As the Goods and Services Tax (GST) rolls out from July 1, businesses are busy preparing themselves for the final stages of implementation of the biggest indirect tax reform ever in India. GST is going to have an overall impact on the prices of various commodities, investment opportunities and the business operations, in all sectors of the economy.
For a proper, seamless transition to the GST regime, proactive management of resources and punctual groundwork should be done beforehand. Checklist for every business to ensure Pre-GST readiness before the roll-out date:
- GST migration
- Technology infrastructure
- Invoice preparation utility
- Accounting ERP
- Excel/spreadsheet software:
- Service provider
- Selecting an application service provider
GST is a procedure-driven system where timely and accurate compliance are necessary. We list important actions you should keep in mind as a GST-registered firm.
Decide if the product/ service you are buying or selling is subject to levy of GST. Check the list of goods and services exempted from GST. On the rest, the GST is leviable. The overarching principle is GST is applicable on all made in India supplies of Goods or Services by a taxable person for business purpose and imports.
Know who will pay the GST in a transaction? Generally, the supplier is liable to pay the tax. But many exceptions to this rule exist. So, if you are buying from a firm not registered with GST, you have to raise a self-invoice and pay tax under the reverse charge mechanism. The importer of the goods also pays the GST. An e-commerce operator has to pay tax collected at source (TCS) @1 per cent on behalf of firms selling goods on its website.
Charge GST on supplies: As a GST registered firm, you must charge GST on all taxable supplies at the prevailing rate. Use Harmonised System (HS) of nomenclature along with the description for classifying the goods.
File returns on time: The submission of correct and timely return is the most crucial responsibility of a GST registered firm. A GST registered firm will have to provide information to GSTN in electronic format at regular intervals. As a GST-registered business, you must submit your GST returns one month after the month in which supplies took place. You need to file monthly, quarterly and annual returns. Any wrong filing of return would result in blocking of money and possible loss of business. Annual return is to be filed by December 31 of the following financial year. Incomplete returns are considered invalid returns.
Pay tax and claim input tax credits: The GST charged and collected at the time of supplies is known as the output tax which must be paid to the government through the GSTN. The GST paid by you on business purchases and on import is known as input tax. You can claim input tax credit on such purchases if your firm satisfies the conditions for doing so.
Keep proper business and accounting records: You need to keep all business and accounting records for at least five years. This requirement remains even if your business ceased or is de-registered from GST. The accounts and records must be maintained in electronic form.
Inform GST authority of changes: You need to inform the GST authority within 30 days after any change in your business circumstances. These changes include: Change in business registered address or mailing address, Change in business name, Change in business constitution or ownership etc.
Reconcile account at time of de-registration: When your GST registration is cancelled, you need to account for GST on business assets held on the last day of registration. These assets include inventories, fixed assets, non-residential properties and goods imported under the various GST schemes.
You must ensure that not only you but firms involved in the business transactions with you file returns and pay tax on time.
If they fail, you will not get the input credit due and suffer financially.
With GST now in place, it is time for you to ensure you catch up to speed and seamlessly adapt it in your business as other taxes such as VAT, Excise, service tax, etc. will disappear giving way to one single Tax. GST would bring in significant changes to business processes. Depending on the operating size, geographies, and sector, the changes would be substantial and may require proactive planning with a time-bound action plan.
The procedure for registration for GST system portal is as follows
1 – Paperless procedure: The whole system of registration will be paperless; hence no hard copies shall be accepted by the department. Further, all the aforesaid registered taxpayers will need to visit the GST portal.
Further, it is mandatory for every entity to register for GST, if the turnover is more than 20 Lakhs – the exemption limit.
2 – Provisional ID and password: Business entities must obtain provisional ID and passwords which are provided by your concerned state authorities.
3 – Documents and Information required: Be ready with these to get GST ID.
For the process to go hassle free for you, please ensure that the following information is handy.
- Provisional ID as explained in point 2.
- Password as explained in Point 2.
- Valid email Address (it should not be off professional – Use your own email ID)
- Valid Mobile Number
- Bank Account number
- IFSC code
Please ensure the following documents are available with you in digital format as per specification mentioned.
- Proof of constitution of Business:
- In a case of Partnership deed – Partnership deed (PDF or JPEG in the maximum file size of 1 MB).
- In a case of others: Registration Certification of the business entity (PDF and JPEG format in a maximum file size of 1 MB).
- Photograph of Promoters/Partners/Karta of HUF (JPEG format in a maximum file size of 100 KB).
- Proof of appointment of authorized signatory (PDF and JPEG format in the maximum size of 1 MB).
- Photograph of authorized Signatory (JPEG format in a maximum file size of 100 KB).
- Opening page of Passbook/Statement containing the following information:
- Bank account number
- Address of branch
- Address of account holder
- Few transaction details (PDF and JPEG format in maximum file size of 1 MB).
Documents may slightly vary for you, Please see as per your registered company.
