With the advent of the goods and services tax from July 1, 2017, the nation’s long wait for a simplified tax regime to create one of the world’s largest unified markets became a reality. The first thing that probably came into every registered dealer’s mind on the morning of July 1, was whether they would be able to raise their ‘first GST invoice’. While the large companies were generally successful in modifying their IT systems in advance and raising GST invoices, the small merchants/traders were the most worried lot.
With the GST law mandating the issuance of different documents under varied circumstances, in prescribed formats, their worry was not baseless.
To name a few, a ‘Tax Invoice’ needs to be raised on supply of taxable goods and services, a ‘Bill of supply’ is to be raised on supply of exempted goods and services, and a ‘Receipt voucher’ to be issued in case of receipt of advances and the list goes on.
Thus, the first week of GST has been all about ensuring that the right documents are issued under the correct circumstances. Though, the government had prescribed the particulars to be mentioned on a tax invoice about a month back, the general misconception among the traders was that a ‘definite format’ of invoice would be issued (which never came), resulting in confusion amongst dealers and consequent ‘black out’ of issuance of invoices for the first few days.
The confusion was aggravated by the fact that the criteria to determine the document to be issued by a dealer have been changed under the GST. Till date, the document to be issued by a registered trader was dependent upon the customer’s profile, i.e. whether the customer is a registered dealer or an end consumer. Where the customer is registered, a tax invoice was issued and for the end consumer, a ‘retail invoice’ was issued. Under GST, the customer’s profile is not the determining factor, what matters are the goods being supplied. Thus, a tax invoice is to be issued where the goods being supplied are taxable, otherwise, a bill of supply is issued
Some other challenges on the issuance of the first invoice were the 16 particulars prescribed under the GST law.
To illustrate, under the erstwhile regime, mentioning the product classification code (called Harmonised System of Nomenclature or HSN codes) was mandatory only for manufacturers. Under the GST it is mandatory for all dealers including service providers having a turnover of more than Rs 1.5 crore to mention the government prescribed product/service classification code.
Another area of discussion amongst dealers is the adoption of different series for each of the prescribed documents. The document series is required to be consecutive and multiple series may be maintained for each type of document. Also, the series needs to be unique and must contain alphabets, numerals, special characters or any combination of these with a cap of 16 digits.
The requirement of mentioning the place of supply with the state code, which is relatively a new concept, address of delivery and address of recipient also adds to the complication.
Questions such as whether issuing a hard copy of the invoice is mandatory or electronic invoice can also suffice, whether a scanned signature is permissible, whether hard copies of all prescribed documents need to be maintained is also creating a cloud of doubt amongst the GST community.
Implementation of a reform of such magnitude is bound to come with teething issues. A prudent way to deal with the challenges is to be a little pro-active, say, for example, where the particulars to be mentioned on the invoice are configured appropriately in the enterprise resource planning (ERP) system or the laptop being used, dealers can find the issuance of an invoice to be a hassle-free exercise.
It was heartening to see social media flooded with selfies of individuals highlighting ‘My first GST invoice’, but the irony was while their status or post said ‘my first GST invoice’, in some cases the invoice actually had VGST (Value Added GST) or VAT mentioned on the same.
Last week has been super exciting from doubts on implementation till the last minute, anxiety on who would attend the grand function in the Parliament, cake cutting ceremonies in offices on completion of the GST project, flashing GST compliant bills (some with incorrect particulars) on social media with a sigh of relief.
All said and done, the government has already played its cards, now it is up to the big businessman, small traders, service providers and consumers, to decide what they want to do with theirs—play along or fold!
By Harpreet Singh
With inputs from Rishabh Tandon, assistant manager, KPMG India