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How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
GST - Prior and Post Enactment
INTRODUCTION
It is a well-known and established fact that Small and Medium Enterprises (SME) are the
backbone of the Indian economy. Their zeal and zest of working has proven several times
that they propel the engines of India’s growth. The same has also been recognized by the
Government of India who have introduced a slew of measured to help and aide this segment
which would propel the growth of India into a different tangent.
Upcoming government plan of rating MSMEs on 50 parameters will enable the sector to
improve quality of manufacturing and gain a foothold in the international market. Other
government led initiatives such as setting up of Bankruptcy Bill will enhance the ease of
doing business for SMEs. All these reforms paired with the government intent on GST
ensures a strong backing to the SMEs in India.
WHAT IS GST
Goods and Services Tax (GST) will integrate and simplify the process of indirect taxation and
will replace the complicated taxes such as State Value-Added Tax (VAT), Central Excise,
Service Tax, Entry Tax or Octroi and other indirect taxes. GST is levied on supply of goods
and services and it combines other taxes such as state/local tax, entertainment tax, excise
duty, surcharges, octroi, etc. It will be applicable on transaction value which includes
packaging, commission and other expenses incurred during sales.
It will bring uniform taxation across country and will allow full tax credit from inputs and
capital goods on procurement which can later be set off against GST output liability. The
reform gives equal footing to the big enterprises and SME alike and removes the tax
differentiation on stock transfer. On the other hand, under the current system, VAT is levied
partially at state and central level and at multiple points which creates a cascading effect.
Due to which the manufacturer has to shell out towards huge tax aggregates that is not
sustainable in the long run. GST is aimed to simplify such tax hurdles and will be ultimately
borne by the customer.
ADVANTAGES of GST
The long pending reform since independent India is more or less a done deal and is expected
to be rolled out from 1st July, 2017. With the introduction of this law there would be several
benefits which would start to flow to the assesse thereby reducing their cost of production
or rendering services. Very few of such advantages which would flow to the assesse are as
under: -
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
a.) Availability of credit of Input tax paid on products or services consumed.
Under the current regime of taxation credits are highly restricted and only those can be
availed which are levied under the same taxation statue as the output tax is paid. With
the introduction of GST since all the indirect taxes would be subsumed into one law
therefore input tax credit would be available across the board.
b.) Clubbing compliances under various laws.
Currently any industry has to comply with various fiscal laws simultaneously such as
Excise, Service tax, State VAT, CST to name a few. Apart from that there are several
compliances which need to be done under various laws such as entry tax formalities. All
such compliances would be merged in the new regime thereby reducing the burden on
the assesse.
c.) Understanding multiple laws.
In the current scenario, there are multiple laws which an assessee needs to understand
and then comply. This leads to time wastage and several wrong interpretations. After the
new legislation is in place the same would be mitigated as several laws would get
subsumed. Accordingly, understanding of all the laws would not needed and changes in
the law would be easier to follow. More so, since this law would be more or less similar
across the country hence one understanding can be easily peculated to any functioning
branch across the country.
HURDLES in GST
GST is a massive change which is being ushered with great fanfare by the government.
However, despite all the goods efforts being put in place to bring out a transparent and easy
law there are several gaps which do exist in the law. These would need to be ironed out to
further reduce the burden and move towards a more compliant India. Currently as per the
drafted law we find several issues and out them the following we find the ones which needs
government’s attention the most.
a.) Non-availability of option to be centrally registered across India.
b.) Taxation impact of goods movement during stock transfer.
c.) Procedurally very heavy since multiple returns to be filed every month.
d.) Input credit still not seamless since persons in composition would break credit chain.
e.) Ill drafting of law at certain places leading to interpretations not desired.
f.) Inflationary impact on prices in the initial couple of years since implementation.
g.) Control pandemonium between state and center over assesse not yet sorted.
SUPPORT to be required
On an overall assessment of the current law it is needless to mention that the law is very
favorable for those who function systematically and close their books of accounts on a
regular basis. Under the new GST regime support would be required by the assesse on
several stages of the law. There are several amendments in business practice which as
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
assesse would be required to undertake before enactment of the law. Similarly, there would
be several issues which would need to be done post the implementation of the law. In order
to better appraise the industry about the same we have bifurcated work to be done prior and
post GST implementation.
