Businesses should leverage automation and ERP for GST compliance

Jun 20, 2017

The Goods and Services Tax (GST) rollout will happen by 1 July 2017. The new law will bring about radical and sweeping reforms in the way indirect taxation is practiced in India. The reform will particularly affect enterprises. The tiniest of changes in a tax chain leads to a veritable domino’s effect, which means that it will affect the whole structure of revenue generation and collection, from the top to the bottom. Businesses, therefore, need to be prepared for the transformation. They have to know a number of things for running a profitable business: which taxes they are supposed to pay, how the various tariffs and rate slabs work, quantum of taxes and the various procedures needed to be followed for calculation as well as compliance. However, this is easier said than done.

Understanding the GST?

The tax law will affect the manufacture, sale and consumption of goods and services throughout India. Various taxes that the central government and the states levy separately will be replaced by one tax. This would be collected at every stage of consumption through the input tax credit method. Under this provision, taxes that have been paid in other states for purchase of goods and services can be claimed by enterprises. Only GST-registered enterprises will be able to claim the tax credit as an integral part of the day-to-day business activity.

GST Rollout opportunity for Automation and Enterprise Software

Apart from the input tax credit provision, there are several other factors in the GST, which would make a transition to enterprise technology for Indian businesses unavoidable. These factors include destination system, twin rates, exclusion, etc. New multiple GST-compliant modules will have to be designed in the enterprise resource planning (ERP) software to cater to the new tax requirements. Similarly, the ERP will have to be synchronized with various supply chain models in order to support inventory supply management, which is an integral part of the ERP and a crucial part of business processes in warehousing and manufacturing companies.

“Computation of all these factors need an automated system. It’s not saying that manually it cannot be done. However, the process would get incredibly smoother and streamlined and the various aspects and benefits of GST will get accrued if technology is leveraged. Moreover, automation will remove chances of human error because the slightest of errors can result in an inflated tax bill. This will particularly hurt small and medium enterprises (SMEs) that are facing resource crunch and work on shoestring budgets,” said Shashank Dixit, CEO, Deskera.

Businesses that are already using ERP software would have to change the existing software or completely dump the older ones in order to ensure GST compliance. Nevertheless, this is a great opportunity for Indian enterprises to upgrade to enterprise software technology or completely overhaul their existing systems. No wonder, this is the best time for Indian enterprises to transition to enterprise technology such as ERP. Equipped with sophisticated technological tools, dealing with GST can be a cakewalk for Indian businesses; in fact, they may even end up saving taxes. And which businessman wouldn’t want that.

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