GST is bringing in a Revolution in the way of doing business
Revolution is something which restructures your whole working system and changes it entirely. Goods and Services Tax (GST) has done the same. It has revolutionized the previous economic structure by engulfing indirect taxes like VAT, Excise Duty, Service Tax, Entertainment Tax, Luxury Tax, etc. and merged it into one tax known as GST.
GST, basically has made the entire tax structure more simplified and easy to understand. But it has surely affected the small and medium businesses because in GST, everyone has to file tax return in monthly, quarterly and yearly basis and the same has to be filed in GST network. So, it has created a shift in the level of dependence on computers.
Major changes risen due to GST:
Businesses will have to make a number of changes in their system to operate under GST. Mostly Medium and Small Businesses have operated as informal sector, without following any due procedures and compliance with regulations. But now it has changed. It has become inevitable for the Small and Medium Businesses to take their system online for conducting business. So the system must be ready for billing, invoices, returns, input tax credit and other such actions under the GST.
For a long time, India was using a taxation system which was multi layered such as excise, sales tax, Value Added Tax (VAT) and service tax. However, that scenario has been changed with the advent of GST, which is working fine with its motto of “One Nation, One Tax”. But to get adopted to this new tax system, business need GST-compliance accounting solutions. Every big MNCs are developing an accounting software which will enable its user with the accounting solution they want. And being a businessman, it is mandatory to adapt to the changing trend and be abide by rules and regulations imposed by GST. For that those business houses which were not adhered to using any accounting software are now using one for simplifying their work process.
GST made it compulsory to adapt to the changing accounting system. From data entry operators to book-keepers, everyone from top to bottom needs to be trained in the manner in which business under the GST is to be carried out. Training will be different at different levels. Senior Management needs to be trained for the strategic part of GST, while accountants need to be trained for the key changes regarding the GST compliance.
Prices of all the products has undergone a change in accordance with GST rate. Transparency of the tax rate has been the biggest boon under GST regime as there are no different tax rate for the same type of product and services and it is similar in all states. Though the government has released the list of rates that will apply to a wide variety of items, the actual impact on prices is yet to be seen. Current scenario for business houses is a sluggish one as prices of many products and services has increased due to GST rate revision. So one or two quarters will be rough for them, till people get acquainted with the new tax structure.
Input Tax Credit:
One of the major changes that GST brought in is the Input Tax Credit, it means that when you are paying tax on output, trader (or manufacture) can reduce the tax already paid on inputs. This is similar to VAT input credit. To claim the ITC, you must have a tax invoice of purchase or debit note issued by a registered dealer, which means you cannot have off the book dealings anymore and all your transactions must be invoiced. This is changing a lot on part of businesses as they has to operate in more transparent manner. The gain from the Input Tax Credit has to be mandatorily passed on to consumers, failing which they face action under the anti-profiteering provision under the GST.
Currently, GST compliance is the crucial part for any business. GST has given rise to more documentation work as compared to the earlier tax regime. Businesses will require documentation for almost everything namely from migration and registration to Input Tax Credit. But most of the documents will be in digital form, which will make the process easier. The transition towards compliance to the new GST laws will bring some disruptions as there will be no legal precedence and little experience under the new law. The appeals and the verdicts will set a new precedence for future compliance-related litigation.
The positive outcome of Goods and Services Tax (GST) is that it will bring in transparency in the taxation system which was lacking in businesses in India. Previously India was tangled with a complex web of taxation and all the government entities and private firms were entangled in it. Earlier consumers were having a very little knowledge about the tax they were paying for a particular product but now that scenario has completely changed because of uniform tax rate all over India. From buying raw material to paying taxes, businesses have to be transparent under the GST. It is hard to say that tax evasion can be eradicated but the new system will minimize the chance. But GST and its digital network will make it easier for the authorities to track any transaction and will make harder for tax evaders to destroy any data.
In short, GST has completely revolutionized the taxation system and came out with more positives as compared to negatives. And we all hope that GST will bring in a change in the economic system of India.
- Posted on Aug 5, 2017
- By Dhruv Rudani
- 0 Comments