away from second. It remains to be seen what happens on Thursday.

Though both the sides talk almost in the same language on GST, it is politics that keeps the issue wide open. Drabu said the government is keen to evolve a consensus because they do not want GST to be misused as an ignition to a fragile situation that prevails in Kashmir. “We assure special GST but not a separate GST because that will require massive changes in the constitution which we do not want,” Drabu insisted. “We are not changing even an iota of constitution.”

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