While the GST Council continues to work out the modalities of the GST implementation such as tweaking the rates of cashews or finalizing the e-way bill rules; there will still be opportunities to improve the efficiency of your business.
At the heart of the GST is the interaction between two parties: supplier and business. The interaction between these two parties has to be accurate, seamless and quick because without any of these three things, there can be delays. Delays lead to slowdowns in the delivery of goods or services, delays in payment and delays in the input tax credit. All of which have a negative impact on your business and your supplier’s business.
While you are not able to dictate your supplier’s business process, you can offer tools which can allow his business to operate more smoothly which in turn will help your business. If you are a business who has a large network of supplier such as a major retailer or producer of final goods, then you have a supplier network that can consist of thousands of suppliers who in turn will have multiple suppliers. Like a river the suppliers are your tributaries and you are the main channel of the river; changes upstream can have disastrous effects downstream.
Many companies have created supplier networks where suppliers will register their locations, provide item details and pricing schedules. Now with GST, you can offer value added services to these suppliers to speed up your business process with them.
Depending on the sophistication of your suppliers, the first step could be as simple as helping them register with GST. While many of your suppliers should have automatically been transitioned to the GSTN there is a possibility that some may not have transitioned. If your suppliers have transitioned or not then this is an appropriate time to have all their details revisited and updated to note their new GSTIN.
Remember that GST registration is linked to the supplier’s PAN and it is state based. A location in Maharashtra will have a unique GSTIN from a location in Madhya Pradesh with Maharashtra beginning with ‘27’, and Madhya Pradesh beginning with ‘23’.
Once you have the GSTINs of your suppliers into the supplier network the next service you can offer the supplier is the ability to generate the tax invoices for their supplies. Tax invoices are required for all suppliers for availing input tax credit during GST. Each supplier has to be able to print 16 distinct pieces of information which include items such as the Unique Quantity Code, the taxable value, rate of tax and amount of tax.
Calculation of tax requires your supplier to apply a tax rate per line for each commodity it supplies. A sophisticated invoicing solution can calculate the necessary tax treatments and apply these to the invoices as necessary. Now the tax invoice is ready and the goods can be delivered.
The supplier network can be developed further when you allow the invoices to be reviewed automatically by both parties through a series of checks before they submission occurs to GSTN. This reconciliation between parties ahead of the completion of the transaction reduces errors in GST filings which save time and money.
Your supplier network can evolve with each of the pieces coming over time which can increase the confidence of your suppliers’ in this new approach.
Step 1 – Register the supplier
- Already we are seeing large businesses who will have supplier portals which will require the suppliers to upload GSTIN and proof of GSTIN.
- Update any address information about the supplier.
Step 2 – Manage supplier items
- There are set items you buy from your supplier you can assign these items a tax treatment or have the supplier assign them a tax treatment and review the tax treatment.
Step 3 – Invoice Generation
- Offload the invoice generation for the supplier’s businesses including you through your supplier portal; this way the data is consistent and meets the invoice requirement. This invoice can then be used to create the data required for the outward supplies data for GSTR1.
Step 4 – Invoice Validation
- Collaborate with the supplier on the invoice to ensure that it is create before issuance. Apply the same tests which the GSTN does for reconciliation ahead of the process. Check to ensure the tax amount, tax rates, GSTINs and place of supply match the expectations. The issuance of the invoice now will happen and the data will flow seamlessly between supplier and you. There reconciliation will be automatic and the ITC can be availed with little intervention. This system in place will make it simpler to add the fields necessary when the e-waybill rules come into effect either this year or in 2018.
One of the advantages of GST is creating a national standard for transactional data which will be easier to replicate for other businesses. This is not a model where you are holding suppliers to your business only it is just making you a preferred business because you will be easier to do business with.
Building tax and regulatory capabilities into your supplier network allows you to protect yourself from erroneous input tax credit and enhance the cash flow of both parties. It will help your logistics providers as well because the e-waybill can already be accounted for in the design.
About the Author:
Sandeep is currently CEO of Udyog Software and Director – Global Strategy & Business Development at Adaequare. Sandeep has over 20 years of rich experience in MNCs such as ANZ, Thomson Reuters, HSBC in Australia.
He is successful at establishing the vision to create go-to-market strategies, grow and optimise business and operational footprints across geographies. He is an expert at creating/capitalizing on networks, liaisons and business connections, both C level and multiple external and internal stakeholders while negotiating/managing acquisitions, strategic partnerships, business and product development.
Sandeep is a certified Six Sigma Black Belt. He holds a Bachelor’s degree in Economics and Business Finance from the University of Adelaide and Post Graduate Diploma from Monash University.
by Sandeep Khurana