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Know all about GSTR-3B Filing And How to Enrol For GST.

Know all about GSTR-3B Filing And How to Enrol For GST.

Deadline is fast approaching! Grab this wonderful opportunity to file your GSTR 3B return for free and become GST compliant instantly.

Have you migrated to GST or Goods and Services Tax yet? As the deadline of August 20 approaches, businesses have few days left to file Form GSTR-3B. As per dates notified by the government, details relating to outward supplies for the month of July will have to be filed in Form GSTR-1 between September 1 and September 5. However, in the interim period, businesses have to file Form GSTR-3B, which will be a summary of self-assessed tax liabilities with consolidated details of outward supplies and input tax credit (ITC).

But how to fill the GST enrollment application and why is it important to do so?

Filing of enrollment application is necessary to avail various benefits under GST, the CBEC or Central Board of Excise and Customs has said.

The CBEC, under the purview of the revenue department, has come out with a step-by-step guide for filling the enrollment application through GST portal –

1. Visit the website.

2. Login with your user ID and password created by you and complete the information related to your business details, promotor/partner, principal and additional place of business, authorized signatory, up to five major goods or services or both supplied and bank account details.

3. Complete and verify the information given in the verification tab and submit the application with Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

4. You will get an Application Reference Number (ARN) (also through email) on successful submission of the enrolment application.

Here are some other things to know about:

The GST enrolment form is available on the GST portal or GST Common portal –

Existing payers of levies such as central excise, service tax, state sales tax or VAT, entry tax and luxury tax are required to take up GST enrollment.

“If you do not want to remain registered in GST, after login you may apply for cancellation of your registration by clicking on the cancellation request,” the CBEC noted in a newspaper advertisement.

All taxpayers registered under existing laws – the laws related to various erstwhile taxes that have been subsumed under GST from July 1, 2017 – are required to migrate to GST by filing the enrollment form.

“Those taxpayers who have not completed the enrollment procedure on the Common Portal, are required to complete it immediately, otherwise various benefits under the GST regime will not be available to them,” the CBEC added.

GST Network chairman Navin Kumar had earlier urged companies to not leave filing of their first returns under GST to the eleventh hour. Millions of companies are still not ready to file their first returns under the new Goods and Services Tax (GST) ahead of an August 20 deadline, the top official had told news agency Reuters.

The GST Network or GSTN portal started the facility for filing of July returns using GSTR-3B from August 5.

The last date for filing the GSTR-3B for August 2017 is September 20.

Over 71.30 lakh excise, service tax and VAT payers have migrated to the GSTN portal and over 15 lakh new assesses have registered on the platform.

Why enroll 

The Central Board of Excise and Customs has also pointed out a few advantages of submitting the enrollment application:

  • You will be legally recognized as a taxpayer
  • You will get pre-GST eligible input tax credits for utilization under GST
  • You will be able to avail input tax credit and pass on tax credit to registered buyers
  • You will be able to make payment of tax
  • You will be able to file Form GSTR-3B

It also mentioned disadvantages of non-submission:

  • You will not be able to file Form GSTR-3B and other returns
  • You will not be able to take and pass on input tax credit
  • You will not be able to make tax payment
  • You will not be eligible to take pre-GST transitional credits

To help you explore the power of XaTTaX, particularly the ease, comfort, and accuracy that you can derive by filing the crucial GSTR-3B Form within the dotted line, we are offering FREE access to this FORM. So, what are you waiting for?

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Source: NDTV
Transport performance up through 30% way to GST: Narendra Modi

Transport performance up through 30% way to GST: Narendra Modi

Narendra Modi: GST
The Prime Minister, Shri Narendra Modi addressing the Nation on the occasion of 71st Independence Day from the ramparts of Red Fort, in Delhi on August 15, 2017.

The Goods & Services Tax (GST), which was rolled out in India on July 1, and its beneficial impact on the transportation sector has, for the second time, found mention in prime minister Narendra Modi’s nation-wide comments.  

