More Clarity for Software Industry:
For Business Technology & companies like ProfitBooks, which sell online software, it was not clear whether to apply VAT or Service Tax on the product. There is a clear distinction between products and services in the GST regime, which will remove the confusion for the service industry.
Repairs and Maintenance:
The service providers that provide repair and maintenance services to companies will claim both the credit of input and credit of input services as provided by the GST system. The current regime only offers the credit of input services which is a bit limiting. Now that they can claim both the credit of input and credit of input services, they can offer their repair and maintenance services at lower prices, thereby attracting more clients.
Access to inputs Held in Stock:
The service providers will access CENVAT credit of input held in stocks. This business technology is best applicable when a person moves from one category of taxation to the next, like the exemption category to the taxable one.
Check out this simple example – Earlier, service providers charged Service Tax to the clients and paid VAT on the goods purchased, like computers. It was not possible to set off VAT against Service Tax. But in the GST regime, you pay GST on both sales and purchases, and hence it’s easy to claim the input tax credit on that.
Fewer Costs to Service Providers:
In the previous taxation system, the credit of VAT and CST that were paid to the input were billed to the service provider. Luckily, with the GST system, the CENVAT credit of SGST/CGST and the IGST that are to be paid on inputs and capital goods are all taken care of under the GST system. This is a relief to the service provider.
The Cost of inputs is Likely to Drop:
Now that the multiple taxation systems are abolished, the price of information will go down. Input taxations like VAT, Excise Duty, and the likes will no longer be an issue to deal with.
It will Bring Equality in all States:
The previous taxation system did not cover Jammu and Kashmir. This presented a disadvantage to other places in India because taxation provisions did not cover these two places. However, GST now covers the whole land bringing all service sectors under the same taxation laws.
Negative Impacts Of GST On Service Sector
Other than the goods, there are also downsides to this system of taxation. These negatives include:
Lack of a Centralized Registration:
With the previous taxation system, many service providers rejoiced over registering all their businesses in different areas from a central place. However, this privilege has been taken away. Now, they have to register their businesses in the respective state and pay the CGST tax. This can simply be done by using software developed through smart business information technology.
Taxation For Free Services:
If a business supplies services for free, they will still get taxed for it. Every supply that is made without consideration is taxed. This means you have to prepare yourself before you offer any free services.
The increased Cost of Service to the End Consumer:
Because the rate of taxation will go higher in the GST system, the end consumer will also feel a pinch of extra expenditure. The taxation is between 18% and 20%. Because this rate is high, the cost of service will be higher.
Lack of a Centralized Accounting System:
Every business in every state has to have its accounting records because there is no centralized registration of companies. Business in every state is financially accountable to that state for taxation. This means that the accounts of the business will have to be separate & business technology plays a significant role in this regard.
Burdensome filing of Returns:
As a business owner, you will have to file returns for all the businesses in all the different states separately. This is also because of decentralized registration. This can prove to be burdensome and tiresome as well. You are needed to file as many as 37 returns in just a year.
The Burden of Public Education:
The business owner is charged with educating the masses on the benefits of this GST system. Failure of which may lead to unprecedented events.
What You Can Do To Comply With the GST
As a service provider subject to the GST taxation system, you must ensure that you are using the latest business information technology & that your business complies with GST provisions. You can do the following to ensure that you abide by the regulations of GST.
File your Returns under GST:
We all know that all businesses need to file their returns. There is no exemption to this. When there has not been much activity with the company, you can file nil returns. Failure to comply will attract a penalty. You have to give detailed information on all activities of the business.
Learn more about GST Returns.
With the advent of business technology, the government has a mechanism in place that rates vendors based on how timely they are with their returns, payments, etc. People who look forward to working with you will be rating you based on these scores.
Learn about GST compliance rating.
Know your SAC:
In the GST regime, you need to mention ‘Service Accounting Code (SAC)’ for every service you sell. So, you need to know the correct SAC of the service you are selling.
Learn more about SAC and HSN codes.
Proper GST-compliant invoices have to be raised under the GST system. Invoices issued to the GST showing compliance have specific fields that need to be filled before issuance. The issuance is done via a GST portal, and information on both the buyer and seller is captured.
For example, you need to mention your GSTN, customer’s GSTN, SAC on the invoice.
Learn more about Creating GST Invoice.
Know the Applicable Taxes:
It is essential to know that the GST system is made of two components: the CGST and the SGST. The taxes subsumed at the CGST include central excise duty, the special additional duty of customs, service tax, additional excise duty, and additional customs duty.
The SGST component is made by subsuming the Purchase tax, luxury tax, entertainment tax, VAT, Octroi and entry tax, etc.
If you are selling within your state, you need to apply SGST & CGST, and if you are selling outside of your state, you must use IGST.
Use a good GST Accounting Software:
As the business information technology is progressing, you’ll find various software that will be your best friend as it will help you file your returns more easily and in a faster, error-free way. This software will alert you to any discrepancies that there may be, and you can get to it before any damage is done.
ProfitBooks is one of the popular GST software in India. It will help you to create GST invoices, manage inventory and even file GST returns directly from the software.
By subsuming all these to provide the country with a single taxation level, we can say it is a great move that will further propel the economy. As much as there will be some challenges, it is great to have a single taxation system for the service providers.
For the service industry, the GST system has increased the compliance burden. GST implementation is bound to face hiccups during the initial days, but things will be much smoother once the issues are addressed.
What do you think? Please share your thoughts in the comments.