CF-Whitepaper 07-12 - Capital Float Blog

GST

An Overview, Its Impact & Significance

Table of Contents Page No.

Topics 1. Introduction

03

2. Salient Features of GST Tax System as Modified by GST Registration Procedure for the Collection of Tax Validation of Challans and Returns Exemptions Four-tier Tax Structure

04

3. Key Benefits of GST

08

4. Changes in the GST taxation system Composition Scheme Changes Taxpayer Relief Measures

11

5. Challenges Ahead

13

6. Impact of GST on Various Sectors Manufacturing Services Trading Telecom Online retail Hospitality

14

7. Designing and Managing your Roadmap for Change Changes to Business Processes, IT Systems, Costs and Pricing IT Infrastructure of GST How Will Data be uploaded onto GST? Return Filing Procedure under GST

16

8. Business Advice by Capital Float Why Should SMEs Enrol for GST?

20

9. Conclusion

21

10. About us

21

Disclaimer: No part of this literary work may be reproduced or transmitted in any form or by any means, or stored in any retrieval system of any nature without prior written permission. Application for permission for other use of copyright material including permission to reproduce extracts in other published works shall be made to the publishers. Full acknowledgement of author, publisher and source must be given. © Capital Float 2017

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Introduction The Goods and Services Tax Bill (GST Bill) was launched on 01 July 2017 as the biggest reform in indirect taxes since India’s independence.

Understanding GST The GST saga began in 2000 when the seeds of a major overhaul of the excise structure were sown by the then Prime Minister Atal Bihari Vajpayee. A committee headed by the finance minister of West Bengal at the time, Asim Dasgupta, was set up to design a GST model. For 17 years, the idea of ‘One Nation, One Tax’ witnessed countless delays and heated politics. Nearly two decades since its inception, GST was finally rolled out, and is now expected to simplify the complicated structure of taxation by creating a common market. The Goods and Services Tax Bill (GST Bill) was launched on 01 July 2017 as the biggest reform in indirect taxes since India’s independence. Commenced as a radical step towards India’s transformation, this unified indirect tax structure is expected to usher in a simpler and more transparent system that will reduce tax evasion and augment revenues. On a macro level, GST is expected to boost competitive manufacturing, especially in the Small and Medium Enterprise (SME) sector. More importantly, an increase in the GDP is foreseen as a fallout of the wider coverage of goods and services. This attempt towards bringing a

“One Nation, One Tax” legislation to life will have far-reaching implications on SMEs, as they will see a direct impact on their working capital.

© Capital Float 2017

Current Taxation System The most fundamental classification of taxes splits it into direct and indirect taxes. As the names suggest, direct taxes are ones that are directly paid to the government. They are paid entirely by the taxpayer and cannot be transferred or shifted. An example of direct tax is income tax. You are solely liable to pay this tax since you earn an income. In comparison, indirect tax can be shifted to another taxpayer, as it is applied on the sales of goods and services. In the case of indirect tax, the initial tax can be levied on the service provider or manufacturer, who can later shift this burden to consumers.

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Salient Features of

GST GST has replaced almost all the indirect taxes and created a common market to facilitate a simplified tax structure and easy filing of tax returns online. It will also bring down the burden of the taxpayer by reducing indirect taxes and import and export taxes.

GST will be levied on all transactions that occur during every stage of the entire manufacturing chain, from manufacture to final consumption, with credit of taxes paid at previous stages available as setoff. For instance, an automobile manufacturer transfers the excise duty along with a multitude of state-specific taxes on motorcars to the buyer, and it consequently becomes a part of the vehicle’s cost. While being a critical component of revenue for the government and the economy, this structure generates a high tax rate due to variations in indirect taxes. Manufacturers end up charging a higher price for commodities, as every state has its own tax rate.

indirect taxes and thriving illegal economic operations (also known as the infamous “parallel economy”) are ills that have plagued the nation for long. The simplified structure of GST aims precisely at resolving these complications.

