GST: Inching closer toward India's biggest tax reform

Since GST will bring change in existing regime, companies need to ensure proper compliance mechanism

India’s biggest indirect tax reform is just around the corner and set to roll out in less than 30 working days as per the government’s plans. 

Goods and Services Tax (GST) will bring together the country as one marketplace with one uniform tax, eliminating several layers of tax collection; with an aim to make its small-to-medium businesses considerably more transparent. 

The GST project is a complex and unique initiative in itself, which demands a uniform user interface for the taxpayers and governments as a shared platform amongst states and centre. 

Despite the fact that progressions are significantly tax driven, yet there are a lot of changes that are going on at the process level and the way organisations have been working till date. This change consequently needs full support from the IT framework, which should be in place for digital recording of transactions.  

So, on one hand, we have the changes that need to be made in our enterprise resource planning (ERPs) and the core accounting systems, and then again we need to file returns and reconcile the invoices and transactions every month in the GSTN Portal. 

One side where GSTN will function as a basic front end while on the opposite side meeting regulatory requirement, to be compliant in tax automation, is critical and a challenge for the greater part of the business as it requires a high level of synchronisation between GSTN and taxpayers existing ERP or accounting systems. 

To ease on the complexity front, third party applications have come into existence as GSP/ASP to provide much-needed support to IT users in addressing compliance difficulties. GSPs/ASPs focus on managing taxpayer’s raw data on purchase and sales; at long last converting into GST returns and filing with GSTN (via GSP). 

As of late, the GST Council has concluded its recommendations on the vast majority of the issues alongside the recently concluded meet that gave out rates of 5, 12, 18 and 28 percent for services, in line with those applying to goods. 

Having a well-planned roadmap for passage of State GST (SGST) laws in the respective assembly post-enactment of central GST bills and broad rates structure, the government appears to have a strong focus on GST implementation with effect from July 1, 2017. 

While GST promises to give a noteworthy fillip to Indian economy and the new tax regime will give a major lift to Indian corporations, its implementation is being seen as a challenge. 

In the process of seamless transition to GST ecosystem, a major revamping of the core ERP or transaction system requires process change along with development and configuration variations which involve the creation of a sandbox server for the software changes to be done and testing of various activities before it is finally routed to the production environment instances. 

While many of the large ERP suppliers have been releasing GST specific patches in regular intervals but quite a few critical application patches are yet to be released and this has been delayed due to non-clarity of the rules. 

Irrespective of that, business needs to continue without disruption beyond 1st July so the IT and the business team’s work is cut out and their focus should be on the following for the next 30 days:

• Complete and get the business requirement changes signed off by the business users

• Complete the GST patches given by the ERP vendors deployed in the sandbox server

• Complete the configurations and do the testing

• Complete the master data of vendors, customers, items (HSN or SAC codes created), Goods And Services Identification Number (GSTIN) codes and make these ready for the changes in the IT systems

• Have the production systems configured for GST and do the user level testing

• Create and execute the cutover and transition planning done – for Open purchase orders, supply orders etc.

• Get the ASP systems in place and plan for the data exchanges between the IT systems and the GSP/ASP for return filing

Since GST would bring about a radical change in existing regime, organisations need to ensure proper compliance mechanism, harmonise operations and seamless integration along with improved partner experience during the process of GST transformation.

GST puts a great deal of dependence, especially on compliance wherein item-wise details of all supplies would need to be uploaded to the GSTN portal. 

Further, there are requirements to capture and report additional nomenclature/tax fields on invoices/in accounting and reports. In this way, IT framework needs to be geared up so that such details are available for uploading on GSTN. 

In spite of the fact that the government is moving at a quick pace to implement GST at the earliest, a lot of work is to be done in less than  30 working days from every one of the three sides - government to bring in the remaining rules/rates, ERP vendors with prompt technological support and industries to align its processes in the course of GST readiness.

Rituparno Mukhopadhyay is Executive Director, Technology Consulting ( GST Transformation)- PwC

Roshan Gupta is Consultant -Technology Consulting ( GST Program Management) PwC also contributed to this article.