The Goods and Services Tax (GST) will be implemented by July 2017. The new tax law will bring far-reaching reforms, affecting every member of the society: from the entrepreneur to bureaucrat to industrialist to the layperson. Even a tiny change in tax chain leads to a domino effect; we can very well imagine the radical changes that would be brought in by the GST. Startups and new entrepreneurial ventures would be particularly affected as they usually lack the financial and logistic wherewithal. On the other hand, the GST could lead to enhanced supply chain decisions, reduced transportation cycle times, warehouse consolidation, etc.; all of which would eventually lead to better efficiency in startups and SMEs.
In order to thrive in this fast-paced scenario, businesses, including startups and SMEs, will require technology to figure out a number of things: taxes that they need to pay, how tariffs apply, quantum of taxes and calculation procedures. In all this confusion, its best for enterprises to go for automation, that is, calculate taxes through a software to avoid any chance of human error—as the smallest mistake could boomerang into an inflated tax bill. This can particularly hurt small businesses that are just starting out. However, if equipped with appropriate tools, enterprises can file tax returns properly and can even end up saving taxes. Consequently, businesses should be ready for the impending GST.
Existing tax accounting software needs several modifications To effectively tackle the GST, enterprises must bring their tax accounting in line with GST compliances. Generally, business use the Enterprise Resource Planning (ERP) software for their accounting needs. This ERP will have to incorporate a number of modifications to be GST-compliant since the new law will affect the entire gamut of business activities including manufacture, sale, and consumption of goods and services across India.
Additionally, to be able to benefit from the provisions of the input tax credit feature of the GST (a provision which ensures that taxes paid in other states and regions can be claimed in the home state), multiple modules will be required including destination system, input credit, twin rates, etc. Basic processes such as generating invoices and payroll, meeting new compliance rules, etc. would have to be revisited. Thus, businesses utilizing older software would require an updated version or go for new vendors.
Although full details of the GST are yet to be fleshed out including supply chain management through warehouse engineering, credit allowance during the transition phase, classification of goods and services under the new tax law, businesses should not wait for 1 July 2017. The time to act is now.
Source: forbesindia