Such a complicated regime with a multiplicity of taxes, most of which are high, gives way to various issues. Complex tax compliance, over-reliance on


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The reforms will simplify the convoluted scenario where every state has its own tax rate, and will subsume the following taxes:

Taxes levied and collected by the Centre

Taxes levied and collected by the State

Central Excise Duty

State VAT

Duties of Excise (Medicinal and Toilet Preparations)

Central Sales Tax

Additional Duties of Excise (Goods of Special Importance)

Luxury Tax Entry Tax (all forms)

Service Tax

Taxes on lotteries, betting and gambling

Additional Duties of Excise (Textiles and Textile Products)

Entertainment and Amusement Tax (except when levied by the local bodies)

Additional Duties of Customs (commonly known as CVD)

Taxes on advertisements

Special Additional Duty of Customs (SAD) Central Surcharges and Cesses, applicable to the supply of goods and services

Purchase Tax State Surcharges and Cesses, applicable to the supply of goods and services

Tax System as Modified by GST GST reduces the burden for taxpayers and streamlines taxes that an average Indian pays either directly or indirectly. This new structure mitigates the cascading effects of taxation and forms a dual taxation regime with only three components:

CGST: Where the revenue will be collected by the central government

Tax System as Modified by

GST


SGST: Where the revenue will be collected by the state governments for intra-state sales IGST: Where the revenue will be collected by the central government for inter-state sales

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The tax structure under the new regime will be as follows:

Transaction Sale within the State Sale outside the State

New Regime

Old Regime

Comments

CGST + SGST

VAT + Central Excise/ Service Tax

Revenue will now be shared between the Centre and the State

IGST

Central Sales Tax + Excise/Service Tax

Single tax in case of inter-state sales

Registration

Procedure for the collection of tax Unlike the previous tax regime where the Central Excise/ Service Tax was uniform and VAT varied from state to state, the GST regime will adopt a uniform process and common dates for the collection of tax.

According to Section 22 of the CGST/SGST Act, 2017, every supplier (including agents) who makes a taxable supply (supply of goods and/ or services that are subject to taxation under the GST law), and whose aggregate turnover in a financial year exceeds the threshold limit of `20 lakhs, shall be liable to register the business under GST. The Act further states that a person should register within 30 days from the date on which they become liable to registration, in such a manner and subject to conditions as are prescribed under the registration rules.

Let us take an example to understand the process better. If person A trades goods worth `5000 with person B in Bangalore, a uniform GST rate of 18% is applicable, where 9% goes to SGST and 9% to CGST. In this case, `450 will go to the Bangalore state government, and the remaining `450 will be collected by the central government.

For example, if you run a clothing store online and sell merchandise worth 25 lakhs in your first year, you become liable to register for GST. You will be provided with 30 days post completion of a year in business to register. © Capital Float 2017

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Validation of challans and returns Under the earlier tax regime, there was part validation of challans and returns by the system and full verification subject to assessments by the relevant Central/State authorities. However, GST will entail system-based validation and consistency checks on input credit availed, utilisation and tax payments. The GST Network allows you to initiate a challan or apply for returns in the online platform itself.

For example, if you are a registered manufacturing firm of Indian origin, you can opt for the E-sign feature using your Aadhaar number in order to sign your returns.

the GST Council: 12% and 18%. The GST council has decided to tax all goods and services that are currently taxed at 9-15%, at a standard rate of 12%. Processed foods will also be taxed at 12%. The remaining goods and services will be taxed at the second standard rate of 18%. Higher rate: A higher rate of 28% will be levied on white goods such as washing machines, air conditioners, refrigerators, small cars, etc. Aerated drinks and cement are also included in this tier.

Exemptions Post GST, essential items such as grains, non-mineral water, bread, eggs, milk, vegetables, cereals, books and salt are exempt from taxation. Four-tier Tax Structure The four-tier tax structure under the GST will levy four separate rates: zero rate, lower rate, standard rate and higher rate. Zero rate: It is a nil tax rate applied on goods and services. This is equivalent to tax exemption and does not have any effect on the price of the product. The items within this bracket include foodgrains, milk, curd, eggs, cereal and meat. Apart from these, metro travel, education and healthcare are also exempted from GST. Lower rate: The next slab of 5% tax rate will include sugar, tea, coffee, oil, and other essentials like PDS kerosene and LPG. Transport services including private taxi aggregators have also been placed in this slot. Standard rate: Two standard rates have been finalised by


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Such a taxation format will help the country’s businesses gain a level playing field and will place us on par with nations that have a more structured tax system. With a single tax on goods and services, it will also translate into gains for the end consumer, who no longer needs to pay cascading taxes.