1.) Prior to GST Implementation
a.) GST Migration
Existing registered taxable person (under Service Tax / Excise / VAT) have to migrate
their existing registration to GST before the enactment of GST Law. Accordingly, they
would be allotted a provisional GSTN which would be valid for six months. If there
are multiple premises through which business is being operated and they are located
in different states then all such premises have to be migrated separately under GST.
b.) Undertake Impact Study
GST is not a taxation law, but a law which would deeply impact how business is
undertaken throughout India. All the assesse would need to undertake a deep impact
study of the implications of GST on their business. Just for example the business of
C&F would be impacted since stock transfer from companies would now be liable for
payment of GST even though there is no actual sale. In some cases, the warehousing
structures which were created to lower the duty structure would need to be revisited
and thought out fresh.
Migration
Business Impact assessment
Revisit product / services costing
Last return
Information Technology Implementation
Existing Composition dealers
Orientation Program for Employees
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
c.) Revisit product / services costing
With the introduction of GST there would be substantial amount of credit available
on goods and services consumed. This would greatly impact the costing of the
products manufactured or services rendered. Therefore, to remain competitive in the
market all the assesses would be need to revisit their cost sheets with the updated tax
impact on their products.
d.) Audit and close the books of accounts for the non-GST period during FY18
As per the transition provisions in the law the input credit in the last filed return
under the existing law would be carried forward to the new law. There is no scope of
any amendment once GST is enacted. Therefore, it would be of utmost importance to
the assesse to undertake detailed audit of their vouchers and purchases to ensure
correct returns are filed and there is no revenue loss while carry forwarding the
available Input tax credit.
e.) Information System Implementation
Until recently a lot of manual work has been handled by the assesse and professionals
who helped comply with the law. Under the new regime of taxation everything is
touted to be online and credit would only be available when the figures cross tally as
supplied by the supplier and purchaser. Hence, implementation in good accounting
package and their full utilization would become an absolute must. An accounting
package would be required which automates the entire process and chances of
manual error are ruled out.
f.) Composition Dealers
Dealers who are currently registered under composition scheme cannot opt for
composition scheme if they are engaged in the supply of service as defined under GST
law. Those persons have to switch from composition scheme and are liable to take
credit of input tax paid in respect of inputs held in stock or contained in semi-finished
goods/ finished goods. This task will involve calculation of input taxes paid towards
such inputs and proper documentation like invoices, bills, challan have to be kept in
place.
g.) Undertake orientation programs for the organization
Every organization would be required to train and get their staff ready before the
implementation of the law. Such training is not to be restricted merely to accounts
staff and would need to be spread to purchases, marketing and all allied departments.
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
GST
Timely monthly compliances
Regular detailed returns
Vendor Assessment
2.) Post GST Enactment
a.) Several monthly compliances which need to be electronically filed.
With GST in place, it does not matter whether you are a trader, manufacturer, reseller
or a service provider, you only need to file GST returns as compared to earlier law
where you have to file separate returns. However, on a monthly basis the following
forms are required to be filed electronically as mentioned below. It also needs to be
highlighted that these returns are to be completely matched online before being filed
else Input credit would be denied. Hence timely closure and audit of books would
become a necessity.
• Monthly Details of inward supplies in FORM GSTR-1 by the 10th of next month.
• Monthly Details of outward supplies in FORM GSTR-2 by the 15th of next month.
b.) Returns under GST
• Monthly Filing of Return in FORM GSTR-3 by the 20th of following month.
• Annual Filing of Return in FORM GSTR-8 by 31st December of next financial year.
c.) No revision or rectification of Returns filed
Under the proposed law there is no provision for revision of returns. All under-
reported invoice and ITC revision will have to be corrected using credit/debit note
and such credit / debit note would have to be reflected in the return for the month in
which such adjustment is carried out. The credit/debit note need to record original
invoice to enable the system to link the same with the original invoice as also to
calculate the interest, if applicable.
