India’s GST: 4 things your business needs to do

Most Indian businesses see GST as a landmark piece of legislation – but its full impact remains to be seen
Most Indian businesses see GST as a landmark piece of legislation – but its full impact remains to be seen
16 September 2017 •

Key takeaways

  • India’s GST requires almost all businesses to update their compliance processes and paperwork
  • Far from causing price hikes, GST can help businesses lower their costs to consumers
  • Businesses can gain help from their logistics providers to navigate the complexities – and occasional changes – to the evolving GST system

India’s Goods and Services Tax (GST) has finally become a reality for India’s businesses – but how ready are they to file their first returns? The GST implementation will require all Indian businesses to make at least some changes to their compliance and finance processes.

“With every Indian state barring Jammu and Kashmir now passing their respective GST bills, GST has effectively become a national necessity for doing business,” said Amit Dawar, Senior Director, Value Added Services, DHL Global Forwarding South Asia. “And while the government has relaxed its returns date for the first two months of GST implementation, businesses can’t afford to waste time in updating their operations to account for the new tax: they not only risk late fees and penalties if they dawdle, but also put their general compliance standing at risk.”

Here are four things every business should do if they want GST to work to their advantage, instead of against it:

1. Sign up for your GSTIN

If you run a business with turnover of Rs 20 lakh per annum or more, you will need a valid GST Integrated Number, or GSTIN, for all locations where your business either issues tax invoices or receives supplies. Doing so also enables businesses to claim Input Tax Credits (ITC) on all GST-compliant invoices.

“The faster you can claim your ITC on supplier expenses and other business costs, the more cash flow you can free up for other purposes and reduce cost per unit” says Dawar. “However, that also requires your business to maintain a disciplined approach to have compliant suppliers on board who ensure timely filing of GST returns for their invoices.”

To claim ITC, importers will need to upload their import data to India’s GST portal, while domestic purchases put the onus on suppliers to upload their invoices. In either case, both the supplier and your business will need a valid GSTIN in place and a robust mechanism to ensure correct and timely invoice-level return filing on a monthly basis.

GST should allow businesses to lower their costs to consumers.

2. Update your paperwork

In addition to acquiring a GSTIN, businesses will also need to update their contracts and invoice formats, for both customers and suppliers, to be GST-compliant. Invoices will require additional details such as Harmonized System (HS) codes and locations of supply, both of which impact the rate of GST applied to the invoiced amount. For foreign and unregistered customers or suppliers, the GST enactment provides a different treatment which requires location of supply for inland transportation of goods to be provided additionally.

3. Reduce your sale prices

 GST should not result in price hikes being passed down to customers – the opposite, in fact. “With the availability of ITC credits and refunds, coupled with the simplification of the India service tax process that it hopes to achieve, GST should allow businesses to lower their costs to consumers,” Dawar argues. “Enterprises which can successfully use GST to drive down their manufacturing and operations costs, and pass those savings onto customers, will find themselves at a considerable competitive advantage.”

Unsure how to do so? Dawar suggests consulting third-party logistics (3PL) providers to identify where new GST rules will trim the most excess from their supply chains. GST is expected to bring high efficiency, particularly for logistics services, and the key benefits would be the procurement cycle and speed to market.

4. Read the rulebook

 Properly handling GST involves more than just adjusting invoices and prices. India’s GST Council has issued a range of rules applying to the new tax: these cover everything from advance rulings and appeals, to more complex applications like anti-profiteering. At the same time, the country’s Central Board of Excise and Customs (CBEC) now enforces various regulations regarding GST on the import and export of goods for which various notifications and circulars have been issued. These are available at the CBEC website.

The much talked-about e-Waybill rules, for example, have been passed in principle by the GST Council and are expected to come into force from 1 October this year. A few exceptions in the rules have been provided which would benefit small and medium sized suppliers. For one, no e-way bills are required for shipping distance up to 10km, in addition to exemptions for goods with value up to INR 50,000. To further assist business, the Indian Government is regularly sharing information and FAQs through mass media channels and providing quick updates on Twitter. GST helplines have also been opened to address the tax queries.

“Far from being a static piece of legislation, the GST continues to evolve as the government seeks to iron out how it’ll impact different segments of the economy,” says Dawar. “Staying up to date with these changes is an increasingly important, albeit tasking part of doing business in India.

“Larger enterprises can minimize the hassle of doing so by contracting their logistics providers to handle these customs implications: DHL, for example, has continually adapted its invoice formats and tax processes along with the back-end Customs application systems, as well as upskilling our people, to stay GST compliant at every stage of its evolution.” Furthermore, DHL has been engaged with its customers and suppliers for over a year, updating them on GST implementation through trade events and newsletters.