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Dealers and service providers need to upgrade their accounting and tax software. In the modern world, when all the large-scale companies have sophisticated ERP software, like SAP etc., to upgrade and customize the same will be a big challenge to the software companies. Huge cost to begin with: continuous training of people t each level and continuous updating of all operation systems is essential.
Determination of cost or price structure in the GST
All invoices received and raised after the appointed day would be subject to GST. Therefore, it is essential to determine the impact on the cost, right now, without waiting for the final day. The impact would depend, inter-alia, the following factors:
(i) Existing rate of VAT and excise duty v/s Tax rates under GST.
(II) CENVAT/Input tax credit presently available v/s Availability of input GST credit.
(iii) Non-creditable list in the GST.
style="font-size: medium;">(IV) Impact on input suppliers and output receivers of the concerned entity under the GST.
(v) Taxes/activities to be kept outside the scope of GST, such as, stamp duty alcohol and petroleum products.
(vi) Change in the manner of determination of supply and its valuation under the GST, May transaction, even without consideration, would be deemed as supply and be subject to GST.
(vii) Cost of additional human resources and professionals for compliance of GST provisions.
(viii) Capacity of the supplier to pass on the additional GST burden to its customers.
(ix) Denial of Input credit to an entity due to non-deposit of taxes by its counterparty suppliers.
The entities must evaluate their working capital requirements in the post - GST regime so that they may approach to their banks in advance for additional credit facility. Additional working capital might be required due to increase in investment in taxes for the following reasons:
(1) Abolition of Statutory Form C, I, J specified under the Central sales tax Act: Presently, taxpayer can purchase goods from other states at a concessional rate of 2% or at nil rate, as the case may be on the strength of Central Forms, however, under the GST, these goods would be purchased only after payment of full GST. of course, the working capital requirement of the buyer, during the Golding period of stock, in respect of taxes paid.
(ii) Presently, stock transfer from one state to another take place free of tax against Form F. however under the GST stock transfers by a dealer from one state to its branch/agent located in other state would be treated as interstate supply and be subject to IGST.
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(III) With the abolition of Form H, sale and purchase between the penultimate exporter and the actual exporter would take place only after payment of full GST. The amount of tax so paid will be claimed as refund by the exporter on a future date.
(iv) Sale in the course of import and high seas sale, which are exempt presently, would be made only after payment of GST.
(V) Garment exporters are purchasing fabrics and textile without payment of tax; thus, their investment in taxes is confined only to the extent of tax paid on accessories and packing materials. Under the GST, since fabrics would he taxable, their investment in taxes would increase considerably by the amount of tax paid on these goods.
Format of invoice has been prescribed in the Draft GST Invoice Formats, which has number of additional columns as compared to the columns presently applicable. After the appointed day, the taxpayer will use that format only therefore, he must have suitable software before that day, which could facilitate the generation of invoice in the prescribed format.
For B2B transaction, the taxpayer shall give the line-wise and state-wise details of supplies,credit and debit note would be linked with the original invoice against which the same is being issued.
Further, returns would be filed on monthly basis Number of returns during the year would also multiply.
Therefore, the taxpayer must have adequate staff to comply these additional requirements. Unless the accounting is done in competent software by the capable accountant, timely and properly, required reports could not be generated.
Additional restrictions for claiming input tax credit
Under the GST, input tax credit would be available to the buyer only if the counter party supplier has paid tax to the appropriate government and has filed its valid returns. It means that if a supplier does not deposit his GST liability, all of his counterparty recipients would not receive the credits of ITC, even if they have paid the entire consideration to the supplier. These provisions require chasing by the
recipients of the suppliers to deposit tax liability on or before the due date.
Therefore, efforts should be started right now to identify such dealers who are generally tax defaulters. Taxpayers might have to change their business model by keeping security deposit or indemnity bound from such suppliers till the date these suppliers file their valid return.
