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Transitional Challenges in GST implementation

Goods and Services Tax - GST - By: - Ravi Kumar Somani - Dated:- 23-1-2017 - India is committed to implement Goods and Service Tax (GST). GST is expected to be implemented from April 2017 or a little later. The tax system is currently in the drafting stages with a few undecided issues holding up the agreement between the states and the Centre. The implementation of GST does not just involve tax reform, it is instead a complete business reform. Therefore, changing the historical ways of doing bus .....

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implement the GST. Broadly, there are three models as under: Model - 1: In-house implementation Model: Implementing the GST with its own internal team by developing a core GST Team. This can be an appropriate model when the system and controls are well-organised and the company has separate tax team with complete pool of industry knowledge and the knowledge of taxation apart from the resources to execute the plan. Model - 2: Out-source implementation Model: Outsourcing the entire GST transition .....

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and the outside professionals clearly dividing the roles and responsibilities of internal team and the external experts. This is more appropriate model for major of the companies who have fairly decent capacities in respect of the executing manpower and knowledge of the taxation system. The capacity and the knowledge can be optimally utilized by partnering with the professionals. Credits Transit, Maximization, documentation, Methodology: Various transitional provisions has been prescribed to dea .....

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led in the books and returns with no sanctity checks on the credits; Credits are missed either due non-availability of credit availing document or missed due to oversight or credit assumed to be ineligible which is actually eligible or credits missed transferring in return from the books. Such businesses must run a credit check for the last one year and avail the credits where possible. The Transitional provisions relating to transfer of credits are not clear and provides multiple views. Further .....

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uring due compliance of the law. Whether to avail the credit of disputed items could be a vital decision which would require legal confirmation considering the latest case laws as also the time limit of 1 year of the invoice. Further, businesses must have proper documentation, trails in place to establish the claim of the credit at a later date during departmental audits. Business Model Re-structuring: All businesses will undergo a change due to advent of GST. However, the businesses who act and .....

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rticals; Management hierarchal/ reporting changes - Robust de-centralised reporting required; Venturing into new avenues; Assessing collaborations, partnerships, mergers - Geographical expansion & business line expansions; Change in Sourcing strategies - Local/ inter-state/ SEZ. Understanding the nature and extent of the re-structuring along with the time required v/s tie available would be important. Further, actual implementation of the restructuring would be critical task and needs to be .....

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t supplies - For Ex: Combos with aerated drinks in restaurants, Cinema halls; Merging multiple supplies into a composite supply - For Ex: Vaastu, High Rise Premium to be merged with construction; Determining whether a transaction to be restructured as a Composite supply or as a Mixed supply; Clear breaking up the Price to optimize taxes; Revisiting the Discounts policy - Nature of discount, Cash discount or trade discount, whether linked to invoice or not; Security Deposits in lieu of advances t .....

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ise could be challenging but its worth the benefits accruing from it. What if any transitional aspect is not addressed in the GST law: There are certain transitional aspects which are not addressed in the Model GST law. For instance, Provision for removal of inputs for job-work in the Model law does not explicitly cover direct removal to job worker place from vendor locations and also it does not cover direct dispatches of inputs by job-worker to the principals customer after processing. There c .....

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l aspects which would be more complex in a practical scenario and there may not be only one view of the same. For instance: Determining the quantum of availing credits based on stock or determining the right pricing for goods/ services in the GST regime considering the anti-profiteering measures. In such cases, businesses shall face challenge in selecting the right approach. Further, the approach adopted may easily be contradicted by the department. Therefore, in such scenarios businesses must h .....

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evamped Model GST Draft has been put up in the public domain as recently as on November 26, 2016. Further, upon approval by GST council, soon each state will come up with its own GST laws and there set of rules, procedures etc. In such a fast moving pace, its crucial for businesses and professionals to stay brisk and updated with the current by having a continuous learning and training system in place. Some master trainers must be identified in each department who shall undertake in-depth traini .....

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usinesses are going to face. The consequences of the same will be faced at the time of departmental audits in the GST regime. Therefore, due care needs to be taken under the guidance of the professionals while dealing with such loosely drafted provisions in the law without clear guidance. Filing of the last return in the current tax regime: Filing of the last return in the current tax regime is like a last chance to make good the old issues and start afresh. Based on the impact assessment, compl .....

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nd the time limit of its revision expires then the chance of making changes is less and cash refunds under the earlier law would be the only option. Disputed refunds for credit accumulation could lapse. Filing of First Return in the GST regime: Anything when done for the first time poses the high risk of wrongdoing especially when the importance of the task is so high. Therefore, filing of the first return in the GST regime is a crucial task and during transition where all the old credits, taxes .....

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affair. Many aspects of the GST regime such as matching concept, compliances etc. will be perturb the business in GST regime if the vendors are not organized. Therefore, the challenging task of the vendor evaluation/ assessment and their preparedness for the GST must be assessed well in advance during the transitional phase so that the loose link the chain is not carried along to the GST regime. Vendors who understand can pass on the benefit and ensure that the intermediate supplier is not out .....

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ious reports, formats, fields that needs to be changed in the existing ERP. Various factors that may help in determining the same could be: Efficiency of current package, Size of business, Time for transition to new ERP, Time left for GST, Support from the ERP vendor etc. Based on these factors business must take a decision as to what immediate changes in the ERP must be done to ensure smooth flow of operations in GST with reduced manual efforts on compliance. Performing GST Impact Analysis: Dur .....

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