Month: May 2020

Shifting to New GST Return: How to Prepare for the Change

Posted on by Tally Academy

The introduction of the new GST return system aimed at simplifying the tax filing regime for business owners across India. The current GST return filing will shift from GSTR-1 and GSTR-3B to a new single return RET-1/2/3 with an auto-filled ANX-1 (for tax liability) and ANX-2 (for Input Tax Credit). The new GST return filing mechanism will be focussed on allowing input tax credit based on the actual invoices uploaded by the supplier.

How to Prepare for the transition to the New GST Returns

If turnover is more than Rs 5 crore, a taxpayer will need to file the return (Normal Monthly) and make the tax payment on a monthly basis. If turnover is less than or equal to Rs 5 crore, a taxpayer will have the following three options to choose from:

·       Normal Quarterly

Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable to any type of sales.

  • Sahaj: Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable only to B2C suppliers.
  • Sugam: Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable to B2B or B2C suppliers

·       Switching between return types

A taxpayer can switch only once in a financial year from Quarterly (Normal) to Sahaj or Sugam. The switch has to be initiated at the beginning of any quarter.

A taxpayer can switch only once in a financial year from Sugam to Sahaj. The switch has to be initiated at the beginning of any quarter. A taxpayer can switch more than once in a financial year from Sahaj to Quarterly (Normal) or Sugam.

The change has to be initiated at the beginning of any quarter. A taxpayer can switch more than once in a financial year from Sugam to Quarterly (Normal). The change has to be initiated at the beginning of any quarter.

·       Claim provisional ITC

A taxpayer who opts to file returns on a monthly or a quarterly (GST RET-1) basis would qualify to claim provisional Input Tax Credit (ITC) on missing invoices. However, the credit of missing invoices will not be applicable to a taxpayer who opts to file Sahaj (GST RET-2) or Sugam (GST RET-3).

·       Necessary actions on invoices

A taxpayer will need to accept, reject, or keep the supplier invoices as pending as necessary. A taxpayer has to take appropriate actions on the invoices uploaded to claim ITC between 11th and 20th of the month.

·       Modify ERP systems

The existing Enterprise Resource Planning (ERP) Systems will need to be modified in order to comply with the new GST returns. A few modifications include (not limited to): Bifurcation of capital goods and input services, Details related to Bill of Entry has to be included, Bifurcation of eligible and ineligible purchases and a single debit/credit note has to be linked with multiple invoices of a vendor.

·       Know other key changes

A taxpayer will need an HSN code for submitting details at a document level versus an individual HSN summary. B2B supplies which are accountable for reverse charge mechanism (RCM) need not be shown in the GST ANX-1 by the supplier. Nevertheless, the aggregate figure has to be shown in GST RET-1. The recipient of supplies has to declare the inward supplies which are liable for RCM in GST ANX-1.

·       File a NIL return

If a taxpayer is liable for a monthly return filing but hasn’t made any purchases or has no output tax liability and ITC to avail in any quarter, he or she will have to file one Nil return for the entire quarter versus monthly returns. The taxpayer needs to report Nil transactions through an SMS in the first and second month of the quarter.

Cost Behaviour: Definition, Formula and Example

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Cost Behaviour – Definition

In any business setup, processes change overtime and the best way to overcome any unprecedented changes in the most appropriate way is to be well prepared in advance about the future outcomes. One such aspect which gets impacted with changes is cost behaviour.

Cost behaviour is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of cost behaviour are usually discussed:

  • Variable costs. The total amount of a variable cost increases in proportion to the increase in an activity. The total amount of a variable cost will also decrease in proportion to the decrease in an activity
  • Fixed costs. The total amount of a fixed cost will not change when an activity increases or decreases
  • Mixed or semi variable costs. These costs are partially fixed and partially variable

Understanding how costs behave is important for management’s planning and controlling of its organization’s costs, and for cost-volume-profit analyses (including the calculation of a company’s break-even point).

Formula

Variable Cost = Total variable cost/Units Produced

Fixed Cost = Total fixed cost/Units Produced

Examples of cost behaviour

  • Variable cost

An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery.

  • Fixed cost

An example of a fixed cost is the depreciation and insurance on the bakery facility and equipment. Regardless of the quantity of artisan breads produced in a month, the total amount of depreciation and insurance cost for the month will remain the same.

  • Mixed cost

An example of a mixed cost or semi variable cost is the bakery’s cost of natural gas. Some of the monthly gas bill is a flat fee charged by the utility and some of the gas bill is the cost of heating the building. These two components of the gas bill are fixed since they will not change when the bakery produces more or less loaves of its bread. However, a third component of the gas bill is the cost of operating the ovens. This component is a variable cost since it will increase when the ovens must operate for a longer time in order to produce additional loaves of bread.

MIS Report: Definition, Types and Example

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What is MIS?

MIS Reports are reports required by the management to assess the performance of the organization and allow for faster decision-making. A Management Information System, often simply referred to as MIS, can be understood by looking at each of the words that make up the name. There is the management, the information, and the system. At the heart of it, such a system is one that will provide important information to the management of the company.

