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7 Things That a Contractor or Broker Should Keep in Mind to be GST-Ready

After the Goods & Service Tax implementation on July 1, 2017, there have been a constant stream of amendments and expert advice pouring in for business entities and individuals. While the taxpayers are constantly in the state of dubiety about how to conduct their business and keen on having the rates slashed off, not much help has come their way.

However, a benefit of these continuous updates is that, the taxpayers can get their voice heard to boost their business. For builders to be GST ready, there are certain things they need to keep in mind while conducting their business such as:

  1. Update IT System of the Company

Frankly speaking, the old IT infra and accounting system cannot help them out much. The old taxation system does not hold much water in relation to the new regime. Therefore, to generate GST compliant invoices, IT system needs to be updated. Besides, the invoice should have the rate of GST along with quantity of goods or services stated. Each and every invoice should have name, address and GSTIN number of the supplier.

  1. Pass on the Quantified Benefit

Contractors should pass on the benefit that they have received as credit to customers. This means that asa result of reduction in tax, brokers and contractors should reduce their costs as well for the benefit of the customer.

  1. Contract between Builder and Buyer

The agreements between a builder and buyer must b GST-compatible. No contractor can ask the buyer to pay a higher rate of tax lest, he should face an action for anti-profiteering charges under Section 71 of the GST Act. The under-construction properties fall under the slab of 12% under GST.

  1. Quantification of Existing and New Projects

The savings arising on account of Excise Duty, VAT, etc. need to be compared against differential impact of GST Service Tax which are 12% and 4.5% respectively. This also depends on each project based on its stage of construction. The savings for an under-construction project would be substantially more than a complete project where savings would be materially low.

  1. Sundry Charges and Expenses

Miscellaneous charges like EDC/ IDC, transfer charges, basic sales price, preferential location charges need to be determined under GST. Apart from this, VAT and Service Tax for goods lying in stock have to be correctly determined under the new taxation regime so that the correct tax rate and credit could be applied.

  1. Educate the Value Chain

There are quite a few unorganized players in the chain of taxpayers. Therefore, initiatives should be taken to educating the entire value chain. For the first few months, the Government has decided to take liberal steps till the new regime completely permeates the system.

  1. Proper Reporting for Credit Assurance

The entire value chain should be mindful of the proper filing procedure of their invoices. With accurate and timely filing of invoices by the taxpayer at each stage, the credit shall flow easily. In addition, according to the GST norms, the sale invoice needs to be filed by 10th of each month and purchase invoice needs to be filed by 15th of each month. The sale and purchase invoice must match.

 

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