GST rollout and implementation will push SMEs and startups towards ERP

GST rollout and implementation will push SMEs and startups towards ERP

Paritosh Mahana
Table of Contents
Table of Contents

GST rollout is scheduled for this year, bringing in radical tax reforms. Segments most affected will be startups and small and medium enterprises (SMEs)—the sector that is the backbone of Indian economy, employing 40% of Indian workforce as well as contributing 45% to manufacturing output. There are 26 million SMEs (Source: Ministry of Micro, Small and Medium Enterprises) and startups (3,100; NASSCOM report) in India. This number could increase to 11,500 by 2020.

It is in this context that the adoption of modern technology has to be viewed. It has been tardy, including the enterprise resource planning (ERP) software which provides business solutions.

According to a report by Confianzys “The numbers reveal that at least among the SMEs in this sector, there is still very little awareness of the benefits that an ERP solution could confer. Perhaps the scale of operation and the nature of management too do not make ERP implementation imperative.”

For instance, Rajasthan’s economy depends heavily on SMEs. According to a study by Rajasthan Chamber of Commerce and Industry, the number of SMEs is 3.35 lakh. However, the number of MSMEs utilizing software, such as ERP is pretty low, around 42%, say industry reports.

“Software penetration is low, including textile and marble industries of Rajasthan. We want to aid SMEs in making business process simpler, more user-friendly, and automated. Operational efficiency will increase and business processes will get streamlined. Keeping in view the GST rollout, it is all the more necessary for enterprises to adopt technology,” said Somesh Misra, VP, Products, Deskera as he spoke about the functionalities of Deskera ERP Cloud.

GST implementation to make technology transition inevitable

A technology transition will be unavoidable since there are GST aspects like input credit, destination system, twin rates, exclusion, etc. which need automation and technology to be fully functional. Manually factoring them will be difficult. Enterprises that have existing ERP setups will have to modify them; those that don’t would have to get software that is GST-compliant, in view of the GST rollout.

In such a scenario, enterprises, particularly first timers, need to ensure their software has two important features: (1) cloud-hosted and (2) GST-compliant. A GST-compliant Cloud ERP ensures several advantages: application of tariffs, calculation of taxes, and compliance. Automation would remove human error—since a small mistake can result in inflated tax bills, hurting startups and SMEs the most. However, equipped with sophisticated cloud-based business tools, enterprises can handle GST requirements and may even save up on taxes.

Reasons behind low technology penetration among India’s SMEs?

Companies may be hesitant going for Cloud ERP since they fear their substantial investments may not get them good returns on investments (RoIs). They are not confident about the cloud ERP software. Companies like those can go in for Software as a Service (SaaS) models which are more suitable because of two reasons: (1) lower up-front cost of SaaS ERP and CRM; and (2) pay‐as‐you‐go basis. Businesses can pay as they use the service and can get rid of lock‐in period agreements.

Enterprises and SMEs use the ERP software heavily in the West. In order to keep abreast with international competition, Indian SMEs and startups, including tech enterprises, need to keep themselves updated, particularly as far as technology is concerned. The GST will nudge them to a high-growth path, as the GST rollout dates grow closer.

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