Must to surprise of many businessmen who betted against GST's implementation on 1st of July, Government of India indeed pulled off a landmark tax reform on the said date. Even as finance professionals across the country race to get things up and running smoothly, GST has become a buzzword. It is a topic of daily conversation on Social Media, FMs and dinner tables. Posting selfies with your first GST bill is a thing and as the days pass, newer challenges are emerging. Here are a few real-life challenges that businesses have faced recently.
Confusion over Exports
Exports in GST is a zero-rated supply i.e. supply can be done even without payment of tax. However, the procedural aspects were not clear to many. People struggled with questions like whether ARE-1 was required or not? Whether bonds entered into in excise regime will be sufficient?
Clarity on such aspects was given only on 7th July by government through a circular. Requirement of ARE-1 is now dispensed with. New LUTs/bonds will have to be submitted before 31st July.
Accounting systems not up & running on time
Several businesses delayed their billings under GST as their accounting systems weren’t configured or migrated on time.
Most SMEs had to stop billing for almost 4-5 days after GST. Users were required to close open POs/SOs of old regime and create new POs/SOs in GST regime. Further, end users are yet to understand accounting implications of GST. Robustness of accounting systems like tally and ASPs will be tested while filing GST returns. To ease the returns load, Government has now asked for payment of tax by self assessment through Form GSTR-3B. Invoice level matching & reconciliation would be an activity in September.
Getting the Tax Invoice right
Businesses struggled to get their invoices right. Many were unaware of requirements of the invoice and many also struggled to differentiate between Bill of Supply and Tax invoice. Restaurants were erroneously charging additional tax. Infact, CBEC had to issue “Clarification on rates of GST on restaurants”.
Dealing with HSN Codes and SAC codes
HSN code is a completely new concept for traders and service providers. Some respite on the use of the same came on 28th June. However, most of the businesses are required to disclose HSN codes in their invoices.
A huge exercise of tagging internal item codes with HSN codes had to be undertaken. This is an area which can lead to lot of litigation as classification of goods is largely subjective.
Further, there is a change in SAC codes which were used in service tax regime and the ones which are to be used in GST. Many were caught off guard over here. In fact, the Government’s official site (www.gst.gov.in) which is used for registration has not yet updated the table of SAC codes.
E-Way bill has been deferred and it shall fall in place somewhere around October 2017. There was a lot of ambiguity on documentation and procedure to be used for transportation of goods. Many state governments notified that old procedures shall continue till the time E-Way bill is notified. For e.g. Form 402 and 403 is being continued in Gujarat and E-sugam is continued in Karnataka.
The author is partner/leader-Indirect Tax at S.K.Rathi & Co., and a Consultant for SahiGST and can also be reached out at firstname.lastname@example.org