GSThas been rolled out finally. But still confusions around the country. This article will review the how GST andInformation technology can go hand in hand.
The past indirect tax system is complex,with at least seven major multi-stage value added taxes levied on manyfinancial transactions. This has led to an unreasonable burden on taxpayers,who have had to deal with administrative hassles, the detrimental effects ofdouble taxation, and confusion. The GST aims to tackle many of theissues with the past system by combining central and state indirect taxes.Under the new system, transactions will have both State GSTand Central GST levied upon them. Thenew system is expected to bring down the average costs of goods and servicesacross the country by eliminating double taxation. The main huddle to bring the taxpayers in to the net is the documentation requirements for Input Tax Creditsand the stage at which said credit accrues. The objective of any value addedtax system (such as the GST) is the avoidance of double taxation.
This is doneby providing credits along every step of the production chain, effectivelytaxing only the extent of the value that has been added. IT Sophisticationcan be the solution for this problem. ———————————————————————————————– TheIndirect Tax collection in the country has been totally restructured. The longpending demand of ‘One Nation, One Tax’ was finally realized now and thecountry will be consolidated on the economic growth. With GST, the two major goals that the governmentintends to achieve are:Increase the TaxcollectionEase of the taxpaying mechanismInthe the current taxation system, data’s are flows in one direction to theGovernment, which will be described as a Business to Government dataflow.
With the use of information technology, the time and cost has beenreduced significantly while accuracy of compliance greatly enhanced.Technology-assisted compliance is not an entirely new concept in India. Inthe early 1990’s taxation departments have began to use technology for taxadministration. But this was only as a backend mechanism. A major change occurredwhen online filing of returns was introduced. This was largely a result ofdifferent computer systems being integrated, thus enabling taxpayers todirectly interact with the tax department.Inthe previous systems, the government has notbeen able to detect tax evasion and loss of revenues.
Its daunting task to trackthe input claims against the liability of the seller. There are also lot ofcases of duplication of claims on input tax, fraudulent claims, input taxclaims that do not correspond with tax liability declared by the seller, orseller who has not furnished his tax liability.Inorder to overcome this, GST has introduced invoice matching ofbuyer and seller.In this process, thebiggest hurdle is the co-ordination between tax experts and the technology teamsin introducing and tuning the IT systems.
In most cases some of the ERPsoftware that were provided by the IT companies has to be redesigned as the GSTrules keep updating. Companies are mainly upgrading their enterpriseresource planning (ERP) — a category of business-management software -so as toaccommodate the complexities of calculating GST. Enterprise Resource Planning is software thathelps companies manage everything in the organization including supply chain,finance and human resources. SAP andOracle are the big players in the Indian ERP space. Many companies will have tomove from their current system, where every transaction is recorded separately. Companies will haveto move to a system where there is a correlation between every entry.
Invoice uploading andaccordingly the reconciliation of mismatches is an integral part of GST filing.Large enterprises deal with billions of invoices and thus, uploading invoicesmanually would be impossible. Moreover, the number of mismatches occurringcould be large. The large enterprises cannot afford to lose precious businesstime to sort out minimal and time-consuming GST compliance issues. They need anoptimized automated system that will deal with the prerequisites and expeditethe rest of the process.For the enterprises, ERPintegrated GST will take care of all their GST compliances, ensuring zerodisruption to the business. Synchronization of data from the ERP, converting itinto a GST supported format, uploading of invoice details, reconciliation ofminor mismatches and filing of the GST, everything will be automatized. Whenbillions of invoices, of the buyer and the seller, will be correspondinglymatched, numerous mismatches will occur.
Some could be a minor value, whileothers, a major value. The businesses will definitely require an applicationthat will reconcile the minor value mismatches automatically according to customization,an efficient bulk-reconciliation tool. Such a tool will help in saving crucialtime, as the businesses can then focus on the major value mismatches and reconcilethem to file the GST returns successfully. Goodsand Services Tax Network (GSTN) will act as a single window system where eachand every invoice’s details would be uploaded. Every taxpayer upon registrationwith GSTN common portal is given a unique 15-digit, alpha-numeric id known asGSTIN. It comprises of its PAN number and codes denoting the State it isregistered in, entity number in that particular state, alphabet ‘Z’ and a checkcode of a single number.
