GST rollout: Final checklist for your business

The uncertainty over the Goods and Services Tax (GST) rollout date, at least in some people’s mind, can now be quelled – it is absolutely clear that GST will launch on 1 July 2017.

The biggest worry for many was that businesses’ IT systems were not ready due to the frequent tinkering of GST rules. The GST Council has come out with a solution: Deferring two of the major statements/returns, GSTR-1 and GSTR-2, for July and August. Therefore you get one more month to get your IT system ready to upload invoice-level data and match the data with vendors’ data.

How will GST be computed in the meanwhile? With form GSTR-3B, which will provide a simple summary of outward supplies (sales) and inward supplies (purchases) and work out the tax liability as under the current, pre-GST regime. Thus, cross-matching with vendors will not happen until September.

The revised dates are as follows:

Along with these changes, the council announced a few more regarding the composition limit for northeastern states; the E-Way Bill (implementation will be left to states, allowing them to continue with existing rules if desired); rates for lotteries, hotel stays, etc.; anti-profiteering; and more.

Though these changes have been widely discussed in media and on social media alike, let’s explore what they really mean for you and other businesses.

1. Those on course to implement GST will have to continue with their preparations, perhaps stepping on the pedal a little harder. Those who are still in the planning or exploring stages, likely expecting a last-minute deferment by the end June, will have only 12 days left to prepare.
2. To prepare your business, use this to-do list, ignoring any steps you’ve already completed:
   1. Know the tax rates for your products and services. The rate schedule is already available. This may be a little complex in some cases though. Depending on the tax positions you would like to take with respect to activities like warranty services (whether these should be treated as services, goods, or both) or job work with the use of materials, etc., the rates could differ.
   2. List all activities your organization performs (i.e., a transaction matrix). This will include all types of procurements, supplies, transactions with employees, transactions flowing out of various contracts, etc.
   3. Prioritise the activities or conduct an ABC analysis. Determine which activities have larger implications for your organization – e.g., whether GST should be paid on reimbursement to an interview candidate is very insignificant compared to determining the place of supply for an INR100 crore contract.
   4. Identify the tax position you would take – determine the place of supply and which tax (CGST/SGST/IGST) to levy.
   5. Restructure some of the transactions to make them GST compatible. Instead of replicating what you do today, take advantage of the switch to GST to refine your processes. Let us consider two examples:
      1. Quite often a business’ headquarters will place an order for supply to a branch office/depot in another state. Under GST this may be treated as a bill to/ship to transaction, which will have its own complexities. Consider whether the transaction can be restructured so that the PO recognizes that the payment will be made by the branch/depot to whom the supply has been made; the invoice would be raised on the same branch/depot. One, of course, has to look at practicalities.
      2. Sometimes it may make sense to pay tax at a higher rate to avoid disputes in the future, especially if credit can be claimed on most, if not all, of the taxes. For example, when two products are sold together, tax may be paid based on the product that attracts the higher rate of tax – thus treating it as a mixed supply instead of a composite supply
   6. A supplier may encounter times when his own state questions the place of supply, especially when the tax is IGST. This is because his state would lose the revenue to the other state. It may be necessary to evaluate all IGST situations carefully and build a strong, documented trail to reply to inquiries and notices in the future.
   7. Get your ERP ready to issue various documents like invoices, payment vouchers, delivery challans, and so on. Ensure all fields required for filing returns are generated from your ERP.
   8. Decide on an ASP and GSP solution if not yet decided, as getting the ASP solution to work with your ERP may take two to four weeks or more. Though there is a little breathing time due to the deferment of returns, as explained above, it is better to get the ASP up and running so that the details can be captured as transactions happen. The GST Network will allow you to upload outward transactions starting 15 July.
   9. Go through the anti-profiteering provisions, which will be released soon, and decide on the pricing that adheres to the legal provisions.
   10. Act on changed regulations of other allied departments like customs, DGFT, etc. Declaration of GSTIN in customs documents is mandatory from 1 July, and PAN will be now be used in place of IEC with the advent of GST.
   11. Any other activity you think is important related to stocks, warehousing, resourcing, cash flows, or working capital.
3. It is extremely essential to keep communicating to all stakeholders in these times – whether it is oral communications like a telephone call, group training, or a WebEx meeting or written communications like emails, circulars, or even screensaver messages within the organization. Stakeholders could be the top management, departments other than finance, suppliers and customers, consumers at large (especially in consumer product or service companies), government agencies, peers in the industry, etc. Repeated and crisp communication is key if changes in GST are to be implemented properly. Preparing a list of what to do and what not to do (dos and don’ts) could be one way of making the communications effective.

GST is a big change, and it is at our doorstep. So why not meet it with a big smile? With thorough preparation in next few days, that smile will shine even more brightly.

Avalara is an application service provider (ASP) and partner of licensed GST Suvidha Providers (GSPs). To understand how Avalara India GST can help you with GST compliance, contact us through https://www.avalara.com/in/products/gst-returns-filing.