How To Prepare Your Firm For GST

The Govt. of India has rolled out the nation’s most ambitious reform of the Indirect tax regime in the nation in form of Goods and Services Tax (GST) from July 2017. It replaces multiple existing taxes like Central Sales Tax (CST), Service tax, Octroi duty and Value Added tax (VAT) and other taxes, all of which have been combined into a single tax system.

Businesses need not panic at the roll out of the tax as preparations of the new tax regime have been underway since last 2 years. For instance, best GST invoicing software is already available.

Before switching to the new system, your business must keep up with the following GST preparation check list to manage the transition successfully.

Registration

The first thing to do is to enroll your business under GST regulations. All businesses that trade in goods/ services have to get GST registration number through the GST portal. The portal was open from June 1, 2017.

Documents needed for registration are:

  • In case of Sole Proprietorship, address proof and PAN card.
  • In case of Partnership, partner’s address proof, ID and partnership deed
  • In case of Private Limited Company, PAN card, COI (Certificate of Incorporation), MOA (Memorandum of Association), Directors’ ID and Address proof.

Review Your Business

GST will impact your firm in many ways. But most crucial impact is on Enterprise Resource Planning (ERP) systems, which must be monitored with care. GST will need firms to review the following aspects about their ERP:

  • Modules of financial management
  • Modules for procurement of materials
  • Modules for supply and sales chains

GST is expected to impact business processes, prices, profitability and investments in all parts of the economy. There is potential that the tax will be applied at all stages of the supply chain. Therefore before making any alteration in tax process, you must calculate impact of GST on pricing of products, revenue, working capital and availability of credit.

 Companies must consider changing their ERP versions particularly around making tax modules complaint with GST. Numerous changes in the supply chain will lead to a cascading impact in the ERP. Hence, GST compliant ERP software must be used to determine impact of the tax on ERP systems.

Changes To Agreements

 Contact your customers and suppliers to remind them about the deadline for issue or receipt of payments as well as invoices such that no problems emerge in the transition to GST.

Reporting After Accounting

Numerous benefits of GST can be garnered if you prepare your business, much in advance by meeting accounting as well as reporting needs. Key areas for change are:

  • Supply of services and goods in the complete value chain will be taxable under GST.
  • Integrated GST (IGST) has replaced the former credit for sales tax on inter-state buying of goods amounting to 18% tax.
  • GST is based on the principle of destination. The destination state must be determined. All rules are as per IGST law.

In addition to these steps, a business must install GST compliant technology like new ledgers, including GST registration numbers, installing of GST tax return forms etc.

 The above checklist will help your business to prepare for the new GST regime.

 

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