Additional working capital requirements

 

Additional working capital requirements

The entities must evaluate their working capital requirements in the post - GST regime so that they may approach to their banks in advance for additional credit facility. Additional working capital might be required due to increase in investment in taxes for the following reasons:

(1)   Abolition of Statutory Form C, I, J specified under the Central sales tax Act: Presently, taxpayer can purchase goods from other states at a concessional rate of 2% or at nil rate, as the case may be on the strength of Central Forms, however, under the GST, these goods would be purchased only after payment of full GST. of course, the working capital requirement of the buyer, during the Golding period of stock, in respect of taxes paid.

(ii)  Presently, stock transfer from one state to another take place free of tax against Form F. however under the GST stock transfers by a dealer from one state to its branch/agent located in other state would be treated as interstate supply and be subject to IGST. https://vdbaa.com/fullpage.php?section=General&pub=539318&ga=g

(III) With the abolition of Form H, sale and purchase between the penultimate exporter and the actual exporter would take place only after payment of full GST. The amount of tax so paid will be claimed as refund by the exporter on a future date.

(iv)  Sale in the course of import and high seas sale, which are exempt presently, would be made only after payment of GST.

(V) Garment exporters are purchasing fabrics and textile without payment of tax; thus, their investment in taxes is confined only to the extent of tax paid on accessories and packing materials. Under the GST, since fabrics would he taxable, their investment in taxes would increase considerably by the amount of tax paid on these goods.