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What to Expect from GST There are just a few weeks remaining for you to get prepared for the roll out of GST, and out of the many questions you will be asking yourself, ‘what changes should I look for in my system, from my Tax Consultant, or in business processes, in order to better prepare for GST?’, is likely to be at the top of the list. This article attempts to highlight key expectations and new pain points that are going to emerge in your business due to the upcoming law. These findings surfaced once we refocused our efforts after the constitutional amendment leading up to the GST law. All our work went into identifying new business behaviour changes in order to deliver the simplest-to-use GST solution in the market. As you already know, GST is based on the concept of invoice matching and it will fundamentally change the behaviour of your business in the following ways: 1. We believe that you will move to a ‘Payment on Invoice Upload’ behaviour In the pre-GST era; you were able to complete a transaction after receiving an Invoice and making the due payment to your Supplier. You could also take for granted the ability to avail tax credit on the invoice, even before filing your tax returns. Now with the GST rules, tax credit is assured only after invoice matching is done. The question to ask yourself- how will you bring your confidence that Tax credit is not rejected or it is reflecting incorrect value. So, this is how we see the process going. First, an invoice will be uploaded to the GST system by your supplier. You will then proceed to check whether all the data in the invoice is correct and matching your records (once the invoice is made available to you). You are likely to make the payment to your supplier only once this has been verified. This way of working may start for a few suppliers to begin with but would become a normal process for all of your suppliers. Your customers would also expect you to upload the relevant sales invoices before paying you. Therefore, we believe that ‘Payment on Invoice Upload’ will become a common phenomenon. 'Payment on Invoice Upload’ will become a common phenomenon under GST. CLICK TO TWEET 2. You will interact on a much more regular basis with the Government Tax System In the pre-GST era, interaction with the government tax system was a once-in-a-month or once in a quarter phenomenon for most businesses. However, the ‘Payment on Invoice Upload’ behaviour in GST will make this interaction more frequent than ever before. It begins with an invoice being uploaded either by you, your Goods and Services Tax Practitioner (GSTP), or both of you. And in the case where both of you upload, data needs to be efficiently managed rather than being the source of confusion. You will also start accepting invoices for your purchases and would want a real time status of invoices before paying your supplier. Given all of this, you should prepare to engage more frequently with the Government Tax System. Prepare to engage more frequently with the Government Tax System under GST. 3. You will notice a high level of anxiety during the cut-off dates In the pre-GST era, there was only one cut-off date for the return filing of a Tax type. You would have provided information to your GSTP who prepares and uploads the returns, pay the due taxes, and provide you with the acknowledgements. Now, the process of upload, matching, missed uploads and tax payment have different cut-off dates, namely the 10th, 15th, 17th and 20th. And on each of these dates, anxiety levels are likely to rise depending on whether your returns are successfully processed or not. This is because each of us will have hundreds, thousands or even Lakhs of Invoices in a month and the GST system put together will have several billions of invoices to process in a given month. Given that this system is expected to both store and provide information, it will require time to process such a high volume of data and provide results of success or failure based on the GST rules. To design such a solution requires a two-step process; the first step is to receive data for processing from the taxpayer and the second step is to provide results for the received data (also known as asynchronous behaviour). An analogy to simplify this would be depositing a cheque in a bank account and getting a message that the amount is credited but is subject to clearing. Whether the clearance is successful or not is known to you at a later point in time. This asynchronous behaviour means that just by uploading information to the GST system does not complete your compliance activity. Anxiety levels will peak towards the 4 cut-off dates as the processing time could take longer. You will expect to be informed about any failures or successes, and you should be informed even if you have closed your system. 4. You will need a system that seamlessly operates out of multiple locations Almost all businesses operate from multiple locations. It starts with a minimum of two locations; your businesses location and your GSTP’s location. If your business is operating from multiple locations, the operational complexity further increases. You would be expected to upload a few of the Invoices and invoice matching from each of your locations. Your GSTP will take information from you for and the data from GSTN for already uploaded invoices. Based on this collected information, your GSTP will submit the returns. It is very likely that all of this is simultaneously operated. Simultaneous operations from multiple locations would need an extremely high degree of integrity & accuracy in Compliance data. Therefore, your ability to seamlessly operate with multiple disparate systems is extremely crucial to ensuring your books and compliance returns match. 5. You will need a system that aids confidence in signing returns The last step of return filing requires you to download the summary (which doesn’t contain individual transactions) and sign a return. Before you sign, it will be crucial to ensure that nothing is pending and that there is no difference between what you have submitted and what GSTN has sent to you – this will be a challenge. It is important to be aware that you, your suppliers and your customers could all update relevant sections of information that go in your return. Since the GSTN system is asynchronous, the summation might be in processing, therefore some information won’t be available in summary immediately. You need to reconcile all the above information together in a system in order to build confidence in signing returns. 6. You need Compliance Convenience to remain focused on running the business These pain points are likely to cause a lot of confusion in your business. In fact, if not managed well, it can keep you busy for a significant period of time and potentially even distract you from running your business. You would desire to have “One Simple Transparent Step” to accomplish all the pending activities related to the GST system. And bringing this Compliance Convenience would be Tally’s objective, so that your focus remains in running the Business and it being GST Compliant.
