The new indirect tax Goods & Services Tax – GST implemented on July 1st, 2017 is the hot new topic in India. There are many discussions and debates happening at the Central, State and local levels to better understand the future prospects of the Indian economy due to the implementation of GST.
The main goal of GST – One nation one Tax- aims to curb and subsume all the indirect taxes in India under one bucket. This will further ensure to eliminate the cascading effect of taxes on production and distribution and prices of goods and services.
There are many benefits and impact of GST on business, government, consumers and overall Indian economy. Currently, only businesses having a turnover of more than Rs 500,000 are required to register under GST. The threshold limit is set at Rs 500,000 so as to ensure that the small businesses are not burdened with the costs of registration and other administrative procedures. However, the small businesses on their own may wish to voluntarily register.
Let us try and understand what are the top items aspiring businessmen should know about GST in order to sustain in the market:
- The Rules and Regulations: Understanding the Act of GST is utmost important for every entrepreneur. They should understand the various types of GST-like CGST (Central GST), SGST (State GST) and IGST (Integrated GST). They should further understand the different rates of tax applicable and the bracket which will be applied to them. Few other items such as preparation of tax invoice, generating GSTIN number.
- Understand the tax calculation under GST. It is important for every businessman to check whether his tax costs have increased or decreased due to the introduction of GST. The applicable rules for input tax credit on inputs and capital goods need to be also thoroughly studied so as to ensure the tax costs have reduced.
- Update all the accounts and documentation correctly as per the Act. It is important to disclose each account details with the authorities in order to ensure a smooth and seamless transition to GST. Ensure the books of accounts are correctly maintained and recorded.
- Apply for registration of GSTIN under the GST Act so as to enjoy the benefits of input tax credit. Ensure to issue tax invoices on each purchase and sale of goods and services. Also, it is important to ensure if the details of tax calculation are mentioned in the invoice correctly.
- Avoid purchasing from unregistered dealers and manufacturers so as to avoid restriction on input tax credits. Also, ensure that all the current suppliers of the businessmen register under GST. GST aims to bring the unorganized sector to more organized sector and it is the responsibility of each businessman and consumer to support this initiative.
With proper documentation and disclosures, businesses can achieve the required results and avoid penalties and fines from the tax authorities. The current implementation issues are a one-time effort which done correctly will bring about great benefits.