India has 50 million SMEs and 3,100 startups. The GST Network (GSTN) will throw up 5 billion invoices a month; plus, the 15 million retailers that have to undergo digitalization of sales. The scale is mind-boggling. Therefore, the Goods and Services Tax (GST) requires a new approach in which government tax systems as well as the companies are in continuous dialogue. There is no one-time filing. The proposed changes are although tax driven but they will affect the entire business cycle and is driven by GST APIs. GST is India’s biggest indirect tax reform and brings in radical tax reform affecting Indian businesses of all sizes.
What is a GST API
An integral part of tax compliance in the GST is filing data on the network. The GST Network is the nodal agency which holds all the data and is also a reference point for both the central as well as the state governments, which hold a joint stake in the private company. The GSTN is guided by the sole objective of development as well as maintenance of information technology (IT) infrastructure for a successful implementation of the new tax law with the provision for GST APIs.
In the GST, the basic concept introduced by the Indian government is that invoice matching. When a customer carries out a transaction, the government’s expectation is that there is a tax liability established on both parties: One has to upload transaction, including details of items sold, rates at which they were charged, etc. on to the portal. For a small trader, transactions could range from 10s to 100s to 1000s in every month. The process also includes the ability to upload every transaction.
Therefore, the GSTN has created an API framework that allows an enterprise to integrate their ERP accounting software through which invoicing is carried out. Using the API provided by the GSTN helps enterprises upload the APIs on a regular basis. So, rather than create an entry every time in your accounting system, go out of it, log into portal, or re-enter the data, it can be done in one step.
Role of GSPs and ASPs in the GST Network (GSTN)
In all this, the Application Service Provider or the ASP and the GSP will play a crucial role. This idea of invoice matching is something that makes the GSP and ASP elements compatible with the concept behind the GST. It would make things smoother than doing it all by one self and on the GSTN website.
“As an analogy, when a person uses the Ola App, you can see a map when you open the app. The map is not controlled or made by the company. It is an API that has been embedded into the App that uses the Google Map in order to provide the service of the Application. So, the application provider is different from the service provider which in this case would be Google. The model of ASP and GSP works in a similar fashion. The front end continues to be the ERP software and they use the GSP services,” said Shashank Dixit, CEO, Deskera.
They use one of those which have qualified and selected by the government. This ensures that the application provider can integrate with a GSP of their choice. The commercial transaction is happening between an ASP and a GSP rather than the end customer and a GSP. This is in line with the Digital India initiative and for an automated tax compliance regime. Such automation and synchronization is expected to bring greater ease in doing business. In all this, tax automation plays a critical role in order to meet the regulatory requirements as provided under the GST. Consequently, a high level of synchronization is required between a taxpayer’s system as well as the GSTN. Invoicing details, auto-population of purchase registers, reconciliation of various sales registers, and auto reversal features are key to the smooth functioning of data-processing requirements under the new tax law.
How the ASPs and the GSPs will work
An ASP is basically an Application Service Provider. Its function is to prepare monthly as well as annual GST returns on the basis of taxpayer data. It also enables the reconciliation of returns for timely as well as appropriate credits. This functionality requires domain as well as sector knowledge in order to interpret the nuances inherent in the GST rules and regulations. The ASPs file returns for taxpayers through the authorized GSPs. The primary objective of the ASPs is to ensure proper governance and compliance under the GST regime. All this not only needs strong domain knowledge but also technology enablement.
GSP is the short form of GST Suvidha Provider. A GSP will be an enabler so that a taxpayer is able to comply with the various provisions of the GST through the Web based platform. It is an online GST compliance platform. The GSPs are authorized and licensed by the GSTN to connect to the network using published APIs. They thus help taxpayers upload GST returns securely in the prescribed format. GSPs can also customize the products in order to address compliance needs of various segments of users.