With the recent approval for the roll out of GST, it is time for the industry to focus on the various tasks required to be undertaken for an easy transition. In order to carry out an uninterrupted business, it is essential to take all the steps necessary for the implementation of GST for your business. GST is said to change the way of conducting a business, it aims to make the business easier and simpler. Keeping this in mind, various tasks have been listed below to help with a smooth transition from the current tax regime to GST.
1. Review of the business processes to identify the impact of GST and the transactions that are being processed: GST will have an impact on the business processes, profitability, capital expenditure and investments across all the industries. Under the GST, the tax will be applicable at all the stages within the supply chain. From the customer point of view, the biggest advantage will be the reduction in an overall tax burden. Hence, the assessment of the impact on the revenue, pricing and costing of the goods, working capital and availability of the credit should be thoroughly understood before any changes are made in the books of accounts. GST will allow a credit of certain items, which are not available under the current laws. Therefore, an assessment of the business processes would help make the procurement easy and enable to optimize credits.
2. Make amendments to the contracts after carrying out discussions with suppliers and customers: Every business should initiate a discussion with the suppliers and the customers to ensure that they are aware of the upcoming changes in terms of receipts and the payments. This will help overcome any transitional challenges and ensure that the suppliers are aware about the benefit from GST in terms of input credit. The contracts with the suppliers, customers and businesses should be reviewed and necessary amendments should be carried out to ensure recovery of any additional tax.
3. Accounting and reporting requirements: It is of utmost importance to identify the accounting and reporting requirements under the GST so as to ensure that the current system is updated and any modifications required have been carried out. Some of the essential changes required in terms of accounting and reporting include:
a. A change in the taxable event as compared to the current indirect tax laws. In the GST regime, a taxable event would be the ‘supply’ of goods or services in the entire value chain.
b. CST (Central Sales Tax) which is a part of the interstate purchase of goods, is not eligible for credit at present. The same will be abolished and replaced with an integrated GST which is creditable.
c. A destination based consumption tax principle is applicable, which means that the tax would be levied at the place of consumption of goods and services. Therefore, for every transaction, it is important to ascertain the state where the supply is being consumed.
4. Changes in the technology to support GST: Considering the fact that the GST Structure aims to provide a strong information technology platform for the administration and compliance requirements, every business must assess the changes required in the technology to facilitate the GST compliances. All the existing indirect tax functions will require modifications to align with the GST structure. A couple of changes include the particulars to be included in the invoice, purchase orders, etc., the creation of new ledgers and the changes in vendor master to include the GST registration number. The GST return formats are also different as compared to the current return formats for indirect taxes.
Systems need to be updated to incorporate the new return formats and details as prescribed.
Above would facilitate transfer of eligible credit from current regime to the GST regime and file the first GST return and make GST payment as per the prescribed timelines. Considering date of implementation as 1 July 2017, taxpayers who have not started preparation for the transition will need to act fast on the above to ensure GST compliance by 1 July 2017.
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