At midnight, on first July 2017, the entire current indirect tax regime in India will transition to the new Goods and Service Tax (GST) regime. Therefore, all Indian Organizations, irrespective of their industry, size and nature of Business need to be ready to transition to the new system or risk disruption to their functioning. Following are some of the key steps that businesses need to take to ensure smooth transition to GST:
1. Registration on to the GST Network: All taxpayers need to register on to the GST network. The last date of registration was 30 April 2017, the registration has been stopped for a few weeks, and it will re-open to allow the remaining taxpayers to register. Businesses would be required to register in each state where they are supplying goods or service.
2. Training: GST will impact all aspects of a business, there needs to be an organization-wide understanding of GST Regime. Comprehensive training is required for Senior Management and Departmental heads, who can further impart training to their respective teams.
3. Impact Study: Transition to GST will impact each organization differently depending upon their exiting tax structure, nature of business, infrastructure, distribution network and layers in the distribution channel. Most organizations will have to evaluate and tweak their strategy under the GST regime. It is important that Organizations carry out a detailed study of impact of GST on their businesses; it is highly recommended that this be done through trained professionals.
4. Review of existing long term contracts: Existing long term contracts should be reviewed and impact of GST assessed. Wherever required the contracts must be re-negotiated/ renewed.
5. Tax credit on closing stock as on 30th June: Taxpayers can claim input tax credit on the closing stock and WIP that they are holding at the end of 30th June 2017. They must have invoices or other proof of purchase not earlier than 12 months. This input credit can be claimed by uploading a return on the GSTN.
6. IT and Accounting Systems Updating: Taxpayers need to make suitable changes to their IT and Accounting systems to ensure that they meet all requirements of GST.
7. Additional Working Capital Requirement: Currently stock transfers between related entities are not taxed; under the GST Regime, stock transfers will be treated as ‘supply’ and they would be taxed. Currently inter-state sales attract only 2% CST but under GST regime, inter-state sales will attract IGST. In several other ways, working capital requirement under GST will increase significantly.