Following up on the subject first addressed in the ‘Man Ki Baat’ radio programme on July 30, the prime minister spoke about the considerable reduction of time and costs following GST within barely 45 days of the implementation of the reformative tax.

The abolition of inter-state check-posts after the implementation of GST has reduced time for movement of goods by 30 percent and saved thousands of crores of rupees, prime minister Narendra Modi said in his address to the nation from the ramparts of the Red Fort on the occasion of the 71st Independence Day on August 15, as reported by PTI.

GST, which unified more than a dozen central and state levies, is a result of cooperative federalism and its smooth rollout from July 1 has increased efficiencies of business, he said, adding that technology has made the rollout smooth in a short span of time.

Modi said crores of people are behind the success of GST and the implementation of the new indirect tax regime is an example of the benefits that can be reaped if there is cooperative federalism in place between the Centre and states.Business efficiency, he said, has increased. “Efficiency has increased in the transport sector by 30 percent and because of GST such a big change has happened,” he said.”Trucks (carrying goods) are saving 30 percent (travel) time post GST as check-posts have been removed. This has helped save thousands of crores of rupees and more importantly time,” he said.

The biggest tax reform since Independence, GST was rolled out from July 1. The new indirect tax regime has subsumed over a dozen state and central levies like excise duty, service tax and VAT, and has replaced them with four-tier tax structure of 5, 12, 18 and 28 per cent for goods and services across the country.

Removing barriers and cutting costs
GST has removed inter-state barriers to convert India into a single market where goods and services can flow seamlessly. State border check-posts scrutinised material and location-based tax compliance, resulting in delays in delivery of goods and cause environment pollution as trucks queue up for clearance.

In pre-GST India, a typical truck spent 20 percent of its plying time at Interstate check-posts. On an average, a truck in India runs for around 60,000 kilometres as against 200,000km per annum in developed markets of Europe – very inefficient for the fleet owner. Now, with inter-state check-posts removed in around 22 Indian states, the travel time of long-haul trucks are down by around a fifth. As compared to a M&HCVs doing 225km on a typical day, some truckers claim to be clocking between 300-325km a day, a considerable improvement, which can only get better in the days to come.

What’s more, in the pre-GST times, a complex tax structure and considerable paperwork forced the transport industry to spend nearly 50-60 percent of resources on tax compliance and deposit of interstate sales tax. Now, with monitoring, collection of sales tax at interstate barriers obviated, a single GST means increased uptime for trucks, better turnaround and an optimised warehousing structure.

In the pre-GST era, the sector had to bear heavy logistics costs estimated at about 14 percent of the total value of goods as against 6-8 percent in other major countries. It is expected that logistics cost will come down to 10-12 percent of the total value of goods now.  The proposed E-way Bill is set to ease the movement of freight further. Goods worth more than Rs 50,000 will require online registration and the receipt would act as a goods ticket for the entire journey.


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All about GST (Goods & Services Tax)

All about GST (Goods & Services Tax)

All about GST

GST (Goods and Services Tax) is one of the greatest monetary changes in India since Independence. All organizations, little or extensive, will be affected by this new aberrant expense administration.

GST will be required on the two products and ventures and will subsume and supplant the current backhanded assessments, for example, extract, VAT, and administration imposes.

Products and Services Tax Law in India is a comprehensive, multi-stage, destination-construct tax that will be demanded in light of every value expansion. Goods and Service Tax is an assessment that we have to pay on the supply of merchandise and administrations. Any individual, who is giving or providing products and ventures is obligated to charge GST.

Goods and Service Tax is gathered on esteem included products and enterprises at each phase of an offer or buy into the inventory network. GST paid on the acquirement of products and enterprises can be set off against that payable on the supply of merchandise or services. The maker or distributor or retailer will pay the relevant GST rate, however, will assert back through assessment credit system.

