Make GST Work for You – Tips for Organizations on Making the Best Use of GST
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The herculean task of shifting to GST, the new digital regime of taxation of goods and services, aimed at consolidating and streamlining indirect taxes and unifying the market is picking up steam. The transition to GST involves changes in all areas of business - accounting systems, tax rates and tax payment schedule, operations, procurement, supply chain management, logistics, delivery, marketing and sales, finance, human resources, training and technology adoption. While the challenges may, on the face of it, seem huge, changing over to GST can be smooth and seamless with a little preparation.
A Few Pointers to Making the Best Use of GST:
- Assess and understand its impact on each aspect of your business
- Take advantage of the integrated and unified tax system to rationalize prices and streamline operations
- Make use of the Input Tax Credit (ITC). With both services and goods being eligible for ITC and elimination of ambiguity, profitability can be improved once you understand ITC
- Increase profit margins and reduce operational costs by ensuring all expenses where ITC can be claimed (such as advertising/marketing) are properly accounted for and relevant records maintained
- Compliance with ITC requirements, maintaining relevant records and filing returns by suppliers/vendors is essential since a mismatch can result in reversal/rejection of input tax claim on supplies. This may lead to adverse impacts on cash flow/liquidity of a company. Managing vendors/suppliers is, therefore, critical
- In the long run, this will streamline and increase the efficiency of the supply chain. Get your vendors/suppliers also on-board. Compliance is crucial. Instances of non-compliance/delayed compliance by vendors will have serious adverse impacts on your revenue and growth
- Treatment of advance payments received, if any, has to be strictly as per contractual terms. Under GST, ITC is available against tax invoice and only when the goods/services are actually received
- Business organisations with operations in multi-state need to consider the impact of stock transfer on their liquidity, since such transfers are considered as ‘supply’ under GST
- Expand business to other states/parts of the country by taking advantage of the single registration and seamless tax-credit flow mechanism. Use the opportunity to explore new products/suppliers/vendors. It needs to be kept in mind though that off-setting of SGST/CGST may not be an option
- Since GST is an online regime, exercise the option to go digital. Digitisation of business/operations will not only ensure compliance with the GST requirements but also provide added benefits – analytics for better consumer experience, improved efficiency of operations including product management, logistics and delivery, efficient marketing and sales etc.
- Compete on par with local players and benefit from the increased competitiveness and unified GST, which has replaced the multiple taxes levied by different authorities
- Streamline and improve the efficiency of the delivery system and logistics. Switchover to the e-way bill will further improve the transportation and delivery systems
- Benefit from relaxations and changes to GST, such as the enhanced limit for the composition scheme, which though subject to stipulations/restrictions, is highly beneficial for local businesses who do not deal in restricted products
GST is a destination based, transactional-value based tax. The digital platform, the elimination of multiple taxes and cascading effect, the emphasis on adherence and timely compliance, the financial inclusion are all aimed at changing the way business is done in India, moving from an informal cash economy to a more organised, formal economy. Notwithstanding the initial teething issues, GST is set to transform the business scenario in India in a big way. Adapt or be left behind in the race to success.