On July 1, 2017, India implemented the GST tax reform, marking the country’s largest tax system change since independence.

Chinese-funded enterprises in India face huge challenges, and their response strategies have become the focus and attracted widespread attention.

India's tax system used to be complex. Before the implementation of the GST reform, the central and local states were responsible for formulating tax laws and collecting taxes respectively.

The central government collects direct taxes such as corporate income tax, etc., and indirect taxes such as central consumption tax.

Local states charge value-added tax and the like.

The tax systems of each state are different, and there are special taxes and fees on cross-state transactions, which makes business transaction costs very high.

Under such circumstances, GST tax reform is imperative.

Its reform is to simplify the entire tax system and make taxation more reasonable.

The content of this GST tax reform is very critical.

For intra-state circulation, the central government levies CGST and the state government levies SGST.

IGST will be levied by the central government on inter-state transactions.

Seven union territories in India have not yet implemented the state-level GST system and will introduce the UTGST system in the future.

This tax planning covers all regions of India and has a significant impact on the original tax structure, making India's tax system more unified as a whole.

First, from the perspective of financial costs, the new tax reform may change the tax burden structure of enterprises.

If an enterprise operates on a larger scale in areas with complex tax situations, then after the reform of the GST tax system, it is likely that cross-regional taxes and other additional tax burdens will be directly reduced.

If we have previously explored tax optimization strategies based on local differences, then the Goods and Services Tax may subvert the existing optimization model, which requires us to re-examine and adjust the cost calculation method.

In addition, the challenges of financial accounting have changed, and financial personnel must re-master new tax regulations to ensure the accuracy and legality of tax payments, and the cost of compliance may also increase in the short term.

From the perspective of capital flow, the GST tax reform may affect the speed of corporate capital withdrawal.

If a company is at a disadvantage in the industrial chain, there will be differences in response speed between upstream and downstream companies when responding to tax reforms, which may lead to delays in the circulation of funds after the delivery of goods.

In terms of operational processes, before the tax reform, each enterprise needs to independently handle and declare the taxes of each state. After the tax reform, they need to follow unified or new GST declaration and management regulations.

In the field of logistics and transportation, it involves transportation taxes and fees between different provinces. The ability to quickly complete the payment of the new Goods and Services Tax (IGST) and efficiently complete the transportation of goods will have an impact on the efficiency of operations.

Chinese-funded companies carrying out manufacturing operations in India face supply chain management challenges. The raw material procurement and product sales networks of these enterprises may need to be adjusted and optimized due to adjustments in tax policies of various states during the GST tax reform.

Failure to improve quickly could lead to supply chain disruptions or increased costs, such as price changes from certain parts suppliers in the international market.

In terms of market expansion, if Chinese companies originally planned to enter many states in India, the implementation of the GST tax reform has reduced the cost of inter-state transactions, which may provide favorable conditions for new market expansion.

However, if competitors adapt to the GST tax reform faster, they may seize the opportunity.

When expanding business in India's smaller states, those Chinese companies that are the first to grasp the specific provisions of the Goods and Services Tax (GST) reform will be able to build their retail networks more quickly.

From the perspective of market pricing, adjustments to the tax system have forced domestic companies to reconsider their product pricing strategies.

In India's mobile phone industry, if some Chinese brands fail to respond promptly to the cost changes brought about by the GST tax adjustment, their products may be priced too high or too low, which may have an adverse impact on their market share.

In terms of financial strategy, companies need to re-evaluate the financial evaluation and budget adjustments of their business in India.

A financial response team can be formed for the GST tax reform to conduct a detailed analysis of the costs and benefits brought about by the policy changes and incorporate the new tax burden system into the financial forecast model.

At the operational level, Chinese companies need to conduct a detailed inspection of Indian business processes and formulate a set of improvement measures to deal with the GST tax reform.

For example, in logistics management, we cooperate with logistics suppliers that can adapt to GST faster.

If your company does business in India, do you think it will bring more opportunities or challenges in the face of the major goods and services tax reforms implemented in India?