Goods and Service Tax is a normal duty framework proposed by the administration. As the name proposes it is a typical expense for Goods and Services. In basic words today we are paying different expenses, for example, extract obligation, custom obligation, esteem included duty, octroi, benefits impose and so on. When Goods and Service Tax is executed all these duties will be supplanted by a solitary expense which is called as GST. Goods and Service Tax rate is required to be 18-20% which is lesser than the taxation rate of aberrant charges.

 Taxes replaced by GST

Taxes in India


Getting help for GST: Five things to keep in mind before choosing a partner or solution

Getting help for GST: Five things to keep in mind before choosing a partner or solution

GST Partners

Goods and Services tax (GST) or as our Prime Minister likes to call it ‘Good and Simple tax’ regime has been the center point of conversations and discussions across all business, political and media circles for over half a year now.

From a phase of pre-emption to discussions around actual roll-out, to analyses of possible impact across sectors etc., enough and more aspects have been deliberated upon by experts from different spheres. But, now the needle is shifting towards discovery of possible ways of implementing the regime and considerations around most effective tools for easy compliance with the changed law are on the rise.

While most businesses have surface level understanding of the changes, only few large corporates have the knowledge and wherewithal to evaluate multiple solutions being offered in the market to adapt the best suited technology for effective compliance. The smaller players are facing multiple challenges not only in understanding various facets and nuances of GST regime, but they are also clueless on how to go about choosing the right partner who may hand hold them through the process for seamless transition.

Different businesses have different requirements and all GST Suvidha Providers (GSPs) and Application Service Providers (ASPs) are working towards developing customized solutions which are best suited to a specific player’s needs. From offering invoice volume based adaptation models to coming up with duration specific packages, there is no dearth of variety in market today. Yet, due to technology intensive nature of solutions, most players are not in a place to evaluate which partner or solution to go for.

GST Ready Software – For Small And Medium Business

From technology back up, to billing model, to storage capacity, to additional in-built capabilities, numerous features when put together, make for a holistic GST solution. While different players are making different promises and trying to gain a greater share of the pie, here are few aspects which corporates, SMEs, tax professionals or individual businesses should keep in mind when choosing a partner:

1. Maintaining annual records: There are various solutions in the market currently which are offering duration based solutions for limited months like a quarter or six months, but we cannot afford to forget that all businesses will need to file annual returns. If a business operates on a solution which is for six months and switches to some other solution later, it should have the assurance of seamless records transfer. Similarly, there are players who are charging clients on  the basis of duration of association, for such associations, cost of further extension of record keeping should be budgeted in when planning to partner with a solution provider

2. Offline and online capabilities: The new GST regime is completely digital in nature and adapting to internet enabled technology solution is a pre-requisite. But, it would not be prudent for solution providers to overlook limited or no internet connectivity in majority small towns and villages of India which are a hub of SMEs and MSMEs and therefore we cannot do away with offline capabilities completely. It is equally important for your partner to have offline capabilities to store invoice records which may be updated on regular intervals. This would ensure that tax professionals have the flexibility of updating and editing data anytime at their convenience. Additionally, as GST regime is like a chain linked through the entire business transaction cycle, many a times there would be requirements to go back and forth to check, update and manage records and entries and offline capabilities would ensure that working in this domain is possible without pushing the data out.

3. Plug and play model: The solution which a business opts for should offer the flexibility of usage in terms of data entry like – possibility of importing data in multiple formats ranging from manual entry to excel based imports etc. Additionally, it should offer the choice between entering data on the cloud and keeping it there to make further edits or saving it directly on GSTN. Essentially, the solution should offer flexibility of operation which would enable plug and play and reduce adaptation time.

