At the same time that a high tide at the Gateway at Mumbai was throwing people off-guard, a group of people at the Taj were nonchalantly dissecting the two big reforms that have created a flutter in our economy.
This group was busy discussing the trends in mergers and acquisitions, and how the passage of GST and the Bankruptcy law has opened new opportunities for mergers and acquisitions, basically the way companies could improve their net worth by either acquiring or selling assets or distressed parts.
Rekha Bagry, India's first woman tax partner, currently with Price Waterhouse Coopers, was moderating this panel discussion.
Although post-GST most other business folks remained hard pressed, Bagry put up with the request for a quick byte with a smile.
She was prompt in stating that nothing had changed in the two weeks since the GST got implemented, stressing that GST was "good", but "did have some teething problems."
"It (GST) is good because from an overall perspective, the government wants to bring everything under the white economy," she explained. "There is going to be considerable pain and a mindset change is needed to overcome this. Those who have been doing business outside the tax net will be the ones to resist. In fact, the GST has not only resulted in challenges for businesses but also for the people working for them."
She gave an instance of this. "With the GST coming into place, 10000 people working at the toll-booths are out of jobs. They don't know what to do. Now what will they do? There are commissioners and government officials on the ground conducting awareness drives. But we need to do more on the people side," she emphasised.
Bagry observed that the GST will not be a challenge for the large firms, but startups and SMEs could potentially end up on losing opportunities.
For many, July 1 would have seemed a scary day owing to the hype. But in fact it is September 10 that could potentially be the judgment day. It will be the day when firms will have to file their first invoices. Most financial heads that Sify.com spoke to admitted that it was the hurdle and litmus test.
Bagry conceded that it was indeed D-Day. "The 10th of September will set the tone as far as GST is concerned. It will test whether systems are fine, since everybody will sit for un-reconciled numbers and payment differentials. The major question on this day would be on how robust ad supportive the core IT backbone is."
Dealing with defaulters
Her face lit up when she was asked about the recent bankruptcy laws. Bagry was optimistic that litigations such as the recent one involving Essar (which saw Essar Steel contest the RBI's directive to a consortium of 22 lenders to initiate insolvency proceedings against Essar following its high Non-Performing Assets) will be resolved soon and become case studies for dealing with defaulters.
She said, "IBC (Insolvency and Bankruptcy Code) is exciting but we have to be realistic too. The legalities have to be driven with an intention to arrive at a conclusion. Some of the easement on transaction tax and other tax issues will go a long way to help. But, my only concern is such processes can be misused."
About the insolvency case involving Essar, who have defaulted on Rs 42000 crore of loans, she said: "They (Essar) have challenged the entire thing. When I have lent my money to you, it is my prerogative to decide how to recover it. Here you have an ordinance, where the RBI provides directions to direct banks to get the borrowers into the insolvency procedures, and that fundamentally itself is a big change."
When asked if other defaulters could end up following the Essar example, Bagry answered, "The litigation is not surprising at all. Somebody someday was to take it to court. But then, there are also some who are happy and co-operating with the proceedings. Moreover, Essar is not a small company, and they were not going to take it that easy too."
Coming back to GST, Bagry found the reform to be in the same vein as when the country changed from excise to modvat. Post July 1, the fate of many of her colleagues has positively changed, she observed.
"Most of my indirect tax colleagues have been burning the midnight oil, and toiling for last many months, and our efforts are still going on," Bagry said.