GST may be a reality soon. The constitutional amendment bill has been approved in Rajya Sabha with clear majority on 03.08.2016. GST may get implemented (though there are practical difficulties) with effect from April 2017. For CAs, it is very important to get updated with the proposed GST law in order to provide proper advice to clients or enable the entities they are working, for transition to GST. In this article, we have discussed opportunities and few important steps to be taken in this regard.
Opportunities for chartered accountants
Introduction of GST would create in short term, a lot of opportunities. Full time CAs practicing in sales tax and other indirect tax practitioners may find it easier to understand the proposed GST as most of the provisions of GST bill are influenced by service tax / VAT / central excise provisions. Following are few services, which could be added to the service basket of practicing CAs in GST regime which could be of great value to business community:
a) Preliminary GST impact study
The introduction of GST would have huge impact (could be positive or negative) on manufacturing, trading and service industry. Manufacturing sector may find GST’s introduction to be positive as cascading taxes would get reduced and overall tax payment would be less compared present rate of taxes. For few services, it could be negative as rate of GST could be 18% which is higher than present service tax rate of 15%. Therefore, it is essential for the business entities to get preliminary GST impact study done to ascertain the impact on the business. CAs would be apt for providing this service, provided they are well prepared in GST. Presently, model GST law along with few reports on refund, payment, registration and returns are available in public domain which could be relied on for impact study. The impact study report would require be relooked once other regulations and modified GST law is introduced.
b) Assistance in transition phase
After impact study analysis, CAs could assist the business entities in implementation of GST during transition phase. Transition phase could include identification of eligible credits, modification of contracts / agreements, suggestions for modification of ERPs considering GST requirements, training of vendors if necessary. ERP implementation could well be a separate service as GST would be administered through full automation and manual intervention would be very less.
c) Training for entities for compliance
Initially there would be lot of challenges for business entities in implementation of GST. All important divisions of a business such as marketing, stores, finance / accounts would be in need to understand the basics of GST as it is a new law. Entities could face lot of challenges in transition phase. CAs could help the industry during this phase for smooth transition by structuring appropriate training programs.
d) Business consultant
Post implementation of GST, the CAs can act as business consultant considering the GST law as a whole instead of merely acting as tax consultants. As most of the indirect taxes would be merged in GST, CAs can be well prepared to be overall business consultant. Knowledge of implication under direct tax / international taxation in addition to GST would be of a great use. This could include business structuring / tax advice / guiding on development of standard operating procedure etc.
e) Regular review / compliance assistance of GST compliance
CAs could take up regular review of compliance for business entities to ensure compliance with respect to tax payments, availment of credits etc. In GST, compliance would be a key for the assessee for availment of credits, payment of taxes, taking deduction etc. There is a proposal to introduce matching concept wherein the credit for the buyer would be allowed only if taxes are properly reflected by the seller and appropriately paid to department by such seller. For CAs, compliance assistance could be a great opportunity.
f) Mandatory audit by CAs or cost accountants
Section 42 (4) of model GST law provides for mandatory audit of books of account for all taxable persons on reaching specified turnover. Such audits can be undertaken only by CAs or cost accountants. This is in line with the audits under present VAT laws of most states. Post implementation, the mandatory audits could be taken up by CAs.
g) Dispute avoidance and resolution
Initially there could be lot of disputes in GST for which the proposed GST council has to establish a mechanism for resolution. This could create few opportunities to the professionals.
h) Certification of refunds
Refunds are expected be much faster in GST regime. Around 80% of the refund amount could be sanctioned immediately on filing proper application along with specified documents. Like present conditions prevailing in Cenvat credit provisions, even in GST law, there could be a requirement of certification of refund application and the credit amounts. This would provide regular opportunities for CAs.
The above list is only illustrative and there could be many more services to offer. We need to wait and watch for what additional opportunities could get created once the final GST law is introduced along with various rules and regulations.
How to get ready for client’s services
Before proceeding to provide GST related services, the professionals should be thorough with the GST law. As the present law is only in draft stage, lot of changes could be expected before law becomes final. Following could be few ways to update knowledge of GST:
a) Attend seminar – This would be critical to understand the broad concept of GST in the preliminary stage.
b) Attend workshop – In order to get detailed understanding of GST, attending workshops on GST would be essential.
c) Reading bare Act – To understand any law, it is important to ready the provisions as it is in the bare Act. The present model GST law may be understood which has many provisions similar to provisions in present indirect tax laws. One good example could be concept of credit on capital goods in GST is very similar to what is there in present Cenvat credit provisions. Knowledge of present indirect tax law could also be helpful to certain extent to understand proposed GST.
d) Forming study circles – There is nothing like meeting of professionals to discuss the law which could throw lot of questions as well as answers. Study circles would be helpful in understanding the law in better manner.
At the present moment it is not clear if GST could get implemented from April 2017 or not. Nevertheless, it is time for the professionals to start preparing in the best way possible to cater the needs of the clients. We could only hope that a qualitative GST law is introduced considering the purpose of introduction of GST rather than being time bound and introduce GST in hurry.
This article is adapted from article published in KSCAA journal for the month of August 2016.