In India, the Goods and Services Tax (GST) is a comprehensive, value-added tax (VAT) on goods and services. It was introduced on 1 July 2017 and subsumed 17 different taxes into one. The GST is levied on the supply of goods and services at the national level. The main aim of GST is to eliminate the cascading effect of taxes and create a unified national market. GST is a destination-based tax, which means that the tax is levied on the consumption of goods and services in the country.
GST is a self-policing tax system and the compliance burden is borne by the businesses. The businesses are required to file monthly, quarterly, and annual returns. They are also required to maintain proper records of their supplies and purchases. The compliance cost for GST for small businesses is high. They have to bear the cost of compliance, which includes the cost of accounting, software, and tax return filing. There are many easy ways to reduce the compliance cost for GST for small businesses.
Did you know that by taking help from accounting software, filing GST returns online, and availing the services of a GST practitioner, businesses can save time and money on their GST compliance.
What is GST?
The Goods and Services Tax (GST) is a value-added tax introduced in India on 1 July 2017. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multistage because it is levied at every point in the supply chain. Destination-based because it is levied on the consumption of goods and services at the place of consumption and not at the point of origin like previous taxes.
Also Read: How to Register as GST Practitioner? Duties, Responsibility & Registration Process
What are the Significant Aspects of GST law?
- The GST is levied on the supply of goods and services at each stage of the supply chain, from manufacture to final sale, with credit for taxes paid at previous stages allowed as an input tax credit. The end consumer pays the GST but is usually reimbursed by the supplier.
- GST is a destination-based tax, meaning that GST is levied on the consumption of goods and services, rather than on their production or sale. The place of consumption is generally the place where the goods or service is supplied, but there are some exceptions.
- GST is a tax on the supply of goods and services, not on the value of the goods or services. The GST rate is the same regardless of the value of the good or service.
- GST is a multistage tax, levied at each stage of the supply chain from manufacturer to final sale. The GST paid at each stage is creditable against the GST payable at the next stage, so only the value-added is taxed.
- The GST is levied on the supply of goods and services, not on the value of the goods or services. The GST rate is the same regardless of the value of the good or service.
Top Methods of Reducing GST Compliance Cost
One of the key objectives of the Goods and Services Tax (GST) is to reduce the overall compliance cost for businesses. This is achieved by streamlining the tax structure and introducing a self-policing mechanism. The GST compliance cost can be further reduced by taking advantage of the various GST reliefs and exemptions. Here are some of the top methods of reducing GST compliance costs:
Automating GST return
If you do your own bookkeeping, you're probably used to manually preparing and lodging your GST return. But did you know that you can automate the process?
There are a number of software programs that can help you automate your GST return lodgement. Using one of these programs can save you time and hassle by automatically preparing your GST return for you.
- GST Program- When you use software to automate your GST return, you simply enter your GST-related transactions into the program as you go. The program will then calculate the GST payable (or refundable) and prepare the return for you.
- Lodge the Return- Once the return is prepared, you can review it and make any necessary changes before lodgement. When you're ready, you can lodge the return directly with the ATO (Authority to Operate ) via the software.
If you're not currently using software to automate your GST return lodgement, consider doing so. It can save you time and make the process much easier.
Using Accounting Software
Accounting software can be used to reduce GST compliance costs in a number of ways. For example, it can automate the generation of GST returns, help track GST payable and receivable, and provide real-time visibility of GST liabilities. This can save businesses a considerable amount of time and money in complying with their GST obligations.
There are a number of different accounting software programs available on the market, so it’s important to choose one that will fit the needs of your business. Some programs are more comprehensive than others, and some are designed specifically for small businesses. Once you’ve selected the right software for your business, you’ll need to set up your account and input your financial information.
Also Read: Explained in Detail - GSTR-2B: Auto-Drafted ITC Statement
Accounting Software can Help Business
In addition, accounting software can also help businesses claim GST refunds. For instance, if a business has overpaid GST, the software can assist in preparing and lodging a refund claim with the ATO. This can help businesses get back the money they are entitled to in a timely and efficient manner.
Overall, using accounting software can help businesses reduce their GST compliance cost. This can free up time and resources which can be better spent on other areas of the business, such as growth and expansion.
Claiming GST credits
GST credits are essentially a refund of the GST you have paid on your business expenses. To claim GST credits, you must have a valid GST invoice for the expenses you are claiming.
- To claim GST credits, you will need to complete a GST return. On your GST return, you will need to include the total amount of GST credits you are claiming.
- If you are claiming GST credits for the first time, you may need to provide supporting documentation to the ATO.
- Once you have claimed GST credits, you will need to keep track of your expenses to ensure that you do not claim more GST credits than you are entitled to.
- If you claim GST credits that you are not entitled to, you may have to pay back the GST credits plus interest and penalties.
As a business owner, it is important to be aware of the GST credits you are entitled to claim. By claiming GST credits, you can reduce your GST compliance cost.
Also Read: All About GST Accounting - Meaning, GST Journal Entry and Purchase
Keeping Good Records
Good record-keeping is essential for any business to ensure compliance with GST (Goods and Services Tax) requirements. Keeping accurate and up-to-date records will help you to determine the correct GST amount to charge on your sales and claim back any GST paid on your purchases. This will help to reduce your overall GST compliance cost.
Some tips for keeping good records include:
- Keep all invoices and receipts for purchases and sales.
- Mark each document with the GST amount paid or charged.
- A separate GST account in your accounting software.
- Reconcile your GST account with your bank statements monthly.
- A copy of all GST returns filed.
- Keep records of any adjustments made to your GST account.
GST is levied on all supplies of goods and services made in India, except those specifically exempted. GST is also levied on imports into India. Following the article along with these tips, you can ensure that you have accurate records which will help to reduce your GST compliance cost. By taking advantage of these methods, businesses can reduce the cost of GST compliance and free up resources to invest in other areas of their business.
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