Without uncertainty, the initiation of GST SYSTEM will end up being the most critical and extensive taxation change that India has ever observed. It will affect all trades and companies, some more than others. All the while, it will make a typical India as a commercial center and decrease the falling impact of charges. Precisely, GST SYSTEM will subsume all indirect tax and make taxation easier and convenient. As GST SYSTEM is new for the Indian companies and it is going to take some time for the proper execution under the regime so the companies should start preparing for the GST at earliest.
In perspective of the significance of Goods and Services tax, here is a rundown of 14 stages that corporate substances can take to execute GST SYSTEM in a bother free way.
Should Settle on GST SYSTEM Programming Modules
As GST will have a greater amount of an effect on information administration and tax collection, associations need to investigate their present adaptations of fund arrangements and plan in like manner. The redo practice is not going to be a standard programming patch that can be connected to their frameworks at one go. Organizations should be clear about which modules of their product will be influenced, and how they will connect the progressions with GST.
Update ERP frameworks
Keeping in mind the end goal to assess new expense structures, other cost suggestions, organizations need to redesign their ERP frameworks. This is fundamental to oblige the complexities of computing GST.
Understanding with GST Network
GST Network (GSTN) is the one-stop impose entrance that the Government has set up to give charge documenting and input credit administrations. Organizations need to prepare their back offices and acclimate them with the new controls by holding GSTN workshops and sessions.
Patch up IT and Accounting Frameworks
Companies need to assess the effect of GST on IT and bookkeeping frameworks. Banding together with programming organizations can make the move simpler and faster.
Adapt Prescribed Procedures of Different Nations
Companies can set themselves up better for GST usage by picking up a comprehension of best practices of different countries as to united backhanded duty frameworks.
Draw in with the Government
Bigger organizations can connect with the legislature, the finance ministry and different councils of business for a comprehension of GST to guarantee smooth execution and consistency. They can request point by point revelations of principles and methodology.
Redesign Backend Frameworks
Companies need to keep their backend frameworks overhauled with a specific end goal to move to GST flawlessly.
Larger multinationals ought to urge their smaller providers to get ready for the change for GST so as to make supply chains more proficient.
Take Representatives into Certainty
As organizations find a way to prepare for GST consistency, they may experience an interruption of inside procedures. They have to take their workers into certainty and clarify this is an impermanent marvel, and things will become alright soon.
Prepare in Advance
Getting prepared for GST consistency is an immense test. Organizations need to continue checking their advance every once in a while so as not to fall back.
Manage the Policies as Per GST
The organization has to fix and abide by the new policies being incorporated with strictness.
Awareness or Education to the Employees
Exact education regarding the new tax regime will help the organization to run smoothly and error free. The organization should consult some experts who could guide the employees regarding GST in a broader way.
Analyse Organisations Requirement
The organizations should take note of their requirements that will be mandatory under the GST regime. This will help the organization to figure out the loop holes ahead of the GST implementation.
New Legal Compliances
After GST tax compliances, the tax structure will change as per the new tax regime. As in GST, there is monthly return and there is a separate provision for annual return filling and audit in GST. Therefore, companies should be ready for the new compliances.
4 Easy Steps to get your business GST SYSTEM ready
Is your business GST ready? It is accepted that GST is not merely a tax change but business change. GST will impact in all functional areas of an organisation such as Finance, Product Pricing, Supply Chain, Information Technology, Contracts, Commercial etc. Thus, it is very important that all these functional teams are well aware of GST.
Step1: Sensitise the Business System:
Organisations should make sure all their departments are aware of GST and the changes that will have an impact on their business. While there is a lot of information out there, it’s important to identify what is important to read or refer to. Key aspects of GST regime are available in public domain:
Overview on GST
Model GST Law
Draft Rules and Formats
Organisations can sensitise its employees based on above documents available in public domain. Organisations can also sensitise its entire system which includes, vendors and customers as well. An early training to the employees, customer and vendor will give them the sense of involvement in discussion much before the GST legislation is in place.
Step 2: Understand GST’s Impact on Operations:
GST may provide opportunities, but at the same time it may bring in threats. Given this, organisations should do the impact analysis for all its operations and an idea of how its operations will be impacted due to GST.
All departments such as Finance, Supply Chain, Product Pricing, Human Resources should be involved in giving their inputs and suggestions. Organisations should also think about the tax compliance. For example, currently Service tax assesses file two returns annually. In the GST regime, this assesse could be required to file 61 returns (5 returns per month, plus one Annual return). A simple impact analysis would have thrown up this fact and would flag the Human Resource department to inform and educate the effected people.
Step 3: Transition in Information and Technology system:
IT is a key enabler in this process. When, GST is introduced, if nothing else, the IT systems should be ready and running or else business will come to a standstill.
For service providers, it is going to be a challenge to apply CGST and SGST or IGST, as it will depend on place of supply rules (whether it is Inter State or Intra State). Thus, providing a Place of Supply Rules in your IT systems can impose a major challenge. To avoid the disruption of business, it is advisable to do an early study to understand how the migration can be done for GST.
Step 4: Design Business Strategy
To gear up for GST, organisations may need to identify an alternate business strategy to ensure smooth transition. As India becomes a common market, there may not be any extra cost involved in Inter State procurement vis-a-vis Intra state procurement, hence the supply chain strategy may undergo a major change. Organisations may re-visit their pricing strategy as competitors may reduce their price to pass on the GST benefits.