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
d.) Vendors Assessment
All the assesse would be needing to regularly monitor and undertake vendor
assessment with regard to the accuracy of data uploaded by them every month. Since
the availability of Input tax credit would be directly linked with the data uploaded by
the supplier hence vendor grading in terms of quality of data uploaded would play a
key aspect in vendor selection. Similarly, the quality of upload done by the assesse
also need to be monitored since they would become the inputs for another person.
Further, regular review of the customer complaints being received would need to be
undertaken to sort them out timely.
The above list of actions which are required prior and post implementation of GST is very
indicative and as the law gets developed and notified the same could change substantially.
Through this article, we only wanted to highlight to the SME sector that GST is a reality and
the same need to be understood and acted upon as soon as possible. The more an assesse
waits the less prepared they would be resulting into direct financial loss. Therefore, we
suggest to start walking the talk and to implement the checklist from today.
How to head start for GST www.sethspro.com
Seth & Associates, Chartered Accountants New Delhi | Lucknow
About Seth & Associates, Chartered Accountants
Seth & Associates was founded in 1975 on the principles of providing immaculate and
precise consultancy to our clients in the field of taxation, risk advisory and audit.
Since then the firm has grown manifold and achieved great success in providing
its client's advice which has been able to help them in achieving their financial goals.
Out multi-faceted approach to a problem has helped the clients in taking very
informed decisions which have been appreciated a lot.
With Seven highly experienced Partners, Four senior associates as subject matter experts,
we have extended our capabilities to MyCFO Solutions, Business and Financial Advisory,
Startup and New Venture Opportunities, Transaction Advisory (Valuation & Deals), Project
Advisory (Subsidy, Rating etc), Project Financing (Equity & Debt), Goods and Service Tax
(GST), Fraud & Forensic Assessments, Data Analytics, Legal Contracting, Labour Law
Compliance, Franchising & Growth Options, Corporate Compliance and Market Listing
Solutions. We endeavor and strive in value creation for our clients.
Contact for GST
CA Dhruv Seth CA Shashank Mittal
Partner in Charge (GST vertical) Senior Manager (GST Vertical)
dhruv@sethspro.com shashank@sethspro.com
(m) 9935522611 (m) 9598833455
Offices
New Delhi Lucknow
C-7, Sector A Ground Floor, AI Apartments
Vasant Kunj – 110070 Jopling Road – 226001
Connect with us

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How to prepare for GST

  • 1.
  • 2. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow GST - Prior and Post Enactment INTRODUCTION It is a well-known and established fact that Small and Medium Enterprises (SME) are the backbone of the Indian economy. Their zeal and zest of working has proven several times that they propel the engines of India’s growth. The same has also been recognized by the Government of India who have introduced a slew of measured to help and aide this segment which would propel the growth of India into a different tangent. Upcoming government plan of rating MSMEs on 50 parameters will enable the sector to improve quality of manufacturing and gain a foothold in the international market. Other government led initiatives such as setting up of Bankruptcy Bill will enhance the ease of doing business for SMEs. All these reforms paired with the government intent on GST ensures a strong backing to the SMEs in India. WHAT IS GST Goods and Services Tax (GST) will integrate and simplify the process of indirect taxation and will replace the complicated taxes such as State Value-Added Tax (VAT), Central Excise, Service Tax, Entry Tax or Octroi and other indirect taxes. GST is levied on supply of goods and services and it combines other taxes such as state/local tax, entertainment tax, excise duty, surcharges, octroi, etc. It will be applicable on transaction value which includes packaging, commission and other expenses incurred during sales. It will bring uniform taxation across country and will allow full tax credit from inputs and capital goods on procurement which can later be set off against GST output liability. The reform gives equal footing to the big enterprises and SME alike and removes the tax differentiation on stock transfer. On the other hand, under the current system, VAT is levied partially at state and central level and at multiple points which creates a cascading effect. Due to which the manufacturer has to shell out towards huge tax aggregates that is not sustainable in the long run. GST is aimed to simplify such tax hurdles and will be ultimately borne by the customer. ADVANTAGES of GST The long pending reform since independent India is more or less a done deal and is expected to be rolled out from 1st July, 2017. With the introduction of this law there would be several benefits which would start to flow to the assesse thereby reducing their cost of production or rendering services. Very few of such advantages which would flow to the assesse are as under: -
