The government is all set to take the country into a new era in tax payments and has announced a number of tax slabs under the Goods and Services Tax (GST). It has also mandated SMBs to be ready for input tax credit. Every company is preparing for the move to GST from November. But not all of them have been able to migrate to GST yet.
Some of the issues faced in the migration:
- Getting shareholders living abroad to register their foreign numbers.
- There is still confusion around how tax credit on inventory held will be recorded in GST.
- Factories that offer job work are completely dependent on chartered accountants on how GST will impact their industry.
- People in the services sector are struggling to migrate to GST and are expecting enrolment procedure to begin again on 1 June.
- SMBs are still confused as to how to carry forward tax credit and awaiting answers.
- The government has ensured that businesses can carry forward credit not taken on capital goods.
- All goods contracted currently and to be delivered in July will fall under the purview of GST.
- SMBs should track of credit notes provided currently, to be paid later, will garner additional tax.
- Any tax credit refund under existing tax laws will made duly by the government before or after the implementation of GST and this amount will be paid by cash.
- Spend time with your chartered accountant to understand output tax liability and the refund claims thereon.
While GST looks like a monster, it really is not if one has an accountant who is able to understand how your ecosystem works. Say if you are a tier-2 automobile component manufacturer, then the chartered accountant must understand the payment of taxes within the entire chain and the relationship between the tier-1 company and whom the product will be shipped to. In case of a software firm, the same sub-contracted logic remains and the services tax will be levied thereon.