Wider base of goods and services GST will cover the GDP more comprehensively by including a wider base of goods and services. A single indirect tax regime will be instrumental in removing multiple taxation. Earlier, the registration requirement from excise laws could go up to 1.5 crores for manufacturers and 9 lakhs for service providers. However, with the implementation of GST, all businesses with a turnover of 20 lakhs and above will come under this bracket and will have to register, which gives room for many more businesses to fall under this threshold. Standardisation of processes

Key Benefits of GST The GST aims at streamlining the indirect taxation regime by subsuming all indirect taxes levied on goods and services, including State and Central taxes. Emerging as a massive improvement on the VAT system, this will create a seamless nationwide market. These are some of the key benefits of a unified tax structure:


GST will eliminate any direct interaction between the assessing authority and the taxpayer by standardising and automating processes, and will interlink incentives for compliance, making the tax system more accountable. All types of intricate and indirect tax structures like octroi or entry tax, service tax, state value added tax, central excise tax, etc., which manufacturing businesses had to pay earlier, have made way for a standardised taxation structure. Improvement in tax collection GST is expected to improve the overall collection of taxes as well as boost the development of the Indian economy by removing the indirect tax barriers

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between the states and integrating the country through a uniform tax rate. For instance, in the case of a trading company, the tax paid on sale in the state can be claimed against the tax paid outside the Improved compliance Digitisation is at the heart of GST. Apart from simplifying the tax structure, it will make compliance more transparent and convenient. Registering on the GST portal, uploading invoices and filing returns on the same will be mandatory. This will improve the ease of doing business and will promote conformity through a common IT infrastructure, thereby reducing the overall cost of compliance. For example, the e-commerce industry has to ensure complete compliance through the entire product lifecycle. Non-compliant merchants will gradually fall out of the business chain. Reduction of cost The subsuming of major Central and State taxes in GST would reduce the cost of locally manufactured goods and services. This is likely to increase the stature of Indian goods and services in the international market and boost Indian exports. With GST, a retail manufacturer can waive off the output tax he has already paid on raw materials through the mechanism of input tax credit, thereby lowering the cost of the final product.


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Revised GST rates as on 06 October, 2017

Good/Service

Duty credit scrips

Previous GST Rate

Revised GST Rate

5%

Nil

12%

5%

18%

5%

28%

5%

18%

12%

Mangoes sliced dried Khakra and plain chapati/roti Namkeens other than those put up in unit container and: (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily] Ayurvedic, Unani, Siddha, Homeopathy medicines, other than those bearing a brand name Paper waste or scrap Real Zari Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government, subject to specified conditions Plastic waste, parings or scrap Rubber waste, parings or scrap Cullet or other waste or scrap of glass Biomass briquettes Hard rubber waste or scrap Sewing thread of manmade filaments, whether or not put up for retail sale All synthetic filament yarn, such as nylon, polyester, acrylic, etc. All artificial filament yarn, such as viscose rayon, cuprammonium Sewing thread of manmade staple fibres Yarn of manmade staple fibres


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Poster colour Modelling paste for children’s amusement All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST] Fittings for loose-leaf binders or files, letter clips, letter corners, paper clips, indexing tags and similar office articles, of base metal; staples in strips (for example, for offices, upholstery, packaging), of base metal

28%

18%

28% / 18%

5%

Plain shaft bearing Parts suitable for use solely or principally with fixed speed diesel engines of power not exceeding 15HP Parts suitable for use solely or principally with power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps E-Waste Imposing GST only on the net quantity of superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB]

18%

18% (Clarification to be issued)

Changes in the GST Taxation System – with effect from 15 November 2017 Composition Scheme Changes GST rate at 1% for manufacturers and traders Composition scheme limit to be extended to `1.5 crore Composition tax of 1% on the turnover of taxable goods Interstate sales are not permissible for composition dealers. Input tax benefit not allowed.


