With the launch of goods and services tax (GST) around the corner, India Inc. is preparing for a brand new indirect tax regime. GST will require strict, timely and online compliance by every section of the business value chain.
Once GST is implemented, buyers of raw materials; services or products, up the value chain, will not be able to take input tax credit till their vendors have deposited GST as well as done the requisite online filings. This will include the vendors having to upload each invoice detail at a fairly granular level as well as do three filings every month in every state where they are selling goods or services.
With a large section of the Small and Medium enterprises still adopting systems and processes which are not in line with the complex requirements of GST, Lexplosion is assisting them in preparing to face up to the likely business and technology challenges under the GST regime.
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We are doing this through a four-pronged strategy:
- Conducting Assessmentsof small and medium businesses to:
- Understand exist business processes and indirect tax payment rigour
- Evaluate readiness for GST from a knowledge; process; and systems perspective
- Provide a GST-preparedness score
- Providing Trainingand Handholding Support by primarily focusing on the following areas:
- Fundamentals of GST
- Impact of GST on Finance, Tax and Accounting
- Impact of GST on Business processes
- Impact of GST on Compliance
- Risk Management under GST
- Industry specific nuances of GST implementation
- Providing Consultancy Support
- As-is business process mapping
- Restructuring business processes
- Setting up technology systems
- Providing GST Software Support
- Invoicing tool
- Tax computation tools
- Tool to help file GST returns
- Tool for payments and generate challans
- Tool to apply for refunds
- Tool to conduct Audit
- Tool to generate useful Reports under GST
Who should reach out?
- Small and medium businesses needing help with GST preparedness
- Large enterprises who have vendors who need support with getting their vendor community GST ready
- Industry bodies who need GST support for their members
Additional factors to consider if you are a vendor:
- Factors that may influence vendor selection under GST Apart from price and quality of products,Â the four major compliance criteria on which vendor selection will depend under GST would be Registration, timely raising of invoices, timely payment of taxes and filing of returns. Input tax credit would be allowed under GST provided the vendor has paid tax to government and filed return on timely basis. Please note that a vendor will have to file 3 returns every month in each state where they sell their goods and services. Additionally they will also have to file an Annual return in each of the states.
- Making Vendors aware of Importance of GST Registration Purchase of goods/services from unregistered dealers may attract the levy of GST in the hand of recipient resulting in increased compliance burden. So it is necessary to educate vendors falling outside the taxable limit under GST, to get them registered.
- Timely Migration of Vendor under GST is of utmost Importance In case the vendor is not allowed to register owing to deficiency in documentations/any other reasons, the input tax credit taken during the period could be questioned. So it is necessary for the vendors to migrate/obtain registration in a timely manner under GST. Please note that the process of obtaining provisional registration under GST has started in all states.
- Discounting Policy under GST Vendor in accordance to Model GST law should give discount/incentive by linking it to Original Invoice. So it is of utmost importance for the vendors to have a proper Invoice Management Policy. Absence of which could lead to tax liability on the discounted portion.
- Importance of GST readiness of vendors It is equally important that all the vendors of the company get the impact of GST assessment done on their business as well as set up proper processes to avoid negative consequences of GST implementation.
- Amendment of existing contracts with vendors There may be need to amend existing contracts with vendors in light of GST.
- Practice of making advance to vendors GST is payable at the time of supply of goods/services. Receiving advance is also one of the criteria for determining time of supply. Hence, the vendor needs to pay GST at the time of advance. Credit is admissible to recipient at the time of receipt of goods/services. This could result in situations where GST is payable at the time of making payment to vendor but credit is admissible at the time of receipt of goods/services. Â Hence large businessesmay review their advance policy to vendors and inform vendors accordingly as it could impact the company™s working capital.