HOW GST Compliance can help in reducing cost & improving profitability?

Introduction

Effective GST (Goods and Services Tax) compliance is crucial for businesses aiming to optimize their financial performance. By ensuring adherence to GST regulations, companies can significantly reduce costs and enhance profitability through various mechanisms. Here in this newsletter, we have explained some of the primary advantages of GST compliance. .

Fully claiming Input tax credit

Input tax credit is the credit available to the companies who are registered under GST are eligible claim credit against output tax liability raised out of outward supplies made by that entity. It improves cash flows & boosts profitability.

Keeping accurate and up-to-date records will helps to determine the correct GST amount to charge on sales and claim back any GST paid on purchases. This will help to reduce overall GST compliance cost.

The product's price rises because of the cascading effect. However, under GST, a taxpayer can claim an input tax credit for the purchase of raw materials. This decreases the cascading effect on the product's ultimate price/MRP.

Entities usually miss the claim GST input tax credit on the following business expenses

1. Bank charges: GST paid on banking services can be claimed as input credit.

2. Office expenses: GST on office supplies and services, such as utilities and maintenance, is eligible for input credit.

3. Flight tickets on business travel: GST paid on flight tickets for business travel can be claimed.

4. Stationary expenses: GST on office stationery and consumables is claimable as input credit. Etc.

2. Reduces Litigation Cost

Ø Cost of non-compliance

· If any non-compliance is met, like although crossed registration limits, then the cost of non-compliance is measured by monetary losses with huge interest fees, penalties and fines depending on the offence.

Ø .GST Audit

GST audits help identify missed input tax credits by reconciling eligible inputs in the company's books with those on the GST portal, prompting vendor follow-ups to file returns for those missed invoices.

3. GST Refund for the Export oriented Companies

The export of goods or services is considered as a zero-rated supply. GST will not be levied on export of any kind of goods or services. Under the IGST Act, exporters are eligible to claim refund on: (i) IGST paid on exports, and (ii) unutilized input tax credit. For brief regarding the GST refund, kindly refer https://bcshettyco.com/gst-refund.php.

Ø However, Supply of Goods or Services to SEZ

Under GST, supply of goods and services or both to a Special Economic Zone developer/ unit from a domestic tariff area can be made at Zero-Rated supply. That means these supplies attract Zero tax rate under GST Law. In other words, supplies into SEZ are exempt from GST and are considered as exports.

Author Name : Manjo B

Disclaimer:

“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

Prepared On:
17/10/23



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