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GST Filing Extensions GSTR form

GSTR-5 (for Non-Residents) GSTR-4 (for Composition Dealers) GSTR-6 (for Input Service Distributors) ITC-04 (for the quarter of JulySeptember) TRAN-1

Revised Due Date

Previous Due Date

Before 20th August 2017 or days from date of registration

15th December 2017

18th October 2017

24th December 2017

13th August 2017

31st December 2017

25th October 2017

31st December 2017

30th September 2017

31st December 2017

Taxpayer Relief Measures Reduced Late Fee: For delay in the filing of NIL returns, late fee will be reduced from ₹200 per day to ₹20 per day. Credit of Late Fee: For filing of GSTR-3B for the months of July, August and September, late fee has been waived. Any late fee paid will be credited back in Electronic Cash Ledger under ‘Tax’ and can be utilised for GST payments. Manual filing for ‘Advance Ruling’ to be introduced. Export of services to Nepal and Bhutan are now exempt from GST. Input tax credit, if paid, can be claimed for refund. Taxpayers with turnover less than ₹1 crore should file invoices every month, while those with turnover greater than ₹1 crore should file invoices every quarter.

Revised GST rates (with effect from 15-11-2017) Present GST Rate

Revised GST Rate

Guar meal, Khandsari sugar, Dried or frozen vegetables, Uranium ore concentrate, Hop cones, Unworked coconut shells

5%

Nil

Desiccated coconut, Idli Dosa Batter, Coir products, Fly ash bricks, Worn clothes or rags, Fishing hooks, Leather or chamois after tanning or crusting, Nets of textile material, Restaurants (non-ac)

12%

5%

18%

5%

Good/Service

Restaurants (ac), Potato flour, Chutney powder, Sulphur recovered as by-product in refining of crude oil, Specified parts of aircraft, Scientific & technical apparatus, Computer software & accessories, © Capital Float 2017

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Condensed milk, Diabetic foods, Refined sugar, Medicinal grade oxygen, Printing, writing and drawing inks, Pasta, Curry paste, Mayonnaise and salad dressings, Mixed seasoning, Parts of agricultural & sewing machinery, Bamboo and cane furniture, Frames and mountings for spectacles, Hand bags and shopping bags of cotton and jute

Wet grinders, Tanks and other armoured fighting vehicles

Chewing gum, Chocolates, Preparation of facial make-up, Preparations for oral hygiene, Toothpaste, Shaving and after-shave items, Shampoo, Deodorants, Detergents, Granite and marble, Handmade furniture, Electric switches, Watches, Sanitary ware, Cases, Cutlery, Refrigerators, Flavoured drinks, Water heaters, Fire extinguishers, Printers, Automatic goods vending machine, Transmission shafts and cranks, Fork-lift trucks, Self-propelled bulldozers, Batteries, Static converters, Vacuum cleaners, Cameras and projectors, Microscopes, Musical instruments

18%

12%

28%

12%

28%

18%

Challenges Ahead Despite these significant advantages, the implementation of GST at a national level is a colossal challenge. Four tax slabs is a high number for a unified tax regime. Apart from tax evasions and legal battles, here are some of the other challenges that lie ahead: Timing of policy change GST was implemented three months into the financial year 2017-18. This means that a business will have to follow the old tax structure for the first three months and GST for the rest of the fiscal year. It is a daunting task to cross over from one tax structure to the other in a day, and hence, businesses may be running parallel tax systems, resulting in confusion and compliance issues. For example, an invoice dated 15th July 2017 and cancelled on 10th August 2017 will raise ambiguity regarding the service tax to be compensated. The exact tax amount to be returned (whether the pre-GST rate of 14% or the revised tax slab of 18%) and how to justify the same in the monthly GSTN form are the challenges that may be experienced as a consequence of timing.


Implementation and compliance Many companies are still ignorant of the finer points and implications in the new tax regime. Changing over to a completely new system of taxation requires expertise and in-depth knowledge, both of which businesses lack at this moment. Even before businesses can reach the filing stage, they have to issue GST-compliant invoices. India has traditionally been a pen-and-paper economy and many companies are reluctant to shift to digital recordkeeping. With a large chunk of India’s SMEs still relying on conventional documentation and accounting methods, the new taxation regime sounds very ‘foreign’. For example, digitisation is yet to make inroads into a major part of the traditional gem and jewellery industry. In such circumstances, small-time jewellers will find it increasingly hard to implement and comply with GST norms.

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Skilled resources There is a need to train staff with updated subject knowledge, in terms of concept, legislation and procedure, as not many resources are familiar with it. This creates additional workload on members across industries to have GST-skilled personnel to ensure swift implementation.