  • 3. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow a.) Availability of credit of Input tax paid on products or services consumed. Under the current regime of taxation credits are highly restricted and only those can be availed which are levied under the same taxation statue as the output tax is paid. With the introduction of GST since all the indirect taxes would be subsumed into one law therefore input tax credit would be available across the board. b.) Clubbing compliances under various laws. Currently any industry has to comply with various fiscal laws simultaneously such as Excise, Service tax, State VAT, CST to name a few. Apart from that there are several compliances which need to be done under various laws such as entry tax formalities. All such compliances would be merged in the new regime thereby reducing the burden on the assesse. c.) Understanding multiple laws. In the current scenario, there are multiple laws which an assessee needs to understand and then comply. This leads to time wastage and several wrong interpretations. After the new legislation is in place the same would be mitigated as several laws would get subsumed. Accordingly, understanding of all the laws would not needed and changes in the law would be easier to follow. More so, since this law would be more or less similar across the country hence one understanding can be easily peculated to any functioning branch across the country. HURDLES in GST GST is a massive change which is being ushered with great fanfare by the government. However, despite all the goods efforts being put in place to bring out a transparent and easy law there are several gaps which do exist in the law. These would need to be ironed out to further reduce the burden and move towards a more compliant India. Currently as per the drafted law we find several issues and out them the following we find the ones which needs government’s attention the most. a.) Non-availability of option to be centrally registered across India. b.) Taxation impact of goods movement during stock transfer. c.) Procedurally very heavy since multiple returns to be filed every month. d.) Input credit still not seamless since persons in composition would break credit chain. e.) Ill drafting of law at certain places leading to interpretations not desired. f.) Inflationary impact on prices in the initial couple of years since implementation. g.) Control pandemonium between state and center over assesse not yet sorted. SUPPORT to be required On an overall assessment of the current law it is needless to mention that the law is very favorable for those who function systematically and close their books of accounts on a regular basis. Under the new GST regime support would be required by the assesse on several stages of the law. There are several amendments in business practice which as
  • 4. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow assesse would be required to undertake before enactment of the law. Similarly, there would be several issues which would need to be done post the implementation of the law. In order to better appraise the industry about the same we have bifurcated work to be done prior and post GST implementation. 1.) Prior to GST Implementation a.) GST Migration Existing registered taxable person (under Service Tax / Excise / VAT) have to migrate their existing registration to GST before the enactment of GST Law. Accordingly, they would be allotted a provisional GSTN which would be valid for six months. If there are multiple premises through which business is being operated and they are located in different states then all such premises have to be migrated separately under GST. b.) Undertake Impact Study GST is not a taxation law, but a law which would deeply impact how business is undertaken throughout India. All the assesse would need to undertake a deep impact study of the implications of GST on their business. Just for example the business of C&F would be impacted since stock transfer from companies would now be liable for payment of GST even though there is no actual sale. In some cases, the warehousing structures which were created to lower the duty structure would need to be revisited and thought out fresh. Migration Business Impact assessment Revisit product / services costing Last return Information Technology Implementation Existing Composition dealers Orientation Program for Employees
  • 5. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow c.) Revisit product / services costing With the introduction of GST there would be substantial amount of credit available on goods and services consumed. This would greatly impact the costing of the products manufactured or services rendered. Therefore, to remain competitive in the market all the assesses would be need to revisit their cost sheets with the updated tax impact on their products. d.) Audit and close the books of accounts for the non-GST period during FY18 As per the transition provisions in the law the input credit in the last filed return under the existing law would be carried forward to the new law. There is no scope of any amendment once GST is enacted. Therefore, it would be of utmost importance to the assesse to undertake detailed audit of their vouchers and purchases to ensure correct returns are filed and there is no revenue loss while carry forwarding the available Input tax credit. e.) Information System Implementation Until recently a lot of manual work has been handled by the assesse and professionals who helped comply with the law. Under the new regime of taxation everything is touted to be online and credit would only be available when the figures cross tally as supplied by the supplier and purchaser. Hence, implementation in good accounting package and their full utilization would become an absolute must. An accounting package would be required which automates the entire process and chances of manual error are ruled out. f.) Composition Dealers Dealers who are currently registered under composition scheme cannot opt for composition scheme if they are engaged in the supply of service as defined under GST law. Those persons have to switch from composition scheme and are liable to take credit of input tax paid in respect of inputs held in stock or contained in semi-finished goods/ finished goods. This task will involve calculation of input taxes paid towards such inputs and proper documentation like invoices, bills, challan have to be kept in place. g.) Undertake orientation programs for the organization Every organization would be required to train and get their staff ready before the implementation of the law. Such training is not to be restricted merely to accounts staff and would need to be spread to purchases, marketing and all allied departments.
