Impact Assessment of GST

Impact Assessment of GST

We are on the wink of biggest tax reform since independence with an enormous change in entire Indirect Taxation effecting businesses across India. It has changed demographics of each state with the increased consumption in GST, the destination state is going to get the tax. This can be achieved by attracting more industries, by developing tourist destinations, developing and providing better infrastructure to industry and public at large so that there is more consumption in the state. There will be a change in the way business is conducted and how the things will shape up in GST regime. There will be activity level changes. Here are the major impacts GST is going to have on different business processes.

Major impact on Purchase function

Sl. No.	Particulars	Provisions of Central Excise	Provisions of State VAT	Provisions under GST Regime
1.	Scope of Credit	Credit is available only on goods used in or in relation to manufacture. One to One correlation was to be maintained	Credit of goods used in manufacture was available.	Credit is available; be it used for manufacture or not, like office equipment, stationery etc. subject to the condition that it is used in the furtherance of business.
2.	Interstate Purchase	Credit of Excise paid on interstate purchase was available.	Credit of CST paid on interstate purchases was not available.	Credit of GST paid on any purchase for use in furtherance of Business (including interstate) is available.
3.	Advance Payment	Tax is not charged on advance payment made for purchases	Tax is not charged on advance payment made for purchases	Tax is payable on Advance payment of goods or services
4.	Credit Matching	Matching of credit with sellers’ sale is not required. No penalty on buyer if seller does not pay the tax.	Matching of credit with sellers’ sale is required. However, in most of the States credit was allowed  based on verification of Invoice	Complete matching is required. If tax is not paid by the seller then the tax credit will not be available to the buyer.
5.	Tax Complaint Supplier	Seller’s tax compliant status was not required to be checked for buyer. As it had no bearing on him. He was just required to ensure proper documentation in terms of possession of proper Invoice.	Seller’s tax compliant status is not very necessary. There was no official mechanism available to check the compliance by the seller/supplier.	It will be very necessary for the buyer to check beforehand about vendor being tax compliant. Government has come up with GST rating mechanism where it will be easy to find out the status of supplier.
6.	Invoice Time Limit	There was no time limit to receive the Invoice to avail the credit.	The Invoice should be received within the same quarter in some states. In some states within same year.	In GST the Invoice should be received before 30th September after the end of FY to avail the credit.

Major impact on Sales Function

Sl No.	Particulars	Provisions of Central Excise	Provisions of State VAT	Provisions under GST Regime
1.	Branch/ Agent Sale	Sale to agents or branches is taxable since tax is levied on removal of goods from place of manufacture.	Tax is not levied on transfer of goods to agent or branches wherever they are made other than by way of sale.	Tax will be levied on supply to agents, Interstate Branch transfer and transfer to different vertical within same state but having different registration.
2.	Advance Payment	Tax liability does not arise on advance payment	Tax liability does not arise on advance payment	Tax liability will arise on advance payment/ receipt
3.	Place of Supply/Sale	Place of sale was not required to be checked	Place of sale was required to be checked to identify whether CST or VAT is to be charged.	Place of supply is to be checked to identify Whether CGST and SGST or IGST is to be charged, considering place of supply provisions.
4.	Reverse Charge	No tax payable under reverse charge on goods procured	Generally No tax payable under reverse charge, however, in some states purchase tax is levied on purchase from unregistered person	Tax will be payable under Reverse charge on all purchases made from unregistered dealers and on other goods as notified.
5.	Penalty of late payment	Penal Interest, late fee and penalty charged for delayed payment of consideration is not included in valuation.	Interest, late fee and penalty charged for delayed payment of consideration is not included in valuation.	Interest, late fee and penalty charged for delayed payment of consideration is to be included in valuation for the purpose of calculation of tax.
6.	Anti-Profiteering clause	No anti profiteering measures to ensure pass on of credit of tax to final consumer.	No anti profiteering measures to ensure pass on of credit of tax to final consumer.	Anti-profiteering measure is introduced to ensure that credit is passed on to the final consumer.
7.	Consumption/ Destination based tax	Tax is levied by the Central Government on origin based principal.	Tax is levied by states on origin based principal.	Tax is levied by centre and states concurrently on destination based consumption principal. Thus, final tax accrues in the hands of state where goods/services are consumed.

Major impact on Accounting and compliance function

Sl No	Provisions under Excise, Service Tax and VAT	Provisions under GST Regime
1.	Separate compliances were needed under each law.	No separate compliance of Indirect Taxes laws. Only GST laws to be complied.
2.	No separate excise audit was required, however VAT audit was required in some states.	GST Audit is required to be conducted by a Chartered Accountant or Cost Accountant for each registration having turnover above the turnover limit of Rs. 1 Crore.
3.	Statutory forms were required under VAT and statutory registers under excise were also required to be maintained	No statutory forms or statutory registers are required to be maintained. Books can also be maintained in electronic form.
4.	Various manual compliances are required under existing laws.	Most of the compliances are online on GST portal.
5.	Way bill were not required in case of intrastate transportation. Only Inter-state transportation warranted such way bill when the consignment value was over a specific value.	Now e-Way bill is required in case of any transportation of goods when the consignment value is over Rs. 50,000/- irrespective of whether the goods are moved within or outside state.
6.	Material could be sent over challan without Invoice.	Invoice is to be raised in all cases at the time of removal of goods except in certain specified circumstances.