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GST compliance checklist for your business

More than nine months have passed since the launch of India’s Goods and Services Tax (GST), and many businesses still have gaps in their compliance or questions about the new requirements. And with monthly GST changes and weekly notifications by the government, it’s no wonder. Nevertheless, your business must carefully manage your GST compliance to help avoid penalties and fines, retain a positive image, and position yourself for success in the market. 

Since being tax savvy is no longer optional, it’s important to understand what it takes to achieve compliance. Software applications, such as Avalara TrustFile GST, can assist you and companies throughout India with end-to-end GST compliance. Furthermore, this checklist outlines 16 tasks necessary for your company to comply with GST and take advantage of the business opportunities the new tax system introduced.

1. Classifying transactions

Using HSN/SAC code mapping, you must classify all transactions under GST as either “goods” or “services.” Some of these classifications have changed from the old valued added tax (VAT) laws. For example, restaurants  classified as “goods” under state VAT laws are now classified as “services” under GST. 

In addition, GST has adopted the integrated GST (IGST) model, which classifies transactions into two categories: interstate transactions and intrastate transactions. You should take into account frequent changes in tax rates and exemptions, and reclassify items and redefine tax rates as needed.

2. Place of supply and time of supply

You must be clear regarding the applicable provisions of place and time of supply, as provisions differ with location, industry, and commodities. Capturing the time and place of supply can sometimes be confusing. Avalara TrustFile GST helps track this information.

3. Tax slabs

Once supplies have been properly classified, make sure to apply the appropriate tax rate on each supply, and to update tax rates in your system as needed.

4. GST registration — location

GST law requires all factories, outlets, and warehouses in India to register under GST, and all supply points to be identified.

You can obtain GST registrations for different business verticals falling under different jurisdictions to help ease GST compliance and ensure seamless input tax credit (ITC). 

5. Inventory and cost management

a) Following GST’s implementation on July 1, 2017, the transition of old ITC on the existing inventory, including inventory not eligible for offset under the previous laws, can be carried forward and offset against GST. This shall affect the cost of inventory.

b) The change in tax structure and the easier ITC will affect the cost structure of new inventory. Ensure these changes are properly reflected in the system to help ensure an accurate cost structure and make correct pricing decisions.

6. Chart of accounts

You’re required to revisit the chart of accounts post GST. Businesses — especially those in the service sector with PAN India operations, as well as those engaged in ecommerce, e-tailing, etc. — must assess requirements and make any necessary changes in the chart of accounts to make sure they are GST compliant.

7. Account balances and reconciliations

You need to reconcile accounts with vendors and customers as on June 30, 2017, before GST launched. You should also reconcile stock on inventory lists that include complete details of quantity, rate, and ITC.

8. Sales and marketing policy

GST has made substantial changes in taxation with regards to gifts, discounted items, and related party transactions. Amend your sales and marketing policies accordingly.

9. Logistics model and payment policy

There is a marked transformation from previous VAT laws in the point of supply and the point at which tax liability arises and needs to be paid under GST. Understand these changes and analyze your cashflow carefully. Also revisit and redefine you inventory policy, logistics model, and payment policy accordingly.

10. Review existing contracts

Existing contracts need to be reviewed and updated to comply with GST. This applies to penalization, incentives, pricing changes on account of seamless ITC, etc., under GST.

11. Supply chain management

Review your list of suppliers, the nature of goods supplied, place of supply, and contractual terms in case suppliers can be rationalized or consolidated to improve supply chain efficiency. Also ensure that contractual terms are in line with GST law.

12. Review of vendor masters

Make sure to update all vendor masters in respect to:

a) GST registration numbers for all locations

b) HSN codes for the items supplied

c) Reverse charge mechanism applicability

d) Matching of GST credit with suppliers to encourage timely filing of returns

13. Review of customer masters

It is important to capture the place of supply (with up-to-date GST registration numbers) in case PAN India operations need to be captured. In case of ecommerce and B2C transactions, special attention may be required.

14. Update tax masters

If you don’t have an automated GST system, you’ll need to update tax masters at regular intervals.

15. Filing GST returns

Filing timely returns with the correct information is very important under GST to avoid high penalties and ensure a good GST rating. Returns are to be filed in the subsequent months on a monthly/quarterly/annual basis; incomplete data may result in invalid returns.

16. Systems transition and preparedness

Check to see that the system you have in place can be updated to keep current with GST compliance. Pay specific attention to system support, as GST law is expected to undergo many more changes before it stabilizes.

GST is not just a tax reform, but a business reform too, affecting almost every aspect of your operations. It is of prime importance to understand GST and its implications, and to adopt a robust system that will help alleviate GST compliance worries. Be proactive and face the challenges head-on rather than react to problems arising from noncompliance, and you’ll likely be much better off.

Avalara TrustFile GST is an automated application service provider (ASP) that helps ensure end-to-end GST compliance and helps minimize GST-related disruptions. 

Avalara is an experienced ASP and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application, Avalara TrustFile GST, can help you with GSTR-1 to -9, e-way bill creation, and more, contact us through https://www1.avalara.com/in/en/products/gst-returns-filing.html.

Avalara Author
CA Ami Dhabalia
Avalara Author CA Ami Dhabalia
Ami is a Chartered Accountant by profession and presently works as Finance Manager at CouponDunia Media Pvt Ltd – a Times group company. She specializes in Direct & Indirect Taxation, Treasury management & Legal compliance. She is a avid reader, and loves teaching Tax on the weekends.