In our previous blog, we had discussed about why it is important for business owners to get a computer for their business, whether big or small – given the changing business and economic environment, which is continuously moving towards digitization. Accuracy of business records, faster access to information, integration of key business operations, reliability, speed, security, scalability, tracking and most importantly the ability to analyze the business overall, are the many reasons driving businesses to computerize their operations.
At the same time, it is crucial that businesses look to computerize their accounts as well, and the main reason behind the same is GST, which became a reality on the 1st of July, 2017. One of the key changes brought about in the GST regime is the transformed face of compliance – which requires every business to declare information at the transaction level, connect online with the GST network, and adhere to the right compliance norms. The biggest motivation for doing so will be the availability of ITC, which will also require businesses to regularly match their records online with their suppliers. All this calls for maintaining accounts on a computerized system, so that it is easy to maintain and also easy to audit.
Role of the CA
The chartered accountant (CA) community has been one of the major influencers of businesses since time immemorial. Today, as the ecosystem demands digitization, and as we have embraced the GST regime, the role of the CA has become more important than before. We believe, that CAs across the country should definitely be recommending their clients to switch to computerized accounts – not only for the client’s good, but for their own good as well.
Reasons why CAs should recommend Computerized Accounts
If we dissect the reasons, why a CA should recommend computerized accounting to his client, they can be categorized into 2 sections:
- Increase in clientele or number of clients
- Increase in workload per client
Increase in Clientele or Number of Clients
In the previous tax regime, INR 5 – 10 lakh was the threshold limit for VAT registration in most states; manufacturing units with turnover at or above INR 1.5 crore attracted excise duty, and service tax was payable by units with revenue of INR 10 lakh and above on rendering of taxable services. But in the GST regime, a unified threshold limit of INR 10 lakhs for special category States and INR 20 lakhs for rest of India will come about – which will bring a huge number of businesses, especially manufacturers who were enjoying exemptions earlier into the taxable bracket. In simple words, we will have more number of businesses appearing the market who had never done compliance before, and will now need the right support and guidance.
Another case in point would be that with goods and services having a similar treatment under GST, terms like “Manufacturer”, “Trader” and “Service Provider” will gradually lose meaning. Similarly, while the previous regime saw tax experts being classified across to area of expertise – excise, service, VAT etc. – the current regime will see just one entity – the GST Practitioner (GSTP), who will be an expert in GST, which subsumes all such indirect taxes. In other words, the entire market of taxable clients will open up to the entire community of tax practitioners and CAs, and the one with the better expertise and knowledge will be able to have the larger clientele.
Increase in Workload per Client
For an individual client also, the workload of the CA will see a massive increase, due to the following reasons:
- Transaction based compliance – In the previous indirect tax regime, the return filling used to be on summary values of all transactions in a given period. In the GST era, each transaction need to be uploaded on the GST portal and the portal will communicate about one’s tax liability and available tax credit. Unless a client maintains his books of accounts properly, compliance will be difficult. Not only that, the aspect of online matching of bills, with your supplier is a crucial activity for tax compliance and ITC, and that can be done only when accurate transaction based records are maintained.
- Business will get input tax credit based on the tax discipline of Supplier – In the current scheme of returns filing under GST, it is important that the supplier of a business, files his returns properly and pays the requisite tax against those returns – as that will ensure the right ITC being credited to the business. This is bound to increase the behaviour of maintaining books as accurately as possible, as ITC has a direct impact on working capital.
- Input Tax Credit can be availed towards Indirect Expenses – Under GST, the “furtherance of business” concept has been introduced wherein businesses can avail ITC on indirect expenses. Thus, businesses should take care to maintain records appropriately, such that the right ITC can be claimed.
- 37 Returns in a Year – In the previous regime, service tax warranted a half-yearly return while VAT was a monthly / quarterly return. But now, 1 monthly return and 1 annual return in the previous regime, has now made way for 3 monthly returns and 1 annual return in the GST regime. The jump from 13 to 37 returns in the year, is a huge increase of compliance activity. Though some of the data is auto populated, time and effort is required to ensure proper compliance.
- Common Filing Dates for all Clients – In the previous regime, different clients (VAT, Service Tax, and Excise) used to have different filling dates and frequency. In the GST regime, all clients (VAT, Service Tax and Excise) of a CA will need to comply with common filling dates. One can well imagine the increased pressure on a CA on the last date for each return in a month.
As a result of both these factors, the workload of a CA is bound to increase many times than before. One can easily say, that managing a client will become next to impossible, if the client does not have a discipline of recording each transaction when it happens; in other words invoice level details have to be maintained accurately and efficiently. The simple solution is, that CAs should start advocating and educating the client about the need to develop a practice to record inwards/outwards regularly, so that their own workload will be reduced, nearing the compliance dates. And the only way, a CA’s client can do so, is by embracing computerized accounting and technology to have a seamless compliance experience.
Thus, it is amply clear, that CAs have a big responsibility in the GST era. Not only are they responsible for guiding the client through the various GST processes – registration, filing of returns, payment of taxes, replying to notices etc. – but also to ensure that constant reconciliation of sales data and purchase data is done efficiently to maintain the client’s cash flow and credibility. Thus while computerized accounting has ample benefits on its own for the business owner, CAs should positively advocate it, for greater seamlessness of compliance, and more effective handling of their increased workload under GST.
Credits: Tally Solutions