GST may lead to shutting of branches and setting up of shell firms

The soon to be implemented goods and services tax (GST) specifies that any interstate transaction will attract the interstate goods and services tax (IGST), however, the companies selling goods directly to the customers in an interstate transaction, on approval basis, will be liable to pay the IGST over a deferred period of six months.
  
The complex provision is likely to pose a challenge for the enforcement authorities, as the companies will be lured to close down branches and set up shell companies to avail the privilege of deferred payments of taxes, according to market experts.    
 
The following practice is most likely to be embraced by the companies into jewellery business, textiles and industries on which a higher tax rate is likely to be imposed under the GST regime, besides the industries that mostly operated in unorganised markets.  
 
While, market experts also emphasised on the additional need of working capital for the companies operating across India, as according to the provisions the goods will be taxed on the date of stock transfer and the input tax credit will be effectively utilised only at the liquidation of stocks by the receiving branch.