4. 24X7 support and real time infrastructure upgrade: despite opting for the easiest to implement technology solution, tax practitioner, businesses or any other user when operating a new system, may have queries or require hand holding. Therefore, an infrastructure to handle such queries in form of a multi-linguistic call center or real-time support by trainer professionals in form of free demonstrations, regular counselling and personal visits, or in-built assisted return filling model etc would be much required. These solutions would essentially be needed for tier II and III towns which are a hub for SMEs and MSMEs.

5. Possibility of pre and post filing reconciliation: While GST regime makes the entire taxation model fairly effective but for many players who are used to the traditional format of functioning, this technology enabled advancement is limiting. Data once filed with GSTN cannot be edited, for many players who have a complicated supply chain or who work with multiple vendors, there is a huge chance of invoice mismatches or other gaps in overall transactions which would only be reconciled after returns are filled. But, there are many players which are offering enhanced features in their tax filing solutions and pre-filing reconciliation is one of those critical feature which would ensure faster follow ups and closures for reduced mismatches.

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There are multiple models of operating with the GSTN and GSPs are mainly offering 3 to 4 kinds of solutions so far. These include API based billing model, MB consumption based fee structure, GSTIN based fee and per CA / tax practitioner. While most businesses can predict their invoicing nature and work-load to opt for the best suited solution, but it is best to select a solution provider who offers flexibility of switching from one model to the other so that a business may function on one model and choose to move to the other in case required, with no additional charge or formality.

Apart from the above mentioned points, there are various other aspects which should be analyzed and evaluated before selecting a GST implementation partner. Going by the cheapest available solutions or being lured by free trials and monthly subscriptions or even sticking to well-known old and renowned players just for their brand equity, may not be the best way to forge partnerships in this domain. Technology capabilities with experience and expertise in on-ground implementation, complimented with direct presence across key cities throughout the nation are some pre-requisites which would help you identify the right partner for your business

GST Compliance Software – Register Now To Get Free Demo

Article courtesy of : Mr. Ankit Agarwal (Managing Director at Alankit Limited)
GST Registration Online: How To Do It, Processes, Timeline And More

GST Registration Online: How To Do It, Processes, Timeline And More

According to GST laws, traders are required to register on or before July 30, 2017. The finance ministry has urged all traders to register now without waiting for the last date. ” If one is carrying out any business and have an annual aggregate turnover in the preceding financial year exceeding Rs. 20 lakh (Rs. 10 lakh in special category states), you need to register in all the states/union territories from where you are making taxable supplies. However, one need not register if one is engaged exclusively in the supply of exempted goods or services or both,” the finance ministry said in a statement.


Registered under any of the existing law Migrated Liable for registration in GST regime Provisional Ids issued need to be converted to GSTIN by submitting necessary documents in 3 months (i.e. by 22nd September 2017)
Not liable for registration in GST regime Need to apply for cancellation in 30 days (i.e. by 22nd July, 2017)
Not-Migrated Liable for registration in GST regime Need to apply for registration within 30 days (i.e. by 22nd July, 2017)
Not registered under any of existing law Liable for registration in GST regime Become liable from 01/07/2017 Need to apply for registration within 30 days (i.e. by 30thJuly, 2017)
Become liable after 01/07/2017 Need to apply for registration within 30 days from becoming liable for registration

Excise, VAT or service tax payers who have already migrated to the GSTN portal and have been issued provisional IDs need to complete the registration process by September 22, 2017, by giving all the documents following which GSTIN will be issued.

Those taxpayers who need not register under the GST regime can cancel their registration by July 22.

Those who have not migrated but are liable for registration will have to do so by July 22, it added.

For new taxpayers who are not registered under any of the erstwhile tax regimes, they will have to get themselves registered by July 30.

If anytime during the course of the financial year a business crosses the Rs. 20 lakh turnover threshold, then it will have to apply for registration within 30 days from becoming liable for registration.

The Finance Ministry said “taking registration in GST is a very simple process, and the comfort of the taxpayer has been kept in mind while designing the procedure.”