Additional Documents as per your legally registered entity are mentioned below:
OPC (One Person Company):
- MOA/AOA and Certificate of Incorporation of Company
- Mobile no and Email Address of Applicant Director and Nominee Director
Private Ltd Company/Public Limited Company:
- MOA/AOA and Certificate of Incorporation of Company
- Partnership Deed of Firm
LLP (Limited Liability Partnership):
- LLP Agreement and Certificate of Incorporation
Trust/Society/Section 8 Company:
- Bye laws / Moa of Organization
ADDITIONAL CHECKLIST FOR GST COMPLIANCE
1. Understand your business process in GST scenario and classify which transactions are goods and services.
These transactions will be most affected by GST. Integrated Goods and Services Tax (IGST) model of taxation has been adopted for interstate transactions where Center would levy IGST which would be CGST plus SGST. Make sure that you thoroughly understand and bifurcate your transactions. This will help you in understanding the overall impact of GST on your business.
2. Classify your transactions under goods and services, and place of provisions
After classifying the goods and services related transactions, recognize which provisions will be applicable to them. GST is a just broad topic which comprise of many provisions for various goods and services. These provisions differ with location, industry and type of commodity. Thus, identifying what will be applicable to your business beforehand will take you a step further in GST compliance.
3. Define the change in business in stages of pre, during and post manufacturing
GST is surely going to change almost all your processes – be it manufacturing, trade or supply chain. Reorganized manufacturing plants and warehouses would reduce the primary freight charges. GST would eliminate the existing penalties on interstate sales transactions and facilitate the consolidation of vendors and suppliers. Before GST sets in, make a calculation of how your various functions are going to change and operate.
4. Understand your logistics model – depot and branches.
GST is a destination based tax. There will be a greater impact on logistics and the charges/taxes levied. After GST implementation, your warehousing and logistics decision will be based on economic efficiency such as costs and locational advantages vis-a-vis key customers. You may have to strategize your supply management strategies in a manner that minimizes cash flow impact.
5. Define your sales policies – schemes, discounts and returns
Should you charge GST to your customers on the items or services you provide? Would your pricing still be competitive? All such questions are going to affect the selling price of your goods and service, discounts and returns you provide to your customers and other such pricing policies. Defining your sales policies in compliance with GST will help you maintaining your profit levels and customers.
6. Review your contracts – Amendment to current POs
Though GST is still few months away, make sure that you make the required amendments in your current POs and contracts. It is advisable to define the terms and conditions to meet GST requirements. will make your work easier in the future.
7. Review your suppliers – nature of goods, place of supply, contractual terms
Contract terms, not only with your customers but also with your suppliers need to be revised. With GST regime, the supply chain network design would be more flexible. GST would lead to club many small warehouses and have bigger, fewer, and highly efficient warehouses. Thus, changes have to be made in contracts with your current suppliers at various places. Make sure that you review your suppliers, what and where they supply and the mutual contracts.
Given the sparsity of time, being at the cutting edge of technology is now the only way to adopt this change smoothly. Want your business to be GST ready? Our team is here to help you navigate this change.
GST COMPLAINCE CHECKLIST
- Detailed working of closing stock as on 30th June 2017 – make sure to file the return for the tax period ending on 30th June, by the appointed time
- Apportion your closing stock into quantity and item rate per quantity
- Classify stock according to rate, purchase type (interstate or intrastate), duty paid or exempted
- Compare your books with values shown by your debtors/ creditors as on 30th June 2017
- File the form TRAN-1 by 28th September, and TRAN-2 on a monthly basis until December. This is an important process for claiming ITC on old stock
- Collect Form-C, Form-H, and Form-I for the stocks on which ITC is to be claimed
- Finalize your Books of Accounts along with stock details provided to banks/ financial Institutions
- Provide your GSTIN to all your suppliers and collect GSTIN from all customers
- If registered as centralized service provider, apply for migration for such states where your business may be operable
- Make a list of rates under GST for all goods that you deal with
- Make a list of all such on which reverse charge will be applicable
- Ensure that all debit/ credit notes are serially numbered
- Check that your existing accounting software is integrated with your GST return filing software
- Make sure that your invoicing solution is in line with the formats and rules for invoicing under GST. Also, be sure to check the invoicing series applicable to your product
- Ensure that you are sending out a tax invoice for supplying taxable goods and services, and a bill of supply for exempted, nil-rated, and non-GST goods and services
- Decide and prepare a list of Place of Supply for all your business activity
There are so many complicated provisions of the law that if an enterprise tries to handle everything on their own, then they are more likely to make mistakes. ASPs will help the businesses understand GST in a better manner so that they will be able to focus on their business rather than tackling GST issues. To prevent any business disruptions in the beginning and ensuring that no business is lost and fool-proof GST compliance is achieved, businesses should definitely choose an ASP. Now is not the time to be passive and adopt a proactive approach.