GST Returns and Navaratri Arjuna (Fictional Character): Krishna, Navaratri will be starting from 21st September of this month. 9 days we worship the Goddess, just like that there is mess of returns everywhere. So tell the information regarding returns. Krishna (Fictional Character): Arjuna, because the GST has been applicable from 1st July, 2017, every taxpayer has to file monthly return. As 9 days we worship the Goddess likewise the returns are to be filed along with correct information. Up till now the government has not made available utility for filing certain returns. There is mess due to returns. So in accordance with Navaratri, let’s take the information about important GST returns. Arjuna: Krishna, which are the important returns in GST? Krishna: Arjuna, The important returns under GST are as follows: 1. Form 3B and GSTR – 1: Every taxpayer should file summary return in Form 3B for July 2017 to December 2017, on 20th of the next month after payment of tax. Invoice wise information of outward supplies for the month is to be furnished in GSTR – 1 up to 10thof the next month. But for some initial months the date is extended. 2. GSTR – 2: Every taxpayer should check the information relating to purchases in form GSTR- 2A and return is to be furnished in form GSTR – 2 up to 15th of the next month. 3. GSTR – 3: Every taxpayer should furnish the monthly return i.e. calculation of tax liability in form GSTR- 3 up to 15th of the next month. 4. GSTR – 4: The taxpayers, who have opted for composition scheme, should file quarterly return. Composition taxpayer should furnish the quarterly return in form GSTR- 4 after payment of tax up to 18th of the next month after quarter completed. 5. GSTR – 5: Nonresident taxable person should file return in form GSTR – 5 up to 20th of the month succeeding of the tax period or within 7 days from the expiry of the valid registration period whichever is earlier. 6. GSTR – 6: Input service distributor distributes the credit to their branches. For that they should file the return in form GSTR – 6 after distributing the credit up to 13th of the next month. 7. GSTR – 7 and GSTR – 8: The return relating to TDS is to be filed by tax deductor. It is to be filed in form GSTR – 7 up to the 10th of next month. The statement relating to TCS is to be filed by e commerce operator. It is to be filed in form GSTR – 8 up to the 10th of next month. But the government does not give the permission to file these returns. 8. GSTR – 9: The annual return is to be filed by every registered person in form GSTR – 9 before the 31st December of the next year. 9. GSTR – 10: The taxable person whose registration is cancelled or surrendered, then the final return is to be furnished in form GSTR – 10 within three months of the registration cancelled or surrendered. Arjuna: Krishna, What taxpayers should learn from above? Krishna: Arjuna, now there are so many difficulties to file returns. There is hassle bustle on the GST Network. To file the GST returns, taxpayers have to worship goddess. As we worship the goddess with full devotion, like that after compliance with the provisions of the act, corrected returns are to be filed. Because GST returns cannot be revised.
