Software firms cashing in on VAT

The introduction of the VAT (value added tax) regime across 21 states from April 1 may be a manna from heaven for software companies operating in the Indian market.

Half-a-decade after the Y2K problem offered opportunities to Indian software companies to make their mark in the foreign markets, a similar opportunity is unravelling itself in the Indian market, thanks to the introduction of VAT and the resultant need for software that makes it possible.

That the opportunity is big enough can be gauged from the fact that the world's two biggest software companies, Microsoft and Oracle, are hawking their solutions in the Indian market.

The opportunity is also big enough for lesser known companies like Guntur-based Essel Software and Services Limited to think of offering solutions around VAT.

One of the reasons for a plethora of solutions spoiling the customer for choice is the delay that has surrounded the implementation of VAT. Originally slated to be introduced in 2002, Indian companies like Tata Consultancy Services (TCS) have been ready with a solution ever since.

A wait for a market opportunity that has taken three good years to materialise and also time enough for companies to do enough groundwork on their marketing strategies.

TCS, for instance, has been roped in by the commercial taxes department of Andhra Pradesh to develop a software that could help monitor taxes in the new regime.

Incidentally, the software developed would also be hawked to other wanting state governments, and the Andhra Pradesh government would earn royalties on resultant sales.

TCS has, after the three-year wait, now modified the software solution and has taken charge of the maintenance of the new system that will finally see the light of the day on April 1, 2005.

The Value Added Tax Information System (VATIS) built by TCS has an in-built tax calculation system that helps the department to monitor tax collection by generating annual debit credit balance for each dealer.

It also enables online data exchange among the commercial tax department employees. A unique Taxpayer Identification Number (TIN) is generated for each dealer and there is automatic updation of penalty and interest due too.

Well, that's for the state department. But other players like Microsoft and Indian accounting software major Tally have come up with their own versions of VAT software solutions.

The umpteen number of VAT-related software offerings dotting the landscape have made it difficult for the traders to make a quick decision regarding which to choose for VAT compliance, for, while some companies have developed completely new products, others have just updated their earlier versions of software to make hay while the sun shines.

This apart, while there are some generic products that can be used by all kinds of trade, there are a few sector-specific products also. And to add to the confusion, almost all of them have embarked on a major marketing strategy to get a greater mind-share among the already confused traders.

Microsoft Corporation India Private Limited, for instance, has announced the rollout of its end-to-end VAT compliant solution "� AdVATage "� through multi-city seminars.

Tally has been marketing its new accounting and inventory software "� Tally 7.2 "� that works both on sales tax and VAT systems through a 'Tally Mela'. Oracle's Indian arm has developed a software patch that can be downloaded by its clients using Oracle suite to enable VAT compliance.

Essel Software and Services Limited, a software development and consultancy firm, has also come out with two VAT-enabled software solutions "� Retail Pharmasoft and Eezyplus. While the former is specific to the pharma industry, the latter is a generic product.

Says Sridhar Narra, managing director, Essel Software and Services Limited, "We have launched new accounting and inventory software packages that enable manufacturers to comply with VAT in an easier way. These packages will not only help the manufacturers to find out the input tax credit but will also help them plan their taxes well in advance."

"This apart, the software also helps you know the input and output tax both in the case of central sales tax and taxes under VAT. So, even if the manufacturers are exporting their products to other states that may not be VAT-compliant, it will not complicate matters further," he adds.

And how is he looking at marketing his product in spite of the existence of big players in the market?

"We are organising seminars and talking to our corporate clients to introduce this product across Andhra Pradesh," Narra points out. Even Tally is doing the same and is organising roadshows across cities and advertising in well-known national dailies.

But does Essel have a chance to survive in a market that is being hounded by innumerable players especially well-known names like Microsoft and Oracle? "This is like the Y2K scenario when there were innumerable companies coming out with their own software," Narra says.

And like it was then, it seems, that there will be enough space for all kinds of players in this field too.