CEO says the govt’s preparedness for GST rollout was nowhere close to what was claimed and this showed in the GDP growth numbers
Mumbai: Almost three months after the implementation of the goods and services tax (GST), R. Shankar Raman, chief financial officer of infrastructure company Larsen and Toubro Ltd (L&T), is of the opinion that the government’s preparedness for rolling out the tax reform was nowhere close to what was claimed and this found reflection in the slipping GDP growth numbers.
In an interview, Raman said one should brace for an across the board spike in working capital requirements of India Inc. in the September quarter and warned that things are unlikely to improve for the rest of the financial year.
What impact has the implementation of the goods and services tax (GST) had on L&T’s operations?
We have been working very hard to improve our working capital-to-sales ratio from 26% to 19%. In the June quarter, too, we managed to keep it around 19-20%. But we didn’t factor for GST glitches. I remember the government saying that it was ready but the private sector wasn’t. But today, the government is not ready. The systems are not ready. It is extending the time for filing returns. Things are still being done manually. Today, we are paying GST after computing it ourselves, instead of the government architecture telling us how much to pay based on our purchases and sales.
As and when the system configures this and starts coming out with the figure, god knows how different that would be to the figure we have arrived at. Then there will be a whole host of issues in reconciling the two numbers and the first reaction of the government will be that private sector is cheating.
Given the revenue authorities’ best case assumptions that all of us walking on mother earth don’t want to pay tax, it’s going to be a huge problem to reconcile GST that the industry pays and that the government’s system will throw up. So, according to me, this pain is going to continue for another six to nine months and consequently, working capital is going to get blocked. For instance, even many of our customers in the public sector are, today, not accepting the bills that we raise, including that for GST, without an elaborate check of whether or not all the input taxes that we have paid have got reduced.
Small and medium enterprises (SMEs) too are really struggling under GST. I expect the volume of throughput from SMEs going down and hence I am not surprised with GDP growth slipping.
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