Assessment of Tax Liability in GST Assessment of tax means determination of the tax liability of a person. The tax liability of a person is the amount of tax to be paid by a person during a tax period. The types of assessment of tax under GST remain similar to those in the current regime. Broadly, there are 2 types of assessments – assessment by the taxable person himself/herself, i.e., self-assessment, and assessment by the tax authorities. Assessment by the tax authorities are of 4 types: Provisional assessment Scrutiny assessment Best judgement assessment Summary assessment Let us understand these in detail. Self-Assessment Every registered taxable person must assess the tax payable by himself/herself and furnish the relevant return for each tax period. Based on the type of taxable person, the returns to be furnished have been specified. This is explained in detail in our blog Type of Returns under GST For example: A registered regular dealer must furnish Form GSTR-3 on a monthly basis and Form GSTR-9 annually. This is the incidence where the tax payer is conducting self-assessment. Assessment by the Tax Authorities 1. Provisional Assessment If a taxable person is unable to determine the value of goods and/or services or determine the rate of tax applicable, the person can request an officer to allow payment of the tax on a provisional basis. The officer will pass an order allowing the person to pay the tax on a provisional basis. The rate of tax and the taxable value will be specified by the officer. The person has to execute a bond and surety or security, as the officer thinks is fit. The bond is binding on the person for payment of the difference between the amount of tax provisionally assessed and finally assessed. Within 6 months from the date of the provisional assessment order, the officer must pass the final assessment order. The person will be liable to pay interest on any additional tax payable under provisional assessment but not paid on the due date, i.e. 20th of the month. Interest will be liable from the 21st of the month till the date of actual payment, irrespective of whether the amount is paid before or after the final assessment order. If the person is eligible for a refund as per the final assessment order, interest will be paid on the refund amount. For example: A registered person manufactures a new product for which the HSN code and tax rate are not available. In this case, the person seeks a provisional assessment of the tax payable by him. 2. Scrutiny Assessment Under scrutiny assessment, an officer can examine the return and other information furnished by a person, to verify the correctness of the return. If any discrepancy is noticed, the officer will inform the person and seek his explanation. If the explanation is satisfactory, no further action will be taken. In case no satisfactory explanation is given within 30 days of being informed or if the person does not make corrections in the return after accepting the discrepancies, the officer will initiate appropriate action. For example: As part of the regular scrutiny assessment, an officer examines Form GSTR-3 filed by a registered person and has doubts regarding the transaction value and tax levied in certain transactions. In such a case, the officer will seek an explanation from the dealer. 3. Best Judgement Assessment Under best judgement assessment, an officer will assess the tax liability of a person to the best of his/her judgement. The circumstances for this are: a. Assessment of non-filers of returns– If a person fails to furnish a return, even after a notice is served to the person, an officer will assess the tax liability of the person to the best of his judgement. All relevant material which is available or which the officer has gathered will be taken into account. He will then issue an assessment order within 5 years from the due date of filing of the annual return for the year in which the tax return was not filed. If the person furnishes the return within 30 days from the assessment order, the assessment order will be withdrawn. For example: A regular dealer does not furnish Form GSTR-9 for a financial year, even after receiving a notice from the Tax department. In such a case, an officer will initiate best judgement assessment to assess the tax payable by the person. b. Assessment of unregistered persons– If a taxable person fails to obtain registration even though he/she is liable to do so, an officer will assess the tax liability of the person to the best of his judgement for the relevant tax periods, and issue an assessment order within 5 years from the due date of filing of the annual return for the year in which the tax was not paid. For example: During an inspection, an officer finds that a person has not registered under GST though his turnover exceeds the threshold limit. The officer will initiate a best judgement assessment and assess the tax liability of the person. 4.Summary Assessment In certain special cases, an officer may, on finding any evidence showing tax liability of a person which comes to his notice, with the permission of the Additional/Joint Commissioner, assess the tax liability of the person to protect the interest of revenue, and issue an assessment order if he has sufficient grounds to believe that any delay in doing so will adversely affect the interest of revenue. For example: On the basis of Form GSTR-3 filed by a registered regular dealer, an officer initiates summary assessment as he finds enough evidence to believe that a significant loss of revenue can be recovered from the person. It is important for a taxable person to be aware of the different types of assessment under GST and adhere to the compliance requirements. Self-assessment is most important for every registered person. It is important to furnish accurate information and pay tax due on a timely basis, as per the due dates laid down. Self-assessment done appropriately ensures that assessment is not initiated by the tax authorities. In a case where an assessment is initiated by the tax authorities, a dealer must ensure to furnish the information asked for by the time given. Businesses must make use of the facilities of compliance and technology to remain compliant under GST.
What are the Accounts and other Records you should Maintain under GST Accounts and records are the primary source of data for any organization’s financial reporting. Every law of Direct and Indirect Tax in our country also mandates that information in a prescribed manner has to be captured and preserved for a certain period of time. These accounts and records form the basis for returns filed by tax payers under each law. Current regime In the current indirect tax regime, every tax law mandates certain accounts and records of transactions to be maintained for a specific period of time, apart from the regular books of accounts. Under Excise, the general records to be maintained are the RG-1 register (Daily stock account of excisable goods), Form IV register (Register of receipt or issue of raw material), invoice book and job work register Under Service Tax, the suggested records include the bill register, receipt register, debit/credit notes register, CENVAT credit register, etc Under VAT, the records to be maintained include purchase records, sales records, stock records, VAT account containing details of input and output tax, works contract account, etc These records are required to be retained for at least 5 years from the end of the financial year in which they were effected. GST regime Under GST, the activities of manufacture, provision of taxable service and sale of goods will have a common law and hence, businesses can now maintain consolidated information which was maintained separately earlier. Under GST, every registered taxable person is required to maintain correct accounts of the following details at the principal place of business specified in the registration certificate: – Manufacture of goods Inward and outward supply of goods and/or services Stock of goods Input tax credit availed Output tax payable and paid If more than one place of business is specified in the registration certificate, accounts relating to each place of business must be kept at the respective places. The accounts and records must be maintained in electronic form. Persons whose turnover during the financial year exceeds Rs. 1 crore In addition to maintaining the accounts specified above, a registered person whose turnover during the financial year exceeds Rs. 1 crore is required to, Get the accounts audited by a Chartered Accountant or Cost Accountant and Submit a copy of the audited annual accounts and a reconciliation statement in Form GSTR- 9B while filing the annual return in Form GSTR-9. In the reconciliation statement, the Chartered Accountant or Cost Accountant is required to certify that the value of supplies declared in the annual return reconciles with the audited annual financial statement. Persons owning or operating a warehouse or godown An owner or operator of a warehouse or godown or any other place used for storage of goods, irrespective of whether he is registered or not, is required to maintain records of the consignor, consignee and other details which are yet to be prescribed in the law. How long should accounts and records be retained? Every registered person is required to retain accounts and records for 5 years from the due date of filing of annual return for the year to which the accounts and records pertain. For example: For accounts and records pertaining to Financial Year ’17-’18, annual return must be filed by 31st December ’18. These accounts and records must be retained till 31st Dec 2023.
