Kejaria Q4 transcript GST Contestation
How did things work before the GST?
State tax - different tax used to ask for different brackets. The system was very complex
Small players show only part of the revenue in the book and pay tax in that process they could save cash in the overall Tax they pay. This they could pass on as a discount or take a bigger profit from the overall operation. This tax avoidance had a price edge for unbranded players to enjoy - a price discount of up to 40%.
What Happened after GST implementation?
With GST it is a single Tax for the nation. The government is not bothered about what companies used to do before, If you are not GST compliant and they get caught, life is finished. The important point is not just that GST implementation has happened but even compliance and monitoring are very strict.
With GST, companies like Kejaria are fully Tax compliant. Companies which avoid Tax the life are difficult that has reduced the number of new companies which are coming up.
What are the edges for the large players? Why will they benefit from GST?
The important thing is companies that skip paying taxes have come down drastically as this is very difficult to hide your sales. the 40%price edge that small players with tax compliance could enjoy has come down to 20%.
The reduction in the price difference between the organized and unorganized players brings the level playing field for the branded players. The large player with the scale of operation get better traction to grow better in the market.