All the news channels and newspapers nowadays are filled with the updates related to GST Act in India. Each of the media correspondents is actually covering all the news related to the date on which GST would come into force, the preparation of government entities, the concerns of businesses, and so on. As a matter of fact, news channels also cover various details regarding the experts’ opinions on preparation of the country to embrace the new taxation model. Among all these news, what actually interests businesses a lot is how their businesses would be impacted once the GST comes into force. Through this blog, we would learn about the same by discussing some crucial ways in which doing business would be different in GST era.
New invoicing rules
With the implementation of GST, businesses would need to ensure that their invoicing strategies are in accordance with the latest guidelines. As per the new requirement, businesses will be liable to generate invoices in a more detailed format. Currently, most of the invoices generated by businesses across the country show various details, and some even exhibit the details that government has never asked for. With the implementation of GST, businesses will need to ensure that their invoices clearly mention the GST Identification Number (GSTIN), state code, and Harmonised System of Nomenclature. Apart from all these, it must be ensured that the invoice for each and every commercial transaction is in accordance with the rules related to GST rate in India. Businesses need to follow these guidelines in order to stay compliant during GST era.
New ITC rules
Businesses must know that in order to claim ITC, which stands for Input Tax Credit, they have to ensure that each every vendor in the supply chain is actually tax compliant. Presently, businesses can claim tax credit from the concerned authorities and government even if their vendors are not tax compliant. There are various instances that would suggest that businesses in India had actually claimed for tax credit even when their vendors, or third party service providers, do not maintain strict compliance with the governing laws. This actually was a cause of concern for governing bodies as they could not keep the track of all the business entities that were liable to pay taxes. Now we all know that GST is about to come into force with effect from July 1; therefore, it is quite understood that rules related to IT would change. Businesses must also know that credit should be claimed only for taxable supplies.
New stock transfer rules
In the current system of indirect taxation in India, businesses are not compelled to decide the nature of their commercial activities so as to decide whether it is an inter-state commercial transaction or an intra-state commercial transaction; however, with the implementation of GST, businesses would have to decide it on their own. Various businesses were already curious about GST rates in India 2016/2017 so as to get the clear picture of how to streamline their compliance strategies so as to meet diverse types of requirements with utmost ease. Now that GST would be implemented soon, it becomes crucial for them to know that if they would fail to decide the nature of the commercial transactions they are performing and pay inaccurate amount of taxes, then they have to pay the correct amount of first before claiming refund. Experts have felt that the rules related to stock transfer of goods and commodities are complex, and therefore, the government must come up with efficient redressal mechanism.
Higher cash flow requirement
Last but not the least, this would be yet another crucial change that GST era would bring in. At present, most of the commercial activities attract Value Added Tax of around 15%. Right from sale and purchase of goods to transfer of stock from one state to another, most of the commercial activities in India are taxed at 15%. However, with the implementation of GST, this rate is likely to go up. As per the latest GST rate in India, most of the commercial transactions would attract 18% Goods and Services Tax. Apart from this, it is so true that all the businesses that are involved in inter-state supply of goods will have to pay tax right at the check points. All these would certainly necessitate higher cash flow requirement.
These are the four crucial ways in which doing business would be different post GST implementation.