The Goods and Services Tax (GST), the country’s biggest tax reform, is scheduled to be rolled out from July with the Parliament passing all the crucial laws on April 6. The main problem now is implementation, which politicians and experts say, will not be smooth as companies have to file as many as 37 forms in every state. While the compliance cost will increase, businessmen will have to brace for penalties, harassment and even jail term. Many smaller units will have to buy software and hire professionals to compile the transaction details to get tax refunds. For those having units at remote places, filing returns online will be a challenge in absence of internet connections. One of the main architects of the GST and former prime minister, Manmohan Singh, has warned that the new indirect tax regime could be a “game-changer” but fraught with “difficulties”. Congress leader Veerappa Moily has cautioned the government that the rushed GST rollout from July will make it a “technological nightmare” for businesses. Here are the 10 things that taxpayers have to look out for in the new GST regime: 1.Multiple tax forms Companies will have to go through a grueling exercise of filling up and filing multiple forms for central GST (CGST), the inter-state integrated GST every month. “The basic returns under GST could be 37 in a year for a single GSTIN—GSTR-1, GSTR-2 and GSTR-3—for each month, and one annual return. For a company with operations in 20 states, it means 740 annual returns, ” says Archit Gupta, founder and CEO of Cleartax.com. For an e-commerce company, it could even be as high as 432 returns in a year. 2.Can GSTN support a flood of data? GST Network is geared to accept up to three billion invoices a month from 8.5 million taxpayers from day one. The common portal (www.gst.gov.in) acts as an interface between different stakeholders in the GST ecosystem, namely taxpayers, tax departments, banks, the Reserve Bank of India, external service providers, among others. The portal becomes the touch point for taxpayer registration, invoice upload, tax payment, getting input tax credit, maintaining the cash ledger and stock holding etc. This would mean that the network must have the capacity to handle massive amounts of data, and hence the fear of a breach. Given the experiences of online filing of income tax and VAT, experts doubt the new GSTN will be able to seamlessly match billions of vouchers, facilitate tax collection, provide refunds and check evasion. 3.Go digital without hard copies GST will herald not only a new tax but also a 100% digital system to file returns and payments., further raising questions about adaptation, especially in arear of low internet adoption. “All filings, communications and payments will be through a common portal. There will be a discontinuance of hard copy filings and a move towards digital India. It will be a Herculean task as a large number of people especially the small traders do not have access to electronic facility, ” says Priyajit Ghosh, a partner looking into indirect taxes at KPMG. 4.Data privacy Subramanian Swamy, a leader of the ruling Bharatiya Janata Party, has openly expressed reservation at the security and privacy of the GSTN, which will be 51% owned by private players. Opposition leaders—Congress’ Kapil Sibal and CPI’s D Raja—have expressed concerns about data privacy under a private company GSTN. Finance minister Arun Jaitley has assured lawmakers in Parliament that there will be IT firewalls and penal provisions for any leak of information. Given the rise in cyber crimes, can leak of information and technical glitches be ruled out? 5.Allegations of draconian provisions Some of the Parliamentarians raised objections to some of draconian provisions of arrest for fraud in the initial years as many new firms will be using the GSTN system for the first time and are bound to make genuine mistakes. Although Jaitley has assured that small businesses will not be covered by the harsh provisions, every offence of tax evasion will be compoundable. There will be no arrest for frauds up to Rs 2 crore. For offences between Rs 2 crore and Rs 5 crore, it is going to be bailable. For offences over Rs 5 crore, it is going to be non-bailable.
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