New GST Law Is Coming And Online Accounting Software Is Your Savior (Part 1)
“…GST for a product is levied at 12 percent, then 6 percent will be levied by the state and 6 percent will be levied by the Centre.” Paying taxes is about to get much more complicated.
Photo Credit : http://www.gstindia.biz,
The current tax system in India is complex, making it hard for business owners to comply with regulations. This is mainly because there are multiple taxes that need to be filed with multiple tax authorities. It comes as no surprise that Indians on average spend 241 hours per year on tax preparation and filing (World Bank Survey, 2016).
The new GST law will simplify the current tax system by replacing multiple indirect taxes with a single, straightforward tax. The GST will have two components: Central GST (CGST) which needs to be filed with the Centre, and State GST (SGST) filed with the State. This simplifies the entire process for businesses because each component of the GST has its own clearly defined tax authorities. Business owners will know where to file taxes.
Since the GST is a complete overhaul of the existing tax system, you can expect quite a few changes in your financial compliance requirements. It may be a bit nerve-wracking to think of changing the way you've been doing business for so long. Having new paperwork, new tax preparation steps, and new filing processes to deal with is enough to throw you into a tizzy. But with a little planning and organization - and the use of an online accounting system - getting your business ready for GST is actually achievable.
Here are some of the business compliance requirements for GST and some ways that an online accounting system can help.
The GST will have a four-tier tax structure consisting of a higher rate (28 percent), standard rates (18 percent and 12 percent), a lower rate (5 percent), and a zero rate (0 percent). These rates depend on the type of goods and services you sell. Since GST has dual components, these rates will be split equally between the State and the Centre. For example, if GST for a product is levied at 12 percent, then 6 percent will be levied by the state and 6 percent will be levied by the Centre. For interstate transactions, there is an Integrated GST (IGST) that combines central and state GST components. This requires a major change in the way you calculate and track taxes for all your transactions.
An online accounting system is built to handle even the most complex of tax calculations for you. You can set up different tax rates for different types of transactions, then have your online accounting system calculate the tax for each sale and apply it to your invoice instantly. This reduces the chances of making errors in tax calculations. Tracking IGST can be as easy as selecting a customer while creating an invoice; the tax rates can be mapped to the customer's address to give you the appropriate IGST rate. Reports can instantly give you a summary of the different GST rates levied for each transaction.
There’s more to the pain online accounting software can save you. Read here.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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