GST Roll out:

It is more than 4.5 Years now, after the implementation of GST from 01.07.2017, which replaced erstwhile Taxes with Uniformed Indirect tax across the country.

Prior to implementation of GST there were so many taxes like

Central Excise – Tax on Manufacturing

Service Tax – Tax on Services

State VAT – Tax on Sales within State

CST – Tax on Sales between States

The GST Act, rolled out in 2017 replaced all the above taxes of Indian Industries into one single Tax of GST with Sub Classification of Intra-State and Inter-State with CGST/SGST and IGST.

The uniformity in Tax rates, uniformity in Law, uniformity in compliances, uniformity in procedures were made the business simple to a huge extend.

Unlike earlier, companies which operates in multiple states need not to follow different procedures with regard to different states. That was a tedious exercise for their Accounting and Documentation system also. Some states need Road Permits; some states don’t require Road Permits. Some States mandates Delivery notes (apart from Invoices) Some States accept just Invoices for material movements.

Different compliances made the system struggle with huge man power requirement to monitor each state related compliances and handle separately from every location.

GST at Present:

During implementation of GST, it was being considered as Accounts and Legal based tax as the erstwhile Central Excise, VAT, CST & Service Taxes. The erstwhile taxes were fully based on Tax liabilities and Audits, since the majority of the transactions are manual. There is no record at Government end, other than what we are submitting to the Government departments. The tax authorities normally analysis the data what we are submitting to them and issue notices if any discrepancies are found. Hence the companies fully relied on Accounts and legal department to convince the tax authorities proactively.

After the implementation of GST and subsequent amendments made in the GST Acts and Rules, now the GST is more inclined towards IT (Information Technology) driven Act and SCM based Compliance.

IT driven GST:

Now the entire data of any Tax payer has been updated to the Government Tax Authorities almost on real time basis, thanks to eINVOICE System and E-WayBills.

The whole Input Tax Credit and Outward Tax Liabilities are being cumulatively recorded in the GSTN portal itself which was not the case in the erstwhile tax regime.

All major Goods movements are monitored with the help of QR Code based E-WayBill, RFID Tagging, Toll Gate scanning of Vehicle Reporting, eINVOICE data which are all fully IT driven improvements. Infact in many states the Tax authorities are verifying the Vehicles by reviewing EWayBills with the help of Tablets & Hand Held QR Scanner devices, thanks to the support of Information Technology.

Discrepancies in Tax liabilities were now easily identified based on the comparison of eINVOICEs and EWayBills which are auto-populating the data directly to GSTR1 which decides the Outward Tax liability.

On the Other hand The Input Tax Credit availing by the Tax payers also monitored on almost realtime basis with the help of GSTR2A/GSTR2B versus GSTR3B claim and any major discrepancies were got clarified by the Tax authorities any time.

The HSN / SAC code validation, Tax Rates, Tax Conditions (CGST/SGST & IGST) were also now controlled by ERP Systems for error free documentation at tax payer level.

Now the GSTN Portal gives opportunity for Tax payers to get confirmation of their Input Tax Credit by checking through GSTR2A/GSTR2B reports, and they can now directly inform the Suppliers for filing the returns, which was done by the Tax Authorities in erstwhile tax regimes, that too after the closing of the Tax Year and submission of data by the Tax payers.

Thus, the Turnover, Sales Transactions, Purchase Input Tax Credits, Goods Movements under EWB all transactions were fully IT driven and open to review by both Tax authorities as well as Tax payers any time.

Checks and validations in GSTN portal, such as Differences between GSTR1 & GSTR3B; GSTR2A/GSTR2B & GSTR3B gives a confidence to Tax payers & Tax authorities on genuineness of taxes declared by the Tax payers without much major disputes.

Similarly, as the data is open to tax department, tax payers also cautious in documentation and tax declarations. Accordingly assesses also implemented robust systems to have error free documentation and accounting processes.

Government also facilitated the Tax payers with Free Software for preparing and filing GSTR1 & GSTR3B returns, reconciling GSTR2A report with Purchase register etc., so that tax payers can rectify if any errors are made in their tax declarations.