Impact of

GST

on various Sectors Services

The unified tax system is set to revolutionise indirect taxation in India and overhaul the economy in its wake. Some of its key proposed advantages are the streamlining of tax payments, reduction in tax frauds and ease of doing business. The likely impacts of GST on different sectors are listed below: Manufacturing GST is expected to liberate the sector by unifying tax regimes across states. It could lead to a shift from an agrarian economy to a service and manufacture -based economy. Reduced cost of production, hassle-free supply of goods and restructuring of the supply chain management are just a few of the benefits of GST implementation. Under the new tax laws, manufacturers can claim input tax credit on input goods, which is a positive sign for cash flow. GST will also simplify the plant registration process by allowing single registration for all manufacturing entities within the same state.


Under the GST regime, the tax slab is expected to increase from 15% to 18% for most of the services. While this may translate to higher cost of services to the end consumer, GST also presents a whole lot of opportunities. As the State-level taxes are now subsumed, service providers will find it easier to determine their tax obligations. The new tax structure may entail additional cost and effort in the short term, but businesses can look forward to simpler operations in the future. Trading GST is expected to bring domestic players at par with large multinational corporations because of the renewed import and export norms and rules for FMCG suppliers. Since the entire supply value chain, including tax flows, will be on GST records, wholesalers will be better connected to retailers and suppliers. GST will enable high visibility and streamlining of the supply chain, providing wholesalers with a transparent view of supply movements. Both wholesalers and retailers will be able to claim taxes paid for input products and services availed.

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Telecom Telecom companies are not enthused by the additional 3% tax raised by the shift to GST. Previously, a 15% service tax was applicable to telecom services. This is likely to translate into a 2.6% rise in the gross bill of post-paid subscribers. Simultaneously, telecom companies will also enjoy the availability of input tax credit, which will help them reduce operating costs and capital expenditure. Online retail

on various Sectors

The phenomenal growth in the e-commerce sector over the last decade has given rise to multiple tax issues along with challenges such as rising competition, shrinking profit margins, etc. Earlier, online retailers would offer better prices by charging lower taxes. With GST, there are standard taxes rates for each product, placing online and offline sellers at par in terms of costing and pricing. Online marketplaces will now have to deduct 2% tax per transaction while making payments to sellers listed on their portal. This Tax Collected at Source (TCS) will lower the availability of working capital for online retailers. However, as GST does not require a direct nexus between input goods/services and final products to be established, e-sellers can now avail input tax credit facility and regulate their cash flow. Hospitality

GST has classified hotels into four slots based on room tariffs. Those with room rates below `1,000 will be tax-exempt, and the rest will be taxed at 5%, 12%, 18% and 28%. The highest tax rate of 28% has been imposed on hotels with room rates above `7,500. This implies that high-end luxury chains will be paying more when compared to pre-GST rates, and are likely to pass on the additional cost to their customers.


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Designing and Managing Your Roadmap for Change GST is likely to have a multipronged impact on the various aspects of any business, and a smooth transition will require a 360-degree approach. One of the biggest challenges for the industry is to understand the enormity of GST and prepare accordingly for the shift. The transition requires a phase-by-phase management approach, wherein companies will have to begin by understanding key areas of impact on their business and prepare different scenarios for the design and application of GST. An effective transition will require companies to conduct a systematic analysis of the implications of GST on their businesses, planning for contingencies and training employees on the changes that this taxation reform brings.

Working out Impact Analysis To prepare better for GST compliance, companies must categorise areas of impact across the value chain of operations. Special attention must be paid to identify those areas that may lead to adverse impact and adequate contingency measures should be put in place. The finance team must be trained on key changes affecting the compliance framework. Resolving Transition Related to Issues Post Implementation A smooth transition to GST would require a detailed roadmap listing the preparations and change in business processes to align to the new tax regime. Companies must ensure the update of various software solutions across all locations to meet the new structure, and provide training to all personnel on the new processes. SOPs and Training of Concerned Staff

Setting up a Core GST Team within the Organisation It is crucial to identify a core GST team within the organisation and create synergy amongst its members. The challenges posed by GST can be converted into opportunities by informing stakeholders and procuring their support. This core team needs to understand all aspects of the transition and train itself accordingly.


