How should a SME prepare for staying compliant with GST

How should a SME prepare for staying compliant with GST

Mr. Rajiv Gidla, our Chief Business Officer, delivered important message about what SMEs need to do to towards preparing for GST at a recently held seminar at The Trident in Mumbai.

One of Rajiv’s key points was that SMEs must move from a model where they are giving the data to the tax consultants at the last minute to a model where data is sanitized, finalized and prepared at an earlier date. This way, if they are going to give the tax consultant or CA the responsibility of filing the return, then the tax consultant can successfully file the return at the agreed upon deadline. As the submission deadlines for GSTR1, GSTR2 and GSTR3 happen over a 10-day window, the data needs to be ready and accurate when it is submitted.

Watch Rajiv speaking at the seminar.

As an SME, you interact with a fixed number of businesses, and some of these can be very large enterprises. These enterprises have already started to submit tax invoices to you for purchases; but what you must think about is how to work with your counter-parties in the SME space.

ERP for SMEs, GST filing, Fixed Asset mangement

The GST shifts much of the onus for tracking and managing the transactions to the taxpayers. The requirement for reconciling the transaction is there to force the parties involved in the transactions to accurately report and submit data, taxes and payments, in order to secure an input tax credit. Failure to do any one part can lead to penalties for the parties, and can even result in a poor rating.

As the regime continues to evolve and stabilize, it is going to be key to work with your counter-parties to understand how everyone’s business practices will change. There are lots of pieces that can change over the next couple of months.

First, there can be changes to the cost of items because there are new rates slabs for items.

Second, exchange GSTIN numbers with different parties.

A GSTIN has a set format which will be validated when there are uploads to the GSTN portal for compliance purposes. A valid GSTIN will start with two digits for a state and have a total of 15 digits.

Third>, you need to remain prepared for different look and data for invoice documents. As there is not a set invoice format, you could start to see different looks to invoices and you should discuss how your invoices will change with you customers. If need be, you could send them a communication which shows how the new invoice will look and where the price, tax and other fields which have changed.

Fourth, invoice numbers can be no longer than 16 digits. Make sure you are not creating invoice serial numbers which are too long as these could cause problems for counter-parties and check with your counter-parties if they are issuing invoices which are too long.

Fifth, you should start to think about how to accept and manage electronic invoices. While it is not a mandatory request to issue an electronic invoice; it is a good time to start moving to electronic invoices. Over the next several months, new rules will be finalized on e-waybill. These documents will have to be created and uploaded to the GSTN portal for enabling transport of goods. While the data can be sent electronically or stored on a token; the paper format will not be useful for most parties. Therefore, it is recommended for beginning the process of investing an electronic invoicing infrastructure.

GST can give opportunities to SMEs for reducing costs and save money. While everyone expects the next months to be a time for change; all business will see gains because there is a single set of tax rules for everyone; which is one of the goals of One Nation, One Tax.

by Anil Kuruvilla.

He is an international Taxation Expert and Chief Content Officer at Adaequare (Parent company of Udyog Software).