Ever since the launch of GST in India, it has been the single point of conversation for common people and businesspersons in the country. Whereas businesses are worried about how to implement GST into their existing tax (accounting) system, the common man is worried whether GST will increase or decrease the tax charged on goods and services of daily use.
In this article, we will be dealing with the first problem to teach businesses how to get themselves GST-ready. The Goods and Services Tax (GST) will replace all the previous state and Center taxes such as VAT, Service tax, excise duty, etc. The biggest change will be in the way SMEs used to file tax returns for their services and supplies. Follow these tutorial steps and make your business GST-ready.
Some Amazing Things to Make Your Business Ready for GST
As per GST rules, a businessperson is required to register his/her business in every state where he has an office or any kind of place of operations. It is not mandatory to register in multiple states if you are only providing services there but do not have a business place in all those states.
Read and get informed about GST
Unless you are planning to outsource your business tax tasks to a professional, you need to get yourself familiar with the billing and e-filing processes under GST regime. Fortunately, there are several online resources including the official GST portal, GST Mobile Apps, GST Softwares, GST Blogs, tutorials, etc. where you can read more about GST to prepare yourself for the new tax mechanism.
Change your IT Systems
Update or replace your existing information technology systems for GST tax billing, invoices, and online return filing. It is also convenient to buy a GST Taxation software to automate the billing and other processes. At the least, you need to integrate your customer data, tax codes, HSN codes for your supplies, etc. into your IT operations to effectively generate GST compatible reports.
Classify your transactions under GST
GST has many provisions and specific rules for different goods and services. Businesses will have to classify their products and services to be taxed under the right categories and provisions. The GST rules may differ based on the type of product, location, and industry. Read about GST rates, codes, etc. for your particular products/service, or take help from a professional CA.
Upgrade your business or make changes
GST is going to impact each of your business processes, no matter the kind. You may have to upgrade or change some or all of these processes including manufacturing, supply, trade, exports, etc. The tax rates for some business processes, places and supplies may go up while for others tax rate may go down. You need to get ready for all these changes.
Change in contracts for customers and vendors
Under GST, businesses will require maintaining separate invoices and bills for the transactions that took place in different states to maintain separate credit pool for each state. It was not required in the previous tax system. Businesses are therefore needed to collect the services’ invoice in the same place where credit should be liable. This may need you to make some changes in the existing contracts of your customers and vendors.
Define new product prices
Before GST, product prices and margins for different parties used to be defined on the basis of value-added tax (VAT) applicable on the sale price. Since there will be new tax rates under GST, businesses may have to redefine the rates for their goods and services to ensure valid margins after tax deduction.
Input Tax Credits
GST also has the provisions of input tax credit that you can claim against the already paid taxes on the supply of the same commodity. The three types of GST tax, IGST, CGST, and SGST are interchangeable for tax credits.
Business can claim credit for their already tax paid stocks. Since all the new and old stocks will now be considered under GST, businesses can claim for credit against their already paid tax amounts.
It is crucial for businesses to quickly and properly implement GST into their operations as this will affect not only their own working but also the economy of the country.