GST entails a complete overhaul of the existing business processes, which must now be aligned with the revised Standard Operating Procedures (SOPs) to include various aspects: Payment of taxes Maintenance of statutory records Work program for verification of compliance

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Training must be a key focus area throughout the cycle of GST implementation. It can be provided to the senior management on strategic aspects, the business teams on expected impact and the way forward on specific product lines. Vendors and channel partners must be suitably trained to explain the revision in prices, discount structures and promotional schemes.

Changes to Business Processes, IT Systems, Costs and Pricing A robust IT system will be the backbone of the new GST regime, and companies must leverage technology to support the transition. Organisations must redesign solutions and configurations to cater to the new GST requirements. It is vital to enable technology to help drive analysis and facilitate decision-making in Software versions and updates the new GST regime. Businesspersons and traders will have to file a single monthly return and pay tax online GST is expected to bring about a complete overhaul through various payment methods, including of the prevailing taxation system, and companies will credit and debit cards, on the new portal. To need to revisit their pricing methodology. Going ease compliance, traders and businesses can forward, the use of technology could compel many use the offline tool to upload sales data on the existing unregistered retailers to register under the GST portal. GST. This can add to the tax liability of such retailers, and will eventually affect the product price. Comprising of eight sheets, the excel-based template makes tax compliance convenient and easy for taxpayers. Details of transaction such as GSTN number, invoice number, tax incidence and value of goods or services sold, IT Infrastructure for GST to name a few, need to be disclosed in the formatted template. This template can be downloaded from the GST portal and be used The rollout of GST Network (GSTN), an online platby taxpayers to collate all invoice-related data form for filing invoices, has assumed significance, as regularly. the IT infrastructure can power up to three billion transactions every month. The portal (www.gst.gov.in) is user-friendly and has an active interface that Tax masters accommodates different stakeholders, central and Companies need to introduce a system that can state tax authorities in the GST ecosystem. The GSTN facilitate the calculation of GST, taking into will provide convenient and innovative methods account all the new rules set by the Governranging from uploading details to the registration of ment. Tax engines help merge existing financial entities. The robust portal will be a common place systems with frequent changes in taxation, for all taxpayers to register, pay tax, file returns or thereby playing a crucial role in establishing apply for refund of payments across the network. processes under the new tax regime. These This evolving environment will play a strategic role in engines have a central platform that connects building the ecosystem and ensure an open and all source systems. It also has inbuilt logic, rules transparent framework to all taxpayers. and content, which are kept updated to ensure that transactions are taxed appropriately.

How Will Data be uploaded onto GSTN?


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In the GST regime, companies will have to make sure that there are periodic updates/uploads of sales and purchase data with reconciliation for tax payments and credits. Both the supplier and the recipient will need to reconcile data to bring about transparency and minimise tax evasion. The right tax technology can help companies ensure such compliance.

Transactions While making the transition to GST, companies must assess their typical large-scale transactions & systems that are in place for recording to pay, orders to cash and intercompany transactions. To ensure the timely submissions for GST returns and payments, they must update their operating systems to make them GST-compliant. Businesses must also evaluate their billing systems to check if they are capable of raising GST-compliant invoices and storing intercompany GST transactions

on various Sectors

Reports and transitional period Tax technology will also play a crucial role in providing an audit trail and generating the required reports that are useful in internal analysis and audits. The transition from the previous indirect tax regime to GST needs a robust and dynamic technological infrastructure that helps companies remain tax compliant at any given point in time. Technology will play a key role in helping organisations operating across sectors with different processes and business models, navigate smoothly to the GST regime.


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Return Filing Procedure under GST Depending on the nature of the transaction, GST return can be filed in various forms. Under this regime, there are multiple returns based on registration starting from GSTR 1 through to GSTR 9. While a registered taxpayer needs to disclose three monthly returns in addition to an annual return, non-resident and composition scheme taxpayers will have to furnish separate details on given deadlines. Let us take a closer look into the types and forms in which businesses and Indian taxpayers need to submit their returns

Return

Description

GSTR-1

Monthly statement of outward sales of goods/services

Frequency

Date for filing

Registered taxpayer

Monthly

10th of the next month

Registered taxpayer

Monthly

GSTR-2

Monthly statement of inward purchases of goods/services


Registered taxpayer

Monthly

GSTR-3

GST monthly Return for a normal taxpayer along with the payment of tax


Quarterly return for composition taxpayers

Composition taxpayer

Quarterly

GSTR-4

Who files?

