The Goods and Services Tax or the GST will bring reforms, affecting society. Even a small change in the tax chain leads to domino effect. We can imagine the changes that would be brought about by GST. Startups would be affected as they lack the financial wherewithal. On the other hand, it could lead to better supply chain decisions, reduced transportation times, warehouse consolidation, etc., leading to better efficiency in SMEs and startups.
To thrive in this scenario, startups and SMEs require technology to figure out these things: taxes to be paid, application of tariffs, and calculation procedures. It would be best for enterprises and businesses to adopt automation, i.e., calculate taxes through a software to avoid human error—a small mistake can become an inflated tax bill, hurting businesses just starting out. However, equipped with tools, enterprises can file tax returns and may even save taxes.
Current accounting software would require several changes
To tackle it, enterprises should bring tax accounting in line with the GST compliances. Frequently, businesses use the enterprise resource planning (ERP) for accounting needs. This ERP software will need to incorporate many modifications in order to be GST-compliant because it will affect the entire spectrum of business activities such as sale, manufacture, and consumption of goods and services in India. Moreover, to benefit from its features such as the input tax credit system (a feature that ensures taxes paid in other states may be claimed in home state), multiple modules are required, including input credit, destination system, twin rates, etc. Businesses using older software would need updated versions or new vendors.
“Enterprises must prepare for GST, which can be overwhelming for businesses deploying old ERP systems. Companies need new codes for software to move from VAT and Excise to the new tax law. I am happy to announce that our ERP software is GST ready; we have helped enterprises in the past carry out the transition in nations such as Malaysia and Indonesia. This is a big opportunity for enterprises to shift to the ERP,” said Shashank Dixit, CEO, Deskera—a global leader in cloud-based business software.
No need for enterprises and businesses to wait for GST implementation
Although details of GST still need to be worked out, such as supply chain management (through warehouse engineering), credit allowances during the transition phase, proper classification of goods and services under the brand new taxation law, enterprises and businesses should not wait. This is the time to act.