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GST: The Game-Changer

Goods and Service Tax (GST) will radically change the way business is done in India. Professionals who render services to businesses will face a different practice environment in new tax regime.

Because of this, it’s crucial for both dealers and professionals to understand the winds of change and prepare themselves for unfolding opportunities and impending threats.

Most Chartered Accountants (CAs) cater to Small and Medium Enterprises (SME) clientele. In this segment, the pre- and post-GST consultancy services will be mostly outsourced to the CA fraternity.

Facing this major change with huge financial implications for their business, SMEs will come to their existing CAs for guidance and support in preparation and implementation of micro-level GST in their businesses.

This generates a big opportunity for professional CAs, but it’s an opportunity that comes with a challenge: prepare for the new, or be left behind.  CAs who fail to gear up for GST and are unable to support their clients could lose substantial market share. Therefore, it might not be a good idea to restrict a CA practice to direct taxes or excise duty — it’s likely to be more profitable to offer a one-stop consultancy for all tax matters, allowing the CA to play a role of a business solution provider.

Consolidation by Indian Government

Direct and indirect taxes are being integrated at the administrative level with many cross inputs provided by authorities.  Sales transactions which are not reported under income tax can be tracked easily through assessments under Excise and VAT, where such transactions are reported for claims of Input Tax Credit (ITC) credit by their customers.

Dual control by the Central and State governments over GST transactions will result in a manifold increase of such cross-information exchange at all levels of government. Taxpayers would like to safeguard their positions through proper linking of compliance under these two types of taxes, and to that end, they would expect support from their consultants.

How should CAs respond to the Big Change?

Accounting, commercial, logistics and tax systems implemented in the last 70 years were designed to suit a multiplicity of taxes. These systems are set to change to make themselves suitable to a single GST that will replace all major indirect taxes at the Central and State level.

It is imperative for CAs to understand key legal concepts of model GST law, including both the procedures in the public domain and those that will come pre-GST.

Keeping abreast of GST developments is a must for any CA who does not wish to be left behind in the race toward GST alignment for his clients.

The longer a CA has practiced, the harder it will be to unlearn the old system and gain an understanding of the nuances of new tax regime.

Younger CAs have an advantage over their more-experienced colleagues. For these CAs, the GST represents a fresh start with little burden of past knowledge and experience.   A similar advantage will accrue to CAs who have so far restricted their practice to the direct tax field.

However, an experienced CA who enjoys goodwill amongst his clientele needs to step up to the challenge — and if he does, clients are likely to turn to him in times of tax turmoil like those sure to come with the implementation of the new regime.

Professional Opportunities

CAs, being qualified professionals, will have an edge over non-qualified consultants operating in indirect tax practice when associating with customers who wish to upgrade their GST-compliant status through a change of consultant.

Opportunities may also emerge due to the merging of central- and state-level taxes that will make it necessary to have only one consultant for GST (instead of two at present catering separately to Excise and VAT matters).

As for specific opportunities pertaining to GST, a distinction can be made between pre-GST period and post-GST period openings for professional practices.

Pre-GST period opportunities

These are mostly one-time opportunities focused on GST preparedness of clients. Specific areas of work that can be offered in this period will include the following:

  • Understanding legacy tax systems at client workplaces so as to make those systems GST compliant.
  • Preparation of a strategic plan for logistics and commercial systems of clients needed under GST. For example, closure of go-downs and branches catering to stock transfers exempted under present CST law, or sourcing inputs from neighboring States where full input credit of IGST will be possible due to the elimination of 2% CST adding to cost of such inputs at present.
  • Changes in accounting software and internal control systems to suit GST.
  • GST Training for management and staff of existing clients, including offering such training to others not on present tax client list.
  • Catering to Transition assignments, such as ensuring complete claim of ITC under the present registrations, stock planning at the transition date, registrations under new States, amendments in existing certificates, and so on.

Post-GST Opportunities

After the implementation of GST, a range of additional opportunities will open up for CAs, including:

  • In the initial stages of GST implementation, there will be many gaps in people’s knowledge of GST at various levels. These are likely to result in non-compliance and, therefore, a need for advice for corrective actions and solutions.
  • Those who support taxpayers with GST advice at this juncture are likely to retain many new clients in the long run.
  • After GST is stabilized, post-GST practice will centre around compliance and ensuring minimum credit leakages.
  • GST will operate on matching GST payments by sellers with corresponding ITC claims by buyers. This will lead to a continuous need for monitoring of unmatched credits issued by the government portal. CAs can take up tremendous outsourcing opportunities in this sphere through credit monitoring and checking assignments.
  • Routine tax assignments for filing of returns and providing assistance to clients for assessments and representation before appeal authorities will still generate good business opportunities for CAs under the GST regime.

The scale of such opportunities will be much bigger under GST because of the overall economic growth that GST will bring about in India.

To summarize, this nationwide tax reform will be welcomed by those who know how to adapt to change and use automation to their advantage — not only to keep existing clients happy, but also to acquire new ones.

To learn more about how Avalara can help you with GST automation, contact us through https://www.avalara.com/in/contact-us/

This blog is contributed by CA Mukund Abhyankar.