Case studies & Blogs

GST overview

Goods and Services Tax (GST) is a destination based tax on consumption of goods and services. It will be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff.

It is proposed to be introduced from 1st July 2017.

GST would replace most indirect taxes currently in place such as:

Central Taxes	State Taxes
Central Excise Duty	Value Added Tax
Service tax	Octroi and Entry Tax
Additional Customs Duty	Purchase Tax
Special Additional Duty of Customs	Luxury Tax
Central Sales Tax ( levied by the Centre and collected by the States)	Taxes on lottery, betting & gambling
Central surcharges and cesses	State cesses and surcharges
	Entertainment tax
	Central Sales Tax ( levied by the Centre and collected by the States)

The standard rate for goods and services will be 18%. There will be 3 other rates of 5%, 12% and 28% for specified goods and services.

GST Returns

Under the GST law, a normal taxpayer will be required to furnish three monthly returns and one annual return.

Return Form	What to file?	By When?
GSTR-1	Details of outward supplies of taxable goods and/or services effected	10th of the next month
GSTR-2	Details of inward supplies of taxable goods and/or services effected claiming input tax credit.	15th of the next month
GSTR-3	Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax.	20th of the next month
GSTR-9	Annual Return	31st December of next financial year

GST Registration advantages

GST will apply when turnover of a business exceeds ₹20 lakhs. Small businesses can also opt for a composition scheme.

However, many small businesses may do a voluntary registration due to certain inherent advantages. It will:

provide them a legally recognized status as supplier of goods and services
help reduce cost by taking input credit of GST paid on purchases and input services such as legal & professional fees, stationery, telephone bills etc.
facilitate inter-state sales
allow registration on e-commerce sites or starting own e-commerce website
help further business interests by using publicly available GST rating (for good compliance)

Also, large customers may prefer to deal with GST registered vendors due to the “reverse charge” obligations of dealing with non-registered vendors.

Long distance relationship

A multinational company wanted to set up shop in India. They were looking for someone to do the payroll for their Indian employees and fulfil the local statutory compliances. All other accounting work was to happen in the parent country. We were recommended to their Global Director Finance. After a series of mail exchanges, but without any personal meeting (this was in the pre-Skype era), we were given the assignment.

Work increased steadily as employees were added on. Besides doing the payroll and statutory compliances, we were sounded out for advice on diverse matters such as leave rules, salary structures, foreign exchange rules, income tax etc. This was a bit surprising considering the fact that they also had access to a Big 4 firm in India, who were their global auditors.

It was perhaps a measure of the trust and confidence gained in the quality of our work and advice that during a period of six years there was only one occasion when we had to speak to the Director Finance on phone: when we had not received some statutory forms sent for signing by the due date. All other correspondence was through emails.

Three years back the company was taken over by another multinational company. We were informed that they were considering setting up an accounting base in India itself. This made us apprehensive that we might lose the client. In due course the CFO of the new company visited India and we were called for a meeting. It was a pleasant surprise when we were asked to give a proposal to take over the entire accounting for the Indian entity in addition to our existing work.

We bagged the full assignment. The company currently does not have a Finance function in India and our role extends from accounting to being, in effect, an outsourced CFO. The role even includes managing a local bank account for the company.

A little snippet about our UK work

As part of our year end accounts preparation work for a UK accountancy firm, we prepare the accounts for one of their clients, a large subcontractor. About a year back we received the client records for preparing the accounts. Since it was fairly soon after the year end, we did not envisage an immediate deadline and work commenced in the normal course. A week later there was a frantic email from the reporting partner. The client was having a cash flow problem as payments were stuck with the main contractor. In order for them to approach banks for a facility, the accounts were required urgently. He mentioned something to the effect that a quick turnaround could just about save the client from going down. The accounts were at least 2 weeks away from completion. We also had other conflicting deadlines to meet. Besides, because of the complexity of the work, it could not be fully assigned to juniors. But the deadline had to be met. So we got cracking and sent the completed accounts back in a week's time. There was no news thereafter. We were thrilled when we got the same job after a year. The client had successfully negotiated a new bank facility.

Is this the future?

We were approached by someone in Mumbai, who had incorporated a company in the UK and wanted an accountant to do the accounts and statutory filings. He had seen our founder's profile on LinkedIn which mentioned that the founder was a member of the ICAEW. Our initial reaction was to recommend him to one of our UK associates for whom we are doing accounting work. But then we did a bit of research ourselves. We found that it was possible to do the work online, from India itself. The result: we are now doing the client's accounts and filings for Companies House, HMRC and VAT. And we have a highly satisfied client who is getting the work done at a much lower cost!