Thirteen Reasons Why - Part 2

Prepping your business for GST should be your priority right now. Here’s another four points as to why!


  • Pricing Analysis: A person can find the current number of indirect taxes to be quite overwhelming. Goods and Services Tax has subsumed most of the taxes into one and the same will be levied at the different stages of manufacturing and trading. There are various ways in which the prices will be affected in the future. A major variable is the storage and transport of products. Companies prefer having a warehouse in each state to avoid paying road tax, entry tax, and so on. As per the model law of GST, stock transfer will also be deemed as supply which will be taxable. Thus, companies may opt for larger warehouses within the same state rather than smaller, scattered ones. This will have a direct impact on prices. The pricing structure of a particular business would need to be restructured post GST implementation. Availability of ITC, anti-profit clause, low production cost and other factors should also be considered.


  • Purchases: Over the years, Indians have mastered the art of finding loopholes to avoid paying taxes. We forget that the GST Council members are also Indian, and this time they’ve made sure to cover as much ground as possible. The government has come up with a GST rating mechanism where it will be easy to find out the status of tax compliance. It would therefore be necessary for the buyer to check about the vendor being tax compliant, and vice versa. More importantly, complete credit matching will be necessary to avail credit. To avail the credit, invoices should be received before 30th September after the end of the Financial Year. GST is going to turn India into one common market and interstate trading would become simpler. Buyers and sellers will have a multitude of traders to choose from.It’s better to be GST compliant rather than losing out on a potential clientele.


  • Compliances: The incremental burden of compliance varies from business to business. For instance, the service sector which was earlier exposed only to the Central Authorities will now have to face State Authorities as well. E-commerce firms that wish to provide services throughout the country will have to get registered in each state. Multiple registrations will lead to increase in compliance costs. Traders who are based in one state but supply goods to other states will eventually have to pay tax to the respective state government as GST is a destination based tax. Again, this will have an impact on the price of the product. Traders and service providers would be advised to identify their target states and strategize their next move accordingly.


  • Invoicing: The process of subsuming of previous taxes into one GST will be reflected on the invoices as well. Vendors and buyers must pay special attention to the invoicing if they love claiming tax credits. Sticking to the invoicing rules is going to be vital for both the parties in an agreement. Under GST regime, two types of invoices will be issued – namely Tax Invoice and Bill of Supply. A tax invoice must be issuedwhen a registered taxable person supplies taxable goods or services. On the other hand a Bill of Supply will be issued when the supplier provides exempted goods or if the supplier is registered under the composition scheme. It will be imperative for the merchants to abide by the guidelines because, credit matching. The Council has revealed the format for invoicing. Get new invoices made before you miss out on the tax credit.

Stay tuned for more. Meanwhile contemplate how ready you are for the changes.