In simple, unlike pre-GST regime which was fully Assessee depended data, now the GST is fully IT driven act and almost all the data related to GST Transactions are flowing both sides to Tax payers and Tax authorities to have a fair and accurate tax declarations and tax revenues.

SCM based GST:

Earlier the Taxes are decided based on Manufacturing (Central Excise); Processing (Service Tax) & Sales (VAT/CST). The taxes are also levied based on nature of activities. Hence there are lot of dependency on Accounting & Legal departments to decide the valuation of the Goods / Services at various stages.

For example, a Product has X value for Central Excise since it is levied based on Manufacturing activity and Y value for VAT/CST since it is levied based on Sales Activity. The valuation of Material fully depended on Accounts and Finance team of any company. Logistics team are just limited with Document preparation for movement of goods and they are actually supporting to the Finance Team for Tax declarations and Legal team for minimizing compliance disputes.

Now we all know that the term Logistics has been slowly wading off and the term SCM (Supply Chaim Management) being adopted by India Inc.,

This SCM includes total Supply chain management, which not only covers Purchase, Imports, Sales, Exports activities but also it extends beyond activities and includes reviewing and controlling Vendors and Customers for their accuracy in providing data to the company.

GST – Way forward for India Inc.

SCM as a concept now growing rapidly in India as many more companies are moving from separate teams for Logistics, EXIM, Purchases etc., to a consolidated team of SCM which also manages Customers, Vendors, Imports, Exports, Sales and Purchases as a wholesome activity.

On the other hand, we now started realizing that the GST has been changed into Goods and Services based Taxation instead of Activity based transaction. GST is being levied on Supply instead of Activity. Hence, the role of SCM became more importance for GST as SCM is the team which decides the following activities which is deciding the GST requirements of a Company:

Sales – Taxable Outward Liability of the Company

Purchase – Input Tax Credit for the Company

Exports – Customs compliances for Zero Rated supply and IGST Refunds to control Cash flow

Imports – Input Tax Credit on Imports and compliances thereof

Vendor management – Checking compliance of Vendors, supporting for prompt filing by Vendors for maximizing Input Tax Credit for the company

Customer Support – Ensuring Customer data for error free documentation for EWB/eINVOICEs

Transporters – Movement of Goods to designated Customer within EWayBill time-limit

All the above vital activities related to GST compliances are mostly controlled by SCM rather than Finance or Legal. The roles of Finance have been reduced to reconciling tax declarations with financial statements and the role of Legal team reduced to clearing of Detained Vehicles or any SCN/Notices from the department.

The vehicle detention also proactively avoided by the SCM team to certain extend by way of error free documentation. So the role of legal team is required only during SCN/Notices which were not a regular requirement.

Hence, the GST slowly converted the new Taxation as SCM based activity rather than Finance or Legal based activity.

Way forward for India Inc.,

As we saw that the GST is mostly a SCM based transaction now and majority of the activities deciding GST declarations are relied on SCM team, the GST team can be brought under the ambit of SCM rather than Finance or Legal.

However, the support of Finance and Legal teams can be sought in case of any requirement which was not a regular phenomenon under GST regime. Earlier pre-GST regime was fully depended on Finance team, which is not the case now under GST. In fact, if the SCM team works efficiently with their expertise in dealing with Squads and their queries, the requirement of Legal team itself comes down significantly and the GST compliance will be of SCM data in majority with a final reconciliation by Finance team for any discrepancies. A kind of 80:20 responsibilities between SCM and Finance teams.

SCM along with IT for their documentation and reporting can control the Tax declarations of the company. Also SCM can induct many validations with the help of IT, to block vendors who are non-compliant, to check the status of ITC from Vendors and follow up Vendors for prompt filing of returns, since SCM is handling Vendor management also apart from processing their Bills.

GST being under SCM will also reduce delays in getting clarifications on goods movements, specific transactions such as Bill to – Ship to; Merchant Exports, Job Work movements etc., instead of getting clarifications from GST team under a different team.

A Consolidated approach by SCM can make an organization more beneficial than splitting the responsibilities into different teams.


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December 2022