  • 6. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow GST Timely monthly compliances Regular detailed returns Vendor Assessment 2.) Post GST Enactment a.) Several monthly compliances which need to be electronically filed. With GST in place, it does not matter whether you are a trader, manufacturer, reseller or a service provider, you only need to file GST returns as compared to earlier law where you have to file separate returns. However, on a monthly basis the following forms are required to be filed electronically as mentioned below. It also needs to be highlighted that these returns are to be completely matched online before being filed else Input credit would be denied. Hence timely closure and audit of books would become a necessity. • Monthly Details of inward supplies in FORM GSTR-1 by the 10th of next month. • Monthly Details of outward supplies in FORM GSTR-2 by the 15th of next month. b.) Returns under GST • Monthly Filing of Return in FORM GSTR-3 by the 20th of following month. • Annual Filing of Return in FORM GSTR-8 by 31st December of next financial year. c.) No revision or rectification of Returns filed Under the proposed law there is no provision for revision of returns. All under- reported invoice and ITC revision will have to be corrected using credit/debit note and such credit / debit note would have to be reflected in the return for the month in which such adjustment is carried out. The credit/debit note need to record original invoice to enable the system to link the same with the original invoice as also to calculate the interest, if applicable.
  • 7. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow d.) Vendors Assessment All the assesse would be needing to regularly monitor and undertake vendor assessment with regard to the accuracy of data uploaded by them every month. Since the availability of Input tax credit would be directly linked with the data uploaded by the supplier hence vendor grading in terms of quality of data uploaded would play a key aspect in vendor selection. Similarly, the quality of upload done by the assesse also need to be monitored since they would become the inputs for another person. Further, regular review of the customer complaints being received would need to be undertaken to sort them out timely. The above list of actions which are required prior and post implementation of GST is very indicative and as the law gets developed and notified the same could change substantially. Through this article, we only wanted to highlight to the SME sector that GST is a reality and the same need to be understood and acted upon as soon as possible. The more an assesse waits the less prepared they would be resulting into direct financial loss. Therefore, we suggest to start walking the talk and to implement the checklist from today.
  • 8. How to head start for GST www.sethspro.com Seth & Associates, Chartered Accountants New Delhi | Lucknow About Seth & Associates, Chartered Accountants Seth & Associates was founded in 1975 on the principles of providing immaculate and precise consultancy to our clients in the field of taxation, risk advisory and audit. Since then the firm has grown manifold and achieved great success in providing its client's advice which has been able to help them in achieving their financial goals. Out multi-faceted approach to a problem has helped the clients in taking very informed decisions which have been appreciated a lot. With Seven highly experienced Partners, Four senior associates as subject matter experts, we have extended our capabilities to MyCFO Solutions, Business and Financial Advisory, Startup and New Venture Opportunities, Transaction Advisory (Valuation & Deals), Project Advisory (Subsidy, Rating etc), Project Financing (Equity & Debt), Goods and Service Tax (GST), Fraud & Forensic Assessments, Data Analytics, Legal Contracting, Labour Law Compliance, Franchising & Growth Options, Corporate Compliance and Market Listing Solutions. We endeavor and strive in value creation for our clients. Contact for GST CA Dhruv Seth CA Shashank Mittal Partner in Charge (GST vertical) Senior Manager (GST Vertical) dhruv@sethspro.com shashank@sethspro.com (m) 9935522611 (m) 9598833455 Offices New Delhi Lucknow C-7, Sector A Ground Floor, AI Apartments Vasant Kunj – 110070 Jopling Road – 226001 Connect with us