You can take registration from the comfort of your home by filing an online application on the common portal.

All one need is a valid PAN, email id and a mobile number.

Once these 3 details are verified, one will be required to furnish other details relating to his/her business.

There is no need to submit any physical documents (unless a query is raised and documents asked for) and all necessary documents can be scanned and uploaded.

If there are no queries, one will receive his/her registration online within 3 working days from submission of online application.

But what will happen if one doesn’t get registered?

If one is liable to take registration but don’t get registered, one will not be able to enjoy the benefit of input tax credit.

Not only he/she, but any registered person, purchasing from him/her may not be able to get the input tax credit. Not obtaining registration, though liable to do so, would also attract penalty.

Prospective buyers, who are registered under GST, will prefer to buy from suppliers who are also registered under GST, as this would entitle them to the input tax credit. (With agency inputs)

GST means ‘Going Stronger Together’, says PM Narendra Modi

GST means ‘Going Stronger Together’, says PM Narendra Modi

Ahead of Monsoon Session today, Prime Minister Narendra Modi said that the successful launch of the Goods and Services Tax would infuse fresh energy in the Parliament session.

Giving a new definition of the Goods and Services Tax, PM Modi said, “GST means Going Stronger Together”. Modi also said, “Just as rain brings typical fragrance from the earth, the successful launch of the GST would give new enthusiasm to the Monsoon Session.”

The Goods and Services Tax  was launched on July 1 at the special midnight session of Parliament.

 In a series of posts on Twitter, PM Modi further said, “Today the Monsoon Session begins. Like the Monsoon brings hope, this session also brings same spirit of hope. Goods and Services Tax  shows the good that can be achieved when all parties come together and work for the nation.”

“The Goods and Services Tax spirit is about growing stronger together. I hope the same GST spirit prevails in the session,” read another tweet of Prime Minister Modi.

GST : PM Modi


GST Ready Software – For Small And Medium Business

GST: Short-Term Pain Will Be Outweighed By Multiple Gains

GST: Short-Term Pain Will Be Outweighed By Multiple Gains


As India begins implementing the biggest ever overhaul of its indirect tax architecture, through the Goods and Services Tax (GST), I expect significant benefits to accrue in the medium term through the creation of a unified market, removal of tax on tax cascading effect and expansion of the formal economy as more companies enter the indirect tax net. GST will lead to a more efficient and productive economy, and add 2.5-3% to India’s GDP over the medium term.

GST implementation will lead to several macroeconomic gains, even though the transition to the new framework may result in some short-term pain. The commensurate gains are going to be disproportionately higher, though, and I truly believe that it’s a matter of time before small and medium enterprises too start imbibing these advantages.

Big gains to come

GST is expected to accrue significant gains in medium term through formation of unified market, removal of tax-on-tax cascading and higher compliance. I expect GDP growth in FY18 to rise to 7.4% (vs. 7.1% in FY17), led by consumption, public sector-led capex and export growth.

The GST council can now serve as a template for reforming other such institutions of cooperative federalism, starting with the inter-state council.

Further, on the back of recent softer-than-expected food price momentum, food inflation is likely to move towards 4% levels in this fiscal, and this could prompt the RBI to opt for a 25 bps rate cut in the upcoming policy review in August.

Overall, GST is expected to reduce manufacturing costs by 10-15% as logistics costs will decline. It will also boost productivity through efficient resource allocation and greater tax compliance. I also believe that GST will lead to enhanced transparency and higher foreign direct investment.

Going beyond the pure economic impact, I truly believe that the GST roll out could be a blueprint for the future of cooperative federalism. The GST council can now serve as a template for reforming other such institutions of cooperative federalism, starting with the inter-state council.

Tax integration under GST will result in supply chain restructuring to induce changes in India’s trade flows and provide a massive fillip to state’s tax collections as services will be brought under their taxation ambit. By the very construct of GST, states will see a 1.8x increase in their service tax collections.

