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.
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.
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.
Please share your thoughts on these SIX changes in business behaviour that GST will bring.
Our next article will cover the role of the Goods and Services Tax Practitioner(GSTP), who will be more critical than ever before to your business. This will be followed by another article on how our SIXTH Release of Tally ERP 9 will make these SIX behavioural changes simpler for you.