It’s almost time when GST becomes a reality in India and if not, for now, it will be too late for businesses to tighten their seat belts and get ready for the bumpy ride. But if we prepare today things can be smoothened and can result in a calm setting.
We have so far covered the effects that GST would have on startups and small businesses, also on multi-national companies and its effects on manufacturing.
In this blog, we’ll cover the following steps you require to take for a smooth transition to GST.
THE FIRST STEP – THE IMPACT
The first thing that you should do before taking any steps towards the transition is to assess the impact that this change would have on your business. There will be many changes in how things work and you need to know how those will affect your functioning. Like in the current system there’s no tax on supply which isn’t the case after GST. The place of supply will control the occurrence of tax, the rules, and the process that is to be followed for the input tax credit. Also, the information needs to be submitted at the invoicing stage itself and on a monthly basis which is alien to your currently arranged mechanics of submitting it quarterly or half-yearly.
These changes can have a significant impact on your working and that’s why you need a revisit to your policies, price, contracts, and all other facets important to your working. By going through these changes and their effects on your business you can mark a clear path and steps required to bridge the gaps.
THE NEXT STEP – REGISTRATION
As per the model law, every entity registered under the current tax system will be provided with a provisional certificate on 1st July 2017 which is when the GST is supposed to go live. It will be valid for a period of six months within which the user that is you should submit all the necessary documents.
After the submission, you will receive an automatic registration on the appointed date. However, it might be a provisional registration and you might need to further submit documents electronically of which you will be notified and after taking all the necessary steps you will be granted a final certificate of registration.
AND THE NEXT – INPUT TAX CREDIT
The input tax credit claimed before the day GST goes live (1st July 2017) must be transferred to the electronic credit ledger. The manufacturers and dealers are eligible to claim CENVAT credit for the inputs, semi-finished or finished goods held in stocks if the following conditions are met –
- Such goods or inputs will be used as taxable supplies under GST.
- The person applying for credit is eligible for it under GST
- The person applying for GST has all the receipts/invoices showing the payment of duty under the previous tax laws.
- The receipts/invoices or any other document shown as proof is not of a period prior to 12 months from the go-live day.
- The supplier providing services is not eligible for any deductions under the GST.
- The supplier getting the credit must pass it on to the consumer in form of reduced prices.
The input tax credit can only be claimed for those goods which were already taxed under the previous law and are received after the appointed day of GST. The credit would only be granted if the invoice or the document showing the tax paid is attached to the accounts within 30 days from the appointed day in which a maximum extension of 30 days can be granted if given a valid reason.
THE FOURTH STEP – REFUNDS
Any refunds that were claimed before GST like CENVAT, tax or for interest paid, will be disposed in accordance with the previous law.
In case the inputs and semi-finished goods were passed on to the job worker and is furthered after the GST becoming the law of the land then no tax will be payable only if the following conditions are fulfilled –
- If the goods are returned before 6 months of the appointed date in which an extension of maximum 2 months can be granted on grounds of a valid reason.
- Goods are declared adhering to proper rules and regulations.
- The finished goods are supplied only on payment of tax in India or the goods are exported out of India within 6 months from the appointed date which is extendable for a maximum period of 2 months.
And in case when the services are received before and invoices after the appointed date this will happen –
In such a situation the transitional provisions will apply. ISD (Input service distributor) will be eligible to distribute the input tax credit under GST.
In the case of eligible duties and taxes on inputs those which are held in stocks switching over from composition scheme to a taxable person. In this case, the taxpayer who was registered under the composition scheme can avail the credit of input held in stock, semi-finished goods, or finished goods on the day immediately preceding the date from which he becomes a regular taxpayer.
WHAT’S WITH THE DUTIES?
Up until now the dealers or traders were not allowed credit of excise duty or additional customs duty in lieu of excise but after the appointed day these transactions will attract GST and still not be subject to credit. This could result in cascading of taxes as those goods on which taxes have already been paid in accordance with the current rules will again attract tax. This might also result in dealers sending back the purchased goods to buy them after the appointed day which can result in a ruckus.
AND THERE’S ALSO A SCHEME
This change is probably positive for most businesses as the composition scheme bracket is being relaxed and now businesses with a turnover of up to 50 lakh rupees can enjoy the benefits of this scheme which was only available to users with a turnover of 10 lakh rupees before GST. This will result in a lot of taxpayers converting from regular payer to those under composition scheme and vice-versa as certain businesses which currently are under this scheme will no longer be eligible for it.
A timely preparation is always beneficial no matter the subject and is definitely something you should give heed to as it could drastically improve the chances of you having a smooth transition. Good news! We can help you with it. We have been preparing for it and are in alignment with all the changes taking place. Our system S.I.M.P.L.E will help you in taking this journey towards a GST compliant future. It has GST compliant documents and automates the returns and invoice generations. Also, with its other robust features, it is definitely a system that can help in improving the overall health of your organization. It has 1500+ modules ensuring your every need is met. Also, it is micro-vertical specific which means you get a system designed specifically for you having everything you need and nothing you don’t. Take a free demo.