Our in-house simulation of how tax collections would adjust between the Centre and states post GST, basis a redistribution of tax powers and revenues, indicates an increase in annual tax revenues of close to ₹30,000 crore for states as an aggregate.

I believe the most telling impact of GST will be in terms of improving ease of doing business –especially in terms of making “paying taxes” easier.

Further, as GST shifts levy of sales tax from point of origin to point of consumption we will see negative implications for manufacturing states while positively affecting the consumption states. Similarly, with states now levying services tax under GST, states with high share of services in SGDP will stand to benefit.

Interestingly, states with high share of manufacturing such as Uttarakhand, Goa, Gujarat, Himachal Pradesh and Chhattisgarh also have a strong presence of the services sector, and so the impact will be less pronounced in these cases. States with high share of Consumption which stand to gain (also a factor of the state’s population) include Uttar Pradesh, Maharashtra, Bihar and West Bengal.


Our proprietary indicator—the YBL Growth Index—is showing a pick-up in growth conditions from March onwards. The indicator is now near its long-term average, indicating normalisation of growth conditions. Currently, it takes an average of 241 hours per year to pay taxes in India, compared to 110 in UK and 175 in the US. I believe the most telling impact of GST will be in terms of improving ease of doing business –especially in terms of making “paying taxes” easier.

Riding on the achievements, progressive reforms and strategic initiatives of the last three years the Indian economy is well and truly in “take off” mode and GST implementation will fuel this growth trajectory.

XaTTaX GST e-filing software – Simple, Secure, Reliable

Source:Huffington Post
List of State Codes of India for GST purpose

List of State Codes of India for GST purpose

List of State Codes of India for GST purpose

India is consist of States and Union Territories. In step of new reform as GST (Goods and Service Tax).The TIN (Tax Payer’s Identification Number) is new unique registration number. It consists of 11 digit number and will be unique. First two digit of TIN is represented the State Code. The given below is the list of State along with their State code.

10 BIHAR 10
11 SIKKIM 11
18 ASSAM 18
21 ODISHA 21
30 GOA 30
32 KERALA 32


GST is Replacing Service Tax – Get Free GST Software Demo??

GST News: E-way bill system in GST to come from October

GST News: E-way bill system in GST to come from October


E-Way Bill : GST

The GST provision, requiring any good more than Rs 50,000 in value to be pre-registered online before it can be moved, is likely to kick in from October after a centralised software platform is ready, a top official said. The provision, called the e-way bill, would be implemented after infrastructure for smooth generation of registration and its verification through hand-held devices with tax officials is ready.

The information technology platform for the e-way bill system is being developed by the National Informatics Centre (NIC) along with GST-Network — the company which has developed the IT backbone for the new indirect tax regime.

The Centre has also decided to relax the timeline provision under which the e-way bill generated by GSTN for 20 days for goods travelling more than 1,000 km. Earlier, this was 15 days.

As per the provision, GSTN would generate e-way bills that will be valid for 1-20 days, depending on distance to be travelled — one day for 100 km, 3 days (100 to less than 300 km), 5 days (300-less than 500 km) and 10 days (500-less than 1,000 km).

The GST Commissioner may extend the validity period of e-way bill for certain categories of goods. “We hope the e-way bill can be implemented in three months time as by then, we hope to develop the infrastructure for consolidated e-way bill,” a top official said.

Although the Goods and Services Tax (GST) has been rolled out from July 1, a centralised e-way bill could not be implemented as the rules and forms were not ready. “The e-way bill rules may be taken up in the next meeting of the GST Council on August 5. After the rules are in place, the NIC and GSTN would develop an all India platform for a consolidated system,” another official said.

Since states like West Bengal, Kerala, Bihar, Odisha and Andhra Pradesh already had a robust e-way bill system, the GST Council in its meeting last month has allowed the states having e-way bill rules to continue with the existing form till a central format is built.