Some Amazing Things to Make Your Business Ready for GST SYSTEM
As per GST rules, a businessperson is required to register his/her business in every state where he has an office or any kind of place of operations. It is not mandatory to register in multiple states if you are only providing services there but do not have a business place in all those states.
Read and get informed about GST
Unless you are planning to outsource your business tax tasks to a professional, you need to get yourself familiar with the billing and e-filing processes under GST regime. Fortunately, there are several online resources including the official GST portal, GST Mobile Apps, GST Softwares, GST Blogs, tutorials, etc. where you can read more about GST to prepare yourself for the new tax mechanism.
Change your IT Systems
Update or replace your existing information technology systems for GST tax billing, invoices, and online return filing. It is also convenient to buy a GST Taxation software to automate the billing and other processes. At the least, you need to integrate your customer data, tax codes, HSN codes for your supplies, etc. into your IT operations to effectively generate GST compatible reports.
Classify your transactions under GST
GST has many provisions and specific rules for different goods and services. Businesses will have to classify their products and services to be taxed under the right categories and provisions. The GST rules may differ based on the type of product, location, and industry. Read about GST rates, codes, etc. for your particular products/service, or take help from a professional CA.
Upgrade your business or make changes
GST is going to impact each of your business processes, no matter the kind. You may have to upgrade or change some or all of these processes including manufacturing, supply, trade, exports, etc. The tax rates for some business processes, places and supplies may go up while for others tax rate may go down. You need to get ready for all these changes.
Change in contracts of customers and vendors
Under GST, businesses will require maintaining separate invoices and bills for the transactions that took place in different states to maintain separate credit pool for each state. It was not required in the previous tax system. Businesses are therefore needed to collect the services’ invoice in the same place where credit should be liable. This may need you to make some changes in the existing contracts of your customers and vendors.
Define new product prices
Before GST, product prices and margins for different parties used to be defined on the basis of value added tax (VAT)applicable on the sale price. Since there will be new tax rates under GST, businesses may have to redefine the rates for their goods and services to ensure valid margins after tax deduction.
Input Tax Credits
GST also has the provisions of input tax credit that you can claim against the already paid taxes on the supply of the same commodity. The three GST tax types, IGST, CGST, and SGST are interchangeable for tax credits.
Business can claim credit for their already tax paid stocks. Since all the new and old stocks will now be considered under GST, businesses can claim for credit against their already paid tax amounts.
It is crucial for businesses to quickly and properly implement GST into their operations as this will affect not only their own working but also the economy of the country.
Key focus areas for transition can include-
- Mapping the ‘as is’ scenario, and assessing the fiscal and other impacts of GST, on various business verticals and analyse ‘what if’ scenarios.
- Representing the industry on areas requiring urgent attention, before the government.
- Post the final GST law/procedures and rates, refining the hypothesis and approach, in view of changes in law and business models such as the revalidation of assessments undertaken earlier, new projects or upcoming changes in business plans.
- Firming up the final operating model such as the consolidation of warehouses, deployment of IT patches, reorganisation of internal roles, responsibilities of tax functions, etc.
- Finalising a detailed implementation plan to execute and monitor key tasks such as negotiations with suppliers, vendor/customer communications, and implementation of IT and supply chain-related changes, etc.
GST transition closer to GST roll out date
Closer to the roll out date, following activities will need more attention:
- Testing IT systems, updating masters and handling the cut-over and migration-related issues
- Implementing processes to manage the potential cash flow impact
- Listing all transactions that a company would have and plan how it would be executed under GST – would there be changes in the documentation, tax treatment. Sometimes it may benefit to alter the manner in which a transaction is conducted
- Taking stock of vendors and their preparedness – are all vendors registered under GST? Are they prepared to handle the robust GST compliance? Do vendors need support in their preparations?
- Drawing up fresh contracts for procurement/sales, revising the tax clauses in contracts especially long-term ones, etc.
- Revising the tax compliance set up, statutory records templates, tax manuals, compliance calendars, Frequently Asked Questions, etc.
- Communicating with stakeholders including vendors/channel partners and customers.
- Evaluating the fate of pending litigations and the validity of the judicial pronouncements in the pre-GST regime.
Key challenges posed by the changes brought on by GST can be converted into opportunities by sensitising stakeholders and enlisting their support. Training would be a key focus area throughout the entire GST implementation road map.
Training can be provided to:
- Senior management on strategic aspects
- Business teams on the expected impact and the way forward on specific product lines, groups (such as IT, supply chain, sales), locations (factory, head office, depots), etc.
- The tax team on key changes impacting the compliance framework
- Vendors, customers and channel partners, to explain the changes in the prices, discount structures and promotional schemes.
GST could entail a complete overhaul of the existing business processes, including:
- Redefining the process maps at various levels up to L4 and L5
- Aligning processes with the revised Standard Operating Procedures (SOPs)
- Dealing with sensitive changes such as the reconfiguration of escalation matrices, roles and key performance indicators at multiple levels
- Identifying the training and skill enhancement requirements.
As GST is likely to have a multi-fold impact on the various facets of business, a smooth transition to GST would require a holistic approach.