Goods and Services tax (GST) is a very simple law.
Excise duty, Service Tax, Countervailing duty, VAT and many other indirect taxes are history. Collection and issuance of C Forms, F Forms and other forms is also scrapped. No Entry tax and no waiting for the transport vehicles at the check points.
In short, Forget about the previous laws and start with a clean slate and carry no baggage of the past !!!
Steps to be taken:
a. If you are an existing assessee (Excise, Service Tax or VAT) and you haven’t yet migrated to GST, kindly do so asap. Please visit https://www.gst.gov.in and complete the migration process.
b. Consult your tax professional and finalise the following:
i) HSN / SAC codes of the products and services sold by your entity.
ii) Wait for the tax rates for the HSN / SAC codes to be announced by the Government around 18-19th May 2017.
iii) Prepare your price break up sheet for each of your products and services giving details of base price and existing taxes like excise duty and vat / service tax.
iv) Assume a GST rate for your products and prepare the price sheet for the products and services under the GST era. This is important as the Government has announced an antiprofiteering provision from changes due to introduction of GST.
v) The calculations done in iv) above will allow you to work out your liability on sales turnover.
vi) Now work out the likely input credit that you will get on your purchases by making assumptions on GST rates for your inward supplies.
vii) You are now in a position to calculate your net tax liability (v) minus (vi).
viii) There could be a few contracts that may be unfinished at the time of GST implementation and you would need to re-negotiate the same with the counter party. Proper calculations may be done to avoid any losses on this account.
ix) Clarity to be obtained about the input credit of taxes that need to be carried over from existing excise / service tax of vat regime.
c. Evaluate your accounting software / ERP system and understand what changes are required. The principal changes required are as follows:
i) More information required to be captured in the sales / purchase transactions.
ii) Identifying deliveries made but not invoiced.
iii) Segregating advances received against which sales invoices are not yet booked.
iv) Purchases from unregistered dealers and advance paid to them.
Enquire from your vendor for the accounting software / ERP system whether they would provide you with a patch or a new version. If the answer is NO, then you may approach a third party implementer who could make changes to your system and provide suitable output reports and if that is also not possible or viable then chuck out the old and bring in New !!!
d. Procure a Software tool (like Smile and File) to take care of your GST compliance (return filing, challan generation and providing all reports related to taxes and returns).
If you are confused or need assistance please contact us !