The GST era has begun. But the fact is– many businesses who know something about it are confused and those businesses who know little about it are in panic mode. If you are still thinking about how to move your business from the old tax system to GST, here are some material to your help.
The GST Advantage
How GST will benefit businesses and consumers?
Goods and Services Tax (GST) is a single tax system that will replace the earlier fragmented system where indirect taxes were levied at various stages by the Central and State Governments on the sale of goods and services in the country.
Under this, GST will subsume Excise Duty, Service Tax, CST and Custom Duty charged by the Central Government and VAT, Entertainment Tax, Luxury Tax, Entry Tax and other taxes levied by State Government to make indirect taxation a much more simplified and unified system.
Referred to as one of the biggest tax reforms in the country, GST aims to remove the “cascading effect” that increases the tax burden on consumers due to taxes levied at every stage in the supply chain consisting of supplier, manufacturer, retailer and consumer, though it has already been taxed at the previous level. The new system will offer every new entrant in the supply chain the option to claim the Input Tax Credit (ITC), which is the tax already paid in the previous transaction. This ensures avoidance of “taxation over taxes” thereby reducing the cost of making a product and the tax burden on consumers.
The GST Challenge
How will GST impact my current business processes?
While there is no doubt that the new tax regime will reduce the overall tax burden on consumers, makes the market more competitive & easier to do business and aids India’s GDP growth in the long term, in the near term GST is here to bring significant compliance burden to every business, both small and big.
One of the major transitional difficulties faced by businesses is – aligning the existing invoicing and tax filing systems to the new system, where most things are to be done online. For businesses who are currently using an existing software, this means modifying or upgrading their current system and invoicing formats to make it aligned with GST’s online tax portal that will process tax filings and input tax credit claims.
Though it is not mandatory for businesses to generate electronic invoices, filing GST compliance returns will be a nightmare for those following manual invoicing practices. This is because every transaction whether it is sale or purchase needs to be logged online in the GST system correctly to benefit from the tax paid earlier.
Unlike the majority of other countries who have implemented a single unified GST or VAT system, India has opted for a dual GST model where taxes are levied together by both the Centre and State Governments on a common tax base. This has made tax and tax credits determination a difficult step unless supported by a GST-ready software which automates the computation of tax based on source, destination/ states, value addition and other provisions.
Under the new system, a business will be required to file returns every month in every state they operate and one annual return. This means a firm doing business within one state needs to file 13 returns in a year (12 + 1).
For a business selling goods in multiple states, the burden of filing returns will go up accordingly. For example, someone selling products in the 5 South Indian states will have to file 5 times the number of returns, which is 61 returns in a year. Apart from this, there will be additional compliances if there is a mismatch in the buyer-seller invoice data.
The GST Solution
How can I make my business processes GST compliant?
GST is here for good, but moving to the GST regime isn’t easy. This is where business management software giant SAP is here to help businesses take the big leap while mitigating the pain of transition. The SAP team has spent an enormous amount of time and effort in understanding the requirements of the GST law and has incorporated these changes to their ERP software to make it GST compliant.
SAP Business One- the GST ready ERP software
SAP Business One 9.2, the affordable ERP solution developed for small or midsize business is now completely ready with GST. The software which covers every aspect of SME business including accounting, manufacturing, supply chain management, CRM and others, complies with all the legal requirements of the GST law.
For a business owner, this means a smooth transition to the new compliance oriented tax system without having to worry about the new invoicing formats, reconciliation of purchase and sales invoices, ITC computation or the intricacies involved in monthly return filing. As a GST complainant ERP solution, SAP B1 frees businesses from the time-consuming and error-prone manual invoice processes by automating and empowering them with all the necessary GST invoicing templates and formats. GSTN filing is further streamlined by readily available GSTR1 and GSTR2 templates and formats.
As an accredited partner SAP Business One Partner in South India, ISys Techworks offers GST-ready SAP B1 software solutions. Get in touch with us today for a free demo of GST compliant SAP B1 9.2.