The complexities of running businesses, have made us more reliant on advanced technologies which will remove any room for errors. On one hand, it accurately states what a management information system does for the management of the company. On the other hand, it cannot be overemphasized that management information systems are very important to the smooth running of a business. It is crucial that businesses opt for an automated management information system is set up for better decision-making.

What is the need for MIS?

The following are some of the justifications for having an MIS system

  • Decision makers need information to make effective decisions. Management Information Systems (MIS) make this possible.
  • MIS systems facilitate communication within and outside the organization – employees within the organization are able to easily access the required information for the day to day operations. Facilitates such as Short Message Service (SMS) & Email make it possible to communicate with customers and suppliers from within the MIS system that an organization is using.
  • Record keeping – management information systems record all business transactions of an organization and provide a reference point for the transactions.

Components of MIS

The major components of a typical management information system are;

  • People – people who use the information system
  • Data – the data that the information system records
  • Business Procedures – procedures put in place on how to record, store and analyze data
  • Hardware – these include servers, workstations, networking equipment, printers, etc.
  • Software – these are programs used to handle the data. These include programs such as spreadsheet programs, database software, etc.

Types of information system

 

types of management information system

Management information systems find their way into just about every aspect of a company. They work with the people in the company, the technology in the company, its products, and the inter-relationships between all of these on a day-to-day basis. If you implement an MIS in your company, then the levels of efficiency you could potentially achieve with it are mind boggling.

Types of MIS reports in Tally.ERP 9

·       Accounting reports

To obtain information on the financial position, operational performance and economic activities of the business.

·       Financial reports

To determine the financial condition of an organisation as required by shareholders, creditors and government units.

·       Inventory reports

To manage the Inventory effectively since the actual status of stock items is obtained.

·       Management control reports

To utilise budgets, cost centre reports, scenario reports etc. for controlling activities.

Inventory Planning: Basic Concept and Benefits

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Inventory is one of the most crucial aspects of any business model. A close tab on the movement of inventory can make or break your business and that’s why entrepreneurs always emphasise on effective inventory management. While a few business owners do understand the significance and cruciality of tracking inventory on a regular basis, some fail to realise its importance making their business fall through the unseen cracks. While production and manufacturing organizations hold raw material inventories, finished goods and spare parts inventories, trading companies might hold only finished goods inventories depending upon the business model.

When in case of raw material inventory management function is essentially dealing with two major functions. First function deals with inventory planning and the second being inventory tracking. As inventory planners, their main job consists in analysing demand and deciding when to order and how much to order new inventories.

What is inventory planning?

Inventory planning refers to the process that any organization adopts to determine the optimal quantity as well as timing, with the sole aim of aligning such plans with the organization’s capacity to produce and make sales. Inventory planning usually affects the company in numerous ways. For example, it directly determines the cash flow of any organization and its profits margins with reference to those that have an over reliance on fast turnovers of materials and goods. Evidently, inventory planning is an important aspect of any business’s success.

Good inventory planning supports several vital business objectives including:

  • Customer service and satisfaction
  • Supply chain efficiency
  • Control of costs
  • Accurate sales and demand forecasting

Benefits of inventory control and planning

  • Cash Flow

Inventory control and planning allows small businesses to manage their cash flow opportunities. SMEs aren’t always able to purchase large amounts of inventory, due to limited capital. By having better control of their inventory, they can know exactly how much inventory they will need and when they need it. This can free up other capital to re-invest in other areas of the business.

  • Business intelligence

An inventory control and planning solution allows small businesses to gain insights into the fast-selling products. This allows them to adjust their product line and to make quick and smart business decisions.

  • Maximize profits

By being able to make better business decisions the inevitable outcome for a small business will be an increase in profits. This is because the stock in their inventory will only be stock that’s actually selling. Other stock that doesn’t grab customer’s attention can be deemed obsolete and can be abandoned. This makes the general business practice more efficient.

  • Limits employee mishandling

Inventory planning and control limits the ability of employees to steal from the inventory. Often employees use items from a business’ inventory for personal use. Without inventory control, the business owner would be none-the-wiser. This practice ultimately reduces the profitability of the business. By limiting the ability of the employee to steal, the employer is reducing potential ‘hidden’ costs.

  • Reduce labour costs

Improved inventory planning and control techniques allow small businesses to reduce labour costs associated with inventory. These include the time spent counting stock and the transportation of stock. Employing an intelligent inventory planning and control solution can significantly reduce all these labour-intensive activities.

Conclusion

Earlier, the conventional way to track inventory was to use pen and paper. Over a period of time, businesses switched to spreadsheets, and most small businesses still manage their inventory in the same manner. However, as the business grows, it becomes next to impossible to continue using manual methods or spreadsheets, since a business owner will end up spending more time managing inventory rather than focus on the overall business. Also, inherently entering data by hand, is time consuming and error prone, and tends to be a repetitive task, which can easily be automated. Most importantly, an efficient inventory management in today’s day and age demands a centralized database that is accessible to multiple resources in your business, across multiple locations and updates on a real-time basis.

It needs to be noted here that inventory management software isn’t the only technology that can help a business manage its inventory and stock efficiently. It also includes mobile scanners, POS machines, barcode machines and a host of other equipment which can automate your inventory processes.