18th of the month succeeding the quarter 20th of the next month succeeding the tax period and within 7 days post registration expiry

Non-Resident foreign taxpayer

Monthly

GSTR-5

Periodic GST return for a non-resident foreign taxpayer

Input Service Distributor

Monthly

GSTR-6

Monthly Return for an Input Service Distributor (ISD)


Monthly Return for TDS

Tax Deductor

Monthly


GST return for E-Commerce Operator outlining supplies operated through it

E-commerce Operator (Tax collector)

Monthly


GST Annual Return

Annually

31st December of next financial year

GSTR-9

Registered taxpayer (other than TDS/TCS taxpayer, ISD, Casual and non-resident taxpayer)

Final Return

Annually

GSTR-10

Taxpayer whose registration has been surrendered or cancelled

Within three months of the date of cancellation or date of cancellation order, whichever is later

GSTR-7

GSTR-8


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Business Advice by Capital Float How SMEs Can Use GST to Manage Their Working Capital

The positive effects of GST are expected to drive the decentralisation of opportunities and provide an impetus to India’s GDP. However, there are concerns that some of its policy implications could slow down business operations, and small and medium enterprises must prepare themselves for such eventualities.

Why Should SMEs Enrol for GST An SME registered under GST will be recognised as a legal provider of goods and/or services. With GST, tax accounting will be streamlined, as an SME will have to maintain proper accounting of taxes paid on input goods or services. GST will also empower SMEs to utilise the input credit facility to enable better cash flows. Here are some of the other benefits for SMEs:

Modernise operations The new tax regime will provide an opportunity for SMEs to digitise their transactions, making them efficient for the future. Any SME that scales up will be better prepared to manage large-scale transactions through a software-based accounting system.

Transparent transactions GST will result in an online and transparent view of tax obligations. It may take some initial investment in time and resources, but SMEs that restructure their processes at the outset will have the infrastructure to scale up their operations in the long run. Better cash flow due to input credit facility GST will result in an online and transparent view of tax obligations. It may take some initial investment in time and resources, but SMEs that restructure their processes at the outset will have the infrastructure to scale up their operations in the long run.

Easier access to credit As SMEs begin to transact digitally, they create digital footprints that can be used by FinTech lenders to assess the creditworthiness of these enterprises more accurately. This opens up a channel of formal finance for the SMEs, which they may have been previously denied because of ineligibility and inadequate documentation.

SMEs must decide on how best they can leverage the benefits of the change ushered in by GST. We advise that these enterprises invest time and resources in understanding this change, by employing the right people and processes to change the way that business is done to ensure GST-adherence.

Better logistics GST will relieve SMEs from indirect tax barriers between states, allowing the free flow of goods across borders. This will result in savings in logistical costs pegged at around 20%. © Capital Float 2017

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Conclusion Change is never easy, and the government is taking necessary steps to ease the transition to GST. As a first step, the burden of compliance for businesses is being reduced by relaxing the return filing requirements for the first two months post implementation. In addition, the provisions of TCS on e-commerce and registration for online sellers have been relaxed for the time being. It is important to learn from global economies that have implemented GST before us and have successfully overcome teething troubles to enjoy the benefits of having a unified tax system. Once the GST is fully implemented and accepted by businesses in letter and spirit, most of the current challenges will become irrelevant. India will emerge as a single market where goods can move freely and there will be fewer complications to deal with for businesses.

About Us Capital Float is the pioneer of digital lending in India. With its technological expertise and Big Data Analytics competencies, the company has significantly simplified the process of applying for and disbursing loans. Capital Float frequently evaluates and services segments that are high potential, but traditionally underserved by financial institutions. Founded in 2013, Capital Float is the trade name for Zen Lefin Private Limited, a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India. The company has partnered with ecosystems across various verticals such as e-commerce (Amazon, Flipkart, PayTM, Shopclues, eBay, Alibaba, Amazon, etc), travel and hospitality (VIA and Yatra), retail (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services), digital remittances (Payworld, Eko) etc. The company has raised funding from esteemed venture capitalists like Ribbit, SAIF, Sequoia, Aspada and Creation Investments Capital Management, LLC. Capital Float is headquartered in Bangalore with offices in Delhi, Chennai and Mumbai. www.capitalfloat.com * The whitepaper is updated as of 14.11.2017.

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