JOIN USToday, economic pundits as well as businesses are waiting with bated breath for the government’s word on the Goods and Services Tax (GST). Officially known as the Constitution One Hundred and Twenty-Second Amendment Bill, 2014, the legislation is being projected as the “single biggest indirect tax reform in India since independence”.
Precisely put, GST is a comprehensive value added tax destined to replace all direct and indirect taxes levied on production, sale or consumption of products and services (with few exemptions in certain sectors) in the country.
The need for GST arose out of the complexity of the currently existing tax systems. It is an attempt to provide a seamless transfer of goods and services across the nation, replacing the cascading effects of multiple indirect taxes imposed by the Centre and the states and also streamlining compliance issues, mostly for inter-state transactions.
The GST bill was introduced in the Lok Sabha on December 19, 2014, and Rajya Sabha passed the bill on August 3, 2016. With the bill already passed in both the Houses of Parliament, the stage is set for its implementation, barring last minute glitches.
While a lot has been said about GST’s positive impact, its biggest beneficiary
will be the Information Technology (IT) sector. The IT industry landscape is likely to experience several new developments after the much awaited rollout of the GST structure.
There is no doubt that computerisation and digitisation will play a major role in GST implementation. From the point of view of the IT industry (including allied sectors such as electronics and telecom marketplaces), GST can provide a major fillip and competitive advantage once it becomes operational.
It is predicted that GST will generate huge business revenues for both small and big IT firms across the country, as businesses feel the need to reconfigure IT systems internally, at every level—from procurement to audit and from supply chain flow to vendor management.
A lot of Small and medium-sized enterprises and Micro, Small & Medium Enterprises (SMEs and