Wake-up call to be compliant under GST from day one

Source: The Hitavada      Date: 26 Jun 2017 09:32:32


By CA Varun Vijaywargi,

With less than a week left for Goods and Services Tax (GST) rollout, let us analyse our readiness to ensure seamless transition to the e-world of indirect tax system. A run through of the following details can answer the preparedness of trade and industry in relation to GST.

Registration under GST: Check whether provisional or fresh registration in every State from where you will be making taxable supply has been obtained. This will ensure booking of turnover on GST Identification Number (GSTIN) and availment of input tax credit (ITC) from day one.
Documentation changes: For every type of transaction, a separate document has to be raised under GST regime.
Like for all taxable supplies (tax invoice), exempt supplies (bill of supply), on receipt of advance payment (receipt voucher), for supply without payment of GST (delivery challan), on receipt of supply of goods or services under reverse charge, including supplies from unregistered vendors (payment voucher) has been prescribed. Additionally, refund voucher, debit note, credit note, ISD invoice have been prescribed under different scenarios.
For exports, tax invoice needs to be raised with prescribed declarations.
Accordingly, ensuring whether the accounting/billing staff is aware of such changes, whether the formats have been printed or whether the software has been updated for proper generation of such documents, is an important preparation.

Accounting changes: GST will subsume all indirect tax levies (like Excise duty, Service Tax, VAT, etc.) and thus the receivable and payable accounts maintained till now needs to be amended in line with requirements under GST.

Harmonised System of Nomenclature (HSN) Codes and Service Accounting Code (SAC): Declaring HSN code on tax invoice raised by ‘supplier of goods’ and SAC by ‘supplier of services’ will be mandatory under GST (except for few specified categories of suppliers to be notified). Ensure that you have identified the applicable HSN code or SAC.
GST rate: The GST Council, barring a few exceptional cases, has fixed GST rate as nil, 5%, 12%, 18% and 28%. for goods and services.

The rate for goods has primarily been fixed based on HSN code, thus, first identify HSN code applicable to the goods so that applicable rate to goods under GST can be ascertained. For services, rate schedule has been given and majority of the services will be chargeable at the rate of 18%.

Levy under GST: Every transaction of supply of goods and/or services will attract either dual GST (i.e. CGST + SGST) or IGST and the criteria to determine the same is whether the ‘place of supply’ is within the State or inter-state.
Trade is expected to confirm the levy beforehand in case of regular nature of supplies, especially in case of services where the concept of levy with respect to intra-state or inter-state supplies has been introduced for the first time.
Sharing/obtaining GSTIN with suppliers / customers: GSTIN of customer is required to be quoted on tax invoice and returns prescribed under GST.

Also, the GSTIN of supplier is required to be quoted in the return. Ensure that you have obtained their GSTIN and also provided your GSTIN to them.
Preparation in relation transitional items: Transitional Items include migration to GST (i.e. provisional registration), carry forward of credits under existing laws lying either in return or input stock or capital goods, impact on goods either in transit or lying with job-worker and miscellaneous.
A study of own business scenario and applying the transitional provisions is a must.

A quick review of the ground reality, i.e. preparations already done to welcome GST and the ones that require effective planning and consultation, is the need of the hour.
Take it as a wake-up call to be complaint under GST from day one, to optimise credit position, to minimise risk on margins, to ensure control over business as GST will be entirely system driven.

(The author is practising chartered accountant and can be reached at [email protected])