Thus a technology ecosystem needed to be establishedwhich could efficiently handle the information transfer and dissemination.The GSTN portal acts as a interaction between the GST taxpayers of thecountry and the Department. This portal facilitates end-to-end compliancesregarding GST Tax which includes registration of thetaxpayers in order to receive the GSTIN to file Invoice details andReturns subsequently. It would also facilitate payment of taxes bythe taxpayers and refunds, if any. It is to be noted that no part of the moneypaid as tax is retained by the GSTN. It merely facilitates the payment gatewaythrough its infrastructure to the Department. The GSTNplans to achieve this through a network of GSPs (GST Suvidha Provider) and ASPs(Application Service Provider). GSPs will basically act as channels that willtransfer the information between the GSTN server and the ASPs and shall providea secure network for it.
An ASP, on the other hand, will be the applicationthat will perform all the activities that are needed for monthly return filing.The applicationdeveloped by ASPs will help taxpayers to interact with the GSTN. This willnecessarily require a computer connected to the internet from where theinvoices are being uploaded. Since all the tasks pertaining to GST compliancewill be done online, an ERP will prove to be beneficial to generate invoices.With the application of the ASP installed, all the tasks of invoice uploadingand reconciliation of mismatches will be done easily. The success of businesseswill depend on the strength and ability of their technology systems to smoothlyinteract with the GSTN server.
Invoice matching is animportant task of GST. Intelligent systems and networks will identify variousmismatches and provide a bulk solutions that will help in saving a considerableamount of time and resources. Legacy systems and outdated technology will notbe able to cope with the deadlines directed by GST. Meeting the deadlines fordifferent returns, in time notifications to counter parties for mismatchreconciliation and successful filing of returns, all will require the inclusionof technology. Businesses will be frequently required to interact with the GSTNsystem and that will only be facilitated by an advanced application that isable to handle the entire process of transformation easily and make day-to-daytasks quick and seamless. Thus, comprehending the importance of technology inthe GST regime and wisely choosing the right application for your business isgoing to be the first step in achieving compliance.With such an extensiveprocess to be done, the primary priority of businesses now should be theinstallation of a robust ERP system that is fully GST compliant and isefficiently integrated with an ASP application.
The ability of their ERPtechnology to quickly adapt to the GST regime will be the defining moment for amajority of big players. Those who are able to adapt efficiently and seamlesslyto the upcoming indirect tax system will turn out to be the new market leaders. ConclusionWithout uncertainty, the initiation of GST SYSTEM will end upbeing the most critical and extensive taxation change that India has everobserved. It will affect all trades and companies, some more than others. AsGST SYSTEM is new for the Indian companies and it is going to take some timefor the proper execution under the regime so the companies should start preparing for the GST at earliest. Implementing the newIT systems may take 12 -14 months.
IT companies have daunting task because ITprocesses for every company will have to be customizedPrepare for GST SYSTEM Programming ModulesGST will have a greater impact oninformation administration and tax collection, associations need to investigatetheir present adaptations of fund arrangements. The redo practice is not goingto be a standard programming patch that can be connected to their frameworks atone go. Organizations should be clear about which modules of their product willbe influenced, and how they will connect the progressions with GST.
Update existing ERP frameworksKeeping in mind the end goal toassess new expense structures, other cost suggestions, organizations need toredesign their ERP frameworks. Analyze and Understand the GSTNetworkGST Network (GSTN) is the one-stopimpose entrance that the Government has set up to give charge documenting andinput credit administrations. Organizations need to prepare their back officesand acclimate them with the new controls by holding GSTN workshops andsessions.Patch up IT and AccountingFrameworksCompanies need to assess the effectof GST on IT and bookkeeping frameworks. Bonding together with programmingorganizations can make the move simpler and faster.