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Demonetization & GST Cascading effect on the Cleaning Business

‘Lifting customs will hit Make in India initiative’

“We had no impact on our cleaning business due to demonetization. FMCs dealing in cash would have faced difficulties due to shortage of cash. However, it should help companies reduce cash transaction and this should bring about fair practices into this industry.

Speaking of customs duty, I don’t see government lifting customs duty on imports of cleaning equipment. Lifting customs duty will not be in line with Make in India initiative.

In fact, post GST implementation, the net price of imported cleaning equipment to customer will reduce. The distributor or importer will be able to pass on duties to end customer who can further claim it back. This will help to reduce gap between manufactured equipment in India and imports.

Cost of equipment will reduce for FMCs as they will be able to take GST benefit as there will be no excise or service tax post GST implementation. I believe that will give a boost to the cleaning industry.”

Sumeet Bansal, Deputy General Manager-
Marketing, Godrej & Boyce Manufacturing Co. Ltd

[box type=”shadow” ]Irrespective of the present hardships and uncertainties, the industry is highly hoping that things will turn tables in the long run. This positive sentiment will certainly smoothen the path ahead and at the same time strengthen the industry internally.[/box]

‘Swachh Bharat will get momentum’

“Yes, it is true that demonetisation slowed down the cleaning industry, especially in the auto and retail sectors which is largely dependent on cash circulation. With contract labour, I do not see major issues considering the Government initiatives of Jan Dhan accounts and Aadhar cards. Demonetisation did impact business temporarily in the end of the last quarter of 2016 and the next three months but recovery has started in 2017. I think this was a short-term turbulence and the steps taken by the Government to clean the economy will benefit also the cleaning industry in the medium to long run.

As I said, though there were hardship for small dealers and certain sectors, in the long run, it will bring in transparency and efficiency. Further with more funds coming in the Government coffers, Swachh Bharat Mission will get further momentum and help our industry to grow and become more mature.

While, I do not think the Government will lift the Basic Custom Duty, but with GST coming in, Industry will enjoy a small relieve due to tax credits for custom duties paid which is a cost today and imports will become more competitive. The Cleaning Industry will have a mixture of positive and negative impacts. The most important positive impact will the availability of seamless tax credits, improved and faster logistics, free movement of goods throughout India and a simpler tax structure. The possible negative effect will be on cash flows and increased compliance burden.

The key to successful GST implementation is to start early analysis of the required changes and prepare an action plan. As for most of us the tax changes are a very complicated matter, I strongly recommend that companies should hire consultants who help them to implement all the changes on time as 1.07.2017 is the deadline. Businesses should start to look into required changes on pricing policy, credit policy, inventory, cash flow and logistics optimisation which will be the key strategic areas to be taken care off. IT change implementation and trainings for the employees hold significant importance to smoothen this process.”

Ruediger Schroeder, Managing Director, Karcher
Cleaning Systems Pvt. Ltd

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