GST Challenges for SMEs

In the history of Indian Taxation rules, a major change is expected to come. Everyone is eager about one buzzword GST which will be made applicable from 1st April 2017.

 Goods & Service Tax is something which is going to bring turmoil in Indian taxation and businesses.  It is not just about change of taxation or taxation structure but a lot more than that. Many of the businessman look at it as simplification of the taxes. No doubts about it because GST is going to eliminate Excise for Mfg, Excise for traders, VAT, Service Tax and probably some local taxes to avail a single window of taxation. But that is a half piece of information. The changes are not just limited to the taxation structure, but also the way you submit the tax information to government. That is going to have a bigger impact on role of the computerized systems in taxation. This is a primary element that is missed out by many of the businessmen which either they are not aware of or have not understood the real complexity of GST!!

SME sector is by and large unorganized sector especially related to accounting, taxation & MIS. Most of them use Tally Accounting Software but still miss out on using Tally as a system. Rather they rely on person driven MIS, may it be Accountant or CA or Tax Consultant. Till date a ‘software system’ was rarely a necessity and was more a small tool used for calculations prepare some daily reports and get the accumulated sales and purchase figures required for tax returns. The ‘software system’ is rarely used for keeping check on taxation in day to day operations. This factor is going to be changed upside down with implementation of GST!!!

goods and services tax (GST) and tally

Very few people might be knowing that the stringent part of utilizing GST is not actually assessing the GST values but using the GST portal and getting INPUT CREDIT of GST. We all know that most of SME owners are prompt in claiming input credits in their tax returns but at the same time are reluctant to submit all Sales invoices and output taxes. This might be yielding some ‘cushion’ in the earlier VAT or Service Tax returns. But that won’t be possible henceforth. This is because unless your Input Credit claim is supported by the Sales Invoice entry of your supplier, your credit value will not stand valid. This is really serious especially for businesses whose gross margins per transaction are less than the GST value of that transaction. Suppose a distributor is working on 5% gross margin and he is getting his supplier invoice with 18% GST, then it will be a direct 13% loss in that transaction if the same is not uploaded by the supplier. This factor alone will underline the necessity for SME owners to be on their toes to check the validity of the input credit claims. In other words, they need to be equipped with their accounting and inventory management software – Tally. They need to use Tally.ERP9 on real-time basis and just not for the sake of making entries. GST is simple, alright but it has become a truly interdependent activity. Till date the industry has seen this interdependent phenomenon in TDS. However that factor never had a hit on indirect taxation. This was primarily because the State & Central Govt. departments were not equipped with effective portal systems and therefore could not make any compulsions. Now the situation is changed already. Central Government has made it clear that everything will be based on GST portal, leaving no escape routes for the taxpayers to give any excuses. It is high time for SMEs to be system oriented and enter into ‘Realtime’ mode!!! ON one hand Hon. PM has started cracking the ‘cash accounting system’ that makes mandatory for any businessman to take financial transactions through bank and on another hand there will be a system which will make all transactions in see through mode and exposed for tax authorities. our efficient business management software such as Tally has a bigger role to play in this scenario. Not only Tally will prepare your GST returns in time but will bring the more discipline that is required in ‘ERP mode’ which is a much needed factor amongst the SMEs.