How businesses in Oman can become VAT-ready

CA PRITAM MAHURE*

As discussed, in Part I of the Article on Sunday, it’s critical for businesses to gear up from an ERP/IT systems perspective for VAT.

Step Plan III - Gear up for transition of IT systems

Information Technology (IT) is a key area for business organisations, as irrespective of whether they are ready or not, on the very first day VAT is introduced, the IT system of an organisation has to be ready. Else, it will bring the entire business to a standstill.

Design and content of tax invoices become very critical during the transition of ERP systems to VAT. VAT impacts the vendor master, customer master and tax master. Similarly, tax ledgers and entries are required to undergo a change. These changes need to be visualised and appropriate blueprinting needs to be done to ensure that nothing is missed out.

It goes without saying that the importance of generating appropriate tax invoices, from the very first day of VAT, can’t be diluted. Rather, if the system (of, say, a retail chain business entity) is not geared to generate tax invoices appropriately, it can literally bring the entire business to a standstill. Thus, it is advisable that an early study is done to understand how the systems migration for VAT could be done. To gear up for the VAT regime, the organisation may identify alternative efficient business strategies to ensure a smooth transition. Even supply chain strategies (for e.g. procurement from GCC countries or import vis-a-vis local procurement) are expected to undergo a major change. An organisation will have to re-visit pricing strategies, as business competitors may well reduce prices to pass on the VAT input tax credit benefits.

While forming alternative business strategies, it goes without saying that the organisation should take into consideration its commercial feasibility.

Step V - Make Representation

The VAT regime could affect negatively a few industries/ sectors. VAT can have a tagline “VAT is a matter of solicitation. Please read all the law documents carefully!” Thus, efforts should be made by the organisation to identify the possible issues for which representation could be made before the appropriate forums though various trade chambers.

While the current economic situation is characterised by volatile global economic conditions, introduction of VAT remains a new challenge for businesses. Thus, early initiation of the aforesaid steps can surely help organisations gain the most from the VAT regime.

The author, who has written five books on VAT, is Partner with MMJS Tax Consultancy, Morison Muscat Associate Firm.