February 22, 2016

Have you taken transitional measures for GST

The Finance Minister and other eminent personalities have been emphasizing time and again on the readiness for GST. They have been suggesting to the companies to examine the critical exemptions and have a look at their IT infrastructure readiness rather than questioning on the implementation date of GST. The Goods and Services Tax is likely to address the non-compliance in the trading sector and bringing them at par with the manufacturing sector and hence, increasing the competitiveness.  GST is also likely to affect every part of the business in India, with regards to cash flow, costing of capital, tax accounting, supply chain, and even the technology being used to maintain the current tax ecosystem. There will be a requirement of training the key personnel in the company in order to operate effectively under the new regime.

The transition to GST has to be meticulously planned by the industry with a proactive approach. It would be easier to carry out the required activities in a phased manner. The organizations can make a start by understanding the key areas of impact in their business models and preparing different scenarios for the design and application of GST. The implementation of changes will be critical and will have to be managed through a robust program management. This will further require the involvement of the company stakeholders and the members of the entire value chain.

The program management includes the integration, budget management, quality assurance and timely communications. The shared services will have to be explored and outsourced services managed for the GST compliance. If a list of the transitional issues is to be made, it would look like this:

  • Getting the registration certificate
  • CENVAT transition to the new input tax credit system
  • Handling the taxation on overlapping transactions
  • Handling the taxation on continuous supply goods and services
  • Revision in prices due to change in tax structure
  • Treatment of goods and services under exemption
  • Handling of exempt goods returned after sale
  • Tackling of goods lying in the job-work locations
  • Transition of entries in books of accounts
  • Tackling pending refund claims

Since we are a Federal republic, The GST bill has provisioned for taxation at centre and state level. Thus, when the online registration forms have to be filled, the companies have to take care in registering for both state and centre GST. In case the product is sold in more than one state it would require multiple SGST registrations. The existing registration certificates may be continued for the filing of returns, assessments, appeals and refunds etc. They may be phased out over a period of time.

The companies that have opened up warehouses in many states with a view to saving the CST will have to decide on their continuation or closure. The GST registration would require the declaration of premises which are in operation. The timely action of the closure of not required warehouses will help save costs and unnecessary compliance requirements.

These transitional measures checklist can help the organizations to be prepared for the GST well in time and avoid getting caught off guard.