Originally, GSTN was to develop the e-way bill platform, but last month only the GST Council decided to rope in NIC to develop it since it was felt that in the initial days of GST roll out, GSTN would be busy with other works like solving issues like registration and invoice generation.

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The draft e-way bill rules, which was made public in April, provide that the person in-charge of conveyance will be required to carry the invoice or bill of supply or delivery challan, and a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device (RFID) embedded on to the conveyance.

The rules authorise the tax commissioner or an officer empowered by him on his behalf to intercept any conveyance to verify the e-way bill or the number in physical form for all inter-state and intra-state movement of goods. Physical verification of conveyances can be carried out on specific information of evasion of tax, as per the rules. The officer will be required to submit a summary report of every inspection of goods in transit within 24 hours and the final report within three days of inspection.

Physical verification of conveyances can be carried out on specific information of evasion of tax, as per the rules. The officer will be required to submit a summary report of every inspection of goods in transit within 24 hours and the final report within three days of inspection.

The officer will be required to submit a summary report of every inspection of goods in transit within 24 hours and the final report within three days of inspection.

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Source: The Indian Express
Beware! After GST, selecting a wrong vendor can kill your business

Beware! After GST, selecting a wrong vendor can kill your business

With GST, there has been a fundamental shift in how your books are maintained. Till now in the entire tax regime, the only version of the truth was how you maintained your books. All your filings flowed from that.

GST Beware!

In the GST era, there is one set of reporting that you are doing, but there are several parties who are reporting what their transactions with you are. GSTN as a common database consolidates and has unified view of what your business is. It also has connections with the customs, banking channels, income tax and so on. And it gives the taxman a full view of what you are reporting to each entity.

What this eventually means is that it was easier to be a non-compliant earlier. I could rely on my chartered accountant and tell him, “Okay, this year I want to pay this much tax, please prepare my books accordingly.” But, now this would become very difficult because others have reported to GSTN and hence tax authorities know all the details.

One of the fundamental shifts that companies need is to ensure that the books of account that they maintain are fully in sync with GSTN has and they are reconcilable to an external third party. Every transaction that flows into your bank should be aligned to some other transaction which is reported by someone else.

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Beyond the filing and the IT part of things it is very important that you know your supplier and your customer well. If your supplier has not paid their tax you will not get input credit. For example, let us take a very simple three party transaction between A, B and C.

Let us say they are transacting and A sells Rs 1 crore worth of goods every month and B works on it further for Rs 1.2 crore and the next party C sells it at Rs 1.5 crore. At an 18% tax rate the overall tax liability for the government would be 18% of Rs 1.5 crore. But, in between if B defaults, then A has already paid his 18%, which is Rs 18 lakh taxes to the government, but B is not able to pass that credit to the next party in chain, which is C.In this transaction, C who was earlier required to pay only 18% of the value he was adding, that is 18% of Rs 30 lakh amounting to Rs 5.4 lakh, will now end up paying tax on the entire Rs 1.5 crore, which means an outflow of Rs 27 lakh. And the tricky part with GST is that C will get to know about B’s default only two months down the line.

In this case if B has defaulted, his credit will only be reversed after two months, which means C is already transacting with him for two months post his default. If there are further defaults by B, an outflow of about Rs. 40 – 50 lakh additional could potentially kill a business. This means it becomes very important to know who your vendor is, how well compliant they are and if they are not compliant then you need to change your vendor.

This also means you as a business owner need to ensure that you have sufficient credit at all times. If you are running your business on a tight budget, which most SMEs do, it may be time to reconsider how you run your business. If there is ever a situation where instead of Rs 5.4 lakh your tax liability suddenly becomes Rs 27 lakh you need enough headroom to cough up that amount to remain GST compliant.

If you are not compliant, your GST ratings will suffer. When that happens, you will eventually not be able to find new buyers or your existing buyers will get away from you.

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Source: ET