India's biggest tax reform, GST is finally here. Businesses are busy migrating from current indirect tax regime to GST regime. At this crucial time, it is important to make sure that you have not missed out on anything important during your preparation. Here's a checklist for you.
- Are you registered for GST?
Registration is mandatory for businesses involved in the supply of taxable goods and services. Such entities should be registered in every state where they supply. Entities which are already registered in any state under any law should be migrated to GST. Even those entities which are not registered, need to register in the specific states from which supplies are made. The window for migration has been reopened on June 25th, 2017, for a period of 3 months.
- Have you trained your staff and stakeholders?
You not only need to train your employees but also stakeholders, vendors and any other party involved in your business. They must be aware of the compliance requirements imposed by GST. GST Network (GSTN) also known as GST Common Portal is the one-stop tax portal that the Government has set up to provide all kinds of services related to GST compliance to the taxpayers. Companies will need to familiarise their finance department, legal department and any other departments with the Common Portal and provide necessary training wherever necessary.
- Are your IT systems ready for invoicing?
Businesses need to modify or completely replace their IT systems to prepare them for the compliance requirements of GST. Your IT systems should be ready to generate invoices from day 1 of GST regime with customer GSTN. Also, make sure that you have amended your invoice formats as per the requirements of the new law. Businesses also need to keep their vendor and customer master ready before the appointment day.
- Have you upgraded your business processes?
Under the existing indirect tax regime, taxes are imposed on the manufacture or sale of goods and provision of services. However, taxation under the new regime will be applicable on supply of goods and services. In addition to this, several procedural changes have been made to ensure high compliance like reversal of tax credit in case of failure to pay consideration for goods, self-invoicing in case of purchases made from unregistered supplier, etc. Such amendments have made it necessary for businesses to incorporate significant changes in their business processes.
- Have you finalised your tax positions?
It is important for businesses to understand that they will be taxed differently under GST. GST is linked to supply of goods and services. The quantum of taxes applicable on various goods and services will change once GST comes into effect. The way taxes are charged and credited will also change. Therefore, considering the quantum of changes, each transaction undertaken by a company will have to be identified separately, irrespective of whether GST will be applicable for it or not, in order to determine the tax treatment of the transaction. After the mandatory tax treatment is determined, the transaction will need to be configured in the entity's IT system.
- Claim credit of taxes in time
The GST law provides for carry-forward of accumulated tax credit as well as for claiming credit of various taxes paid on stock in hand (which cannot be claimed at present), subject to fulfilment of the prescribed conditions. Furthermore, for carry forward of their VAT credit balance, taxpayers will have to submit their sales tax declaration forms or certificates in Form C, Form F, Form H, etc., as applicable, wherever they have claimed exemption or paid tax at concessional rate on such sales. If relevant declaration forms or certificates have not been submitted to the authorities till now, there is an urgent need to accelerate submission of these forms.
- Amendment of contracts with vendors and customers
Under the current tax regime, no correlation is needed between the place of receipt of input services & receipt of invoices for such services. In the GST regime, it will be important to ensure that an invoice for input services is received at the place where credit of such services is eligible. Therefore, businesses need to do analysis of procurement of services and amend their contracts with service providers as needed. Similarly, contractual terms with customers will have to be reassessed and revised, if needed.