Online tax platforms get ready to ride on GST compliance to boost business

Greater frequency of filing, higher volume of transactions give more revenue earning potential

Goods and Services Tax (GST) is fast emerging as the next growth spot for online tax return filing platforms. start-ups like ClearTax, TaxSpanner and Taxsmile, which have taken a lead in e-filing of income tax returns in India, are now turning their focus on the indirect tax domain to tap the vast universe of small and medium enterprises (SMEs) across the country.

As GST, which is considered to be the first major tax reform legislation in independent India, has made e-filing mandatory, this feature has opened a floodgate of opportunities for these online platforms that are rolling out various technology driven solutions for seamless filing experience.

The shifting of focus by the tax filing websites is mostly driven by the fact that revenue-generating ability in the indirect tax space is far higher than the income tax segment, despite the number of filers being higher in the latter. Also, anything that works in the business to business (B2B) segment has higher earning potential than the business to consumer (B2C) space.

"Under GST, enterprises have to file three returns in a month along with an annual return. So, a total of 37 returns are now being filed per year as compared to one annual return in income tax space," says Navin K Rungta, co-founder of eLagaan, a company that helps start-ups in various kinds of compliance matters including tax filing.

"Though the customer base in GST is small, the number of transactions is much higher. So, GST is a bigger thing to focus on than direct tax," he added.Currently, an enterprise has to file GSTR-1 detailing outward supplies of taxable goods and services by the 10th of every month. By the 15th, it has to file GSTR-2 giving details of inward supplies of taxable goods and services. The enterprise also has to provide monthly return in GSTR-3 on the basis of finalisation of inward and outward supplies by 20th of every month. GSTR-9 has to be filed annually by December 31 of next financial year.

Apart from the frequency of returns, GST filers' universe is also substantial. According to the Economic Survey, around 11 million tax payers are registered for GST, of which 6.8 million are filing returns.

"Currently, we have 150,000 GST filings every month on our platform and this number is growing. In the enterprises space, around 600 entities are using the ClearTax platform," said Sivaram Kowta, head, business at ClearTax. The online platform categorises a business with Rs 2 billion in revenue as an enterprise.

No wonder ClearTax, which has a user base of more than two million in the income tax segment, draws around 70 per cent of its revenue from indirect tax users. The company offers various plans for users which come at different price tags. For instance, the Bengaluru-headquartered firm charges Rs 8,000 to Rs 20,000 for plans that enable chartered accountants to file returns on its platform. Similarly, it has plans starting from Rs 6,000 to Rs 14,000 for SMEs to use ClearTax software for filing GST returns. "After introduction of e-way bills, around 200 enterprises are using ClearTax," Kowta added.

According to industry experts, most tax filing platforms are going aggressive in the SME space in their quest for newer revenue streams. "Online platforms can bring a lot many SMEs onto the GST platform, as the tax regime is in early stage of implementation," said Rungta of eLagaan.

With GST revenue exceeding Rs 1 trillion in October this year, online platforms are also entering into the space of managed services. For example, ClearTax has a battery of chartered accountants who help enterprises in various GST-related issues.

However, with GST Network (GSTN) itself now planning to come up with a new accounting software for SMEs, these start-ups are up for a tough competition in the days to come. "There will definitely be more competition if GSTN comes up with its own accounting software," Rungta added.

According to Gyanendra Tripathi, tax partner at EY, since GSTN implementation is still in a nascent stage and the system is still evolving, these are still early days to say whether any platform has a clear lead in terms of number of filings.