Representational imageKochi: The switch to the Goods and Services Tax regime may have an unintended consequence in the market in the initial days. Essential items, including medicines, may be out of stock for a short period at least as merchants hold off on stock-taking thanks to uncertainties regarding the new system.
Neither the government nor the traders are fully prepared to cope with the changes in the tax structure. Even Union finance minister Arun Jaitley has warned of hiccups in the system in the early days.
A major chunk of the manufacturers, distributors and vendors are busy cutting down their inventories because they are not clear about the tax credits on existing stocks.
The fast-moving consumer goods (FMCG) market has ground to a halt as distributors and traders have stopped accepting the supply from manufacturers. Retailers are into stock clearance by offering discounts and promotions.
Cement and paper merchants are also holding fire ahead of the GST implementation.
The apprehension is evident across the sector. Several pharmaceutical retailers have warned their regular customers to stock up on essential medicine.
The preparations for the GST have affected the manufacturing sector in multiple ways. Major companies insist that their distributors abide by the GST Act but not all distributors are ready for the shift yet.
Companies which hope to benefit from lower taxes under the new system have halted production and the procurement of raw materials until July.
The manufacturing sector has slowed down for at least two weeks as companies wait to start on a clean slate on Saturday.
The banking system is not ready for the GST yet, the Indian Banks Association has informed the government. Banks are required to bring about changes in their information technology infrastructure to suit the GST because some of their operations are still out of the centralized systems.
