Whether you’re new in business or a veteran on the market, it’s impossible not to have heard of the new tax system that will be rolled out this year in India, called Goods and Services tax, for short GST.
With the promise of streamlining the current tax structure, the government will integrate all current indirect taxes into a single GST tax, making tax collection more transparent.
All invoices from B2B transactions have to be captured and compared to the corresponding party’s records. If there are any discorcondances, input tax credit cannot be claimed.
Implementation will be tough on businesses as they will have to learn on the go. Returns need to be made more often and cash flow might have suffer. GST software will be the key in their day to day operations.
While logistics will get easier for companies that sell goods, businesses in the service sector will suffer more. Currently, service providers need to register once at the central level while GST will require registration in every state such a business operates.
No more tax cascading and applying tax at the total value of the product on each stage of the supply chain. Tax will be applied to value addition at each stage and businesses will be able to claim input tax credit.
Taxes for both Centre and State will be collected at the point of sale and charged only on the manufacturing cost. As prices are likely to come down, consumption will increase, resulting in more production and helping businesses grow.
Interstate movement of goods will get easier. All businesses that need to move goods around the country currently need to keep multiple warehouses in order to reduce tax prices. This won’t be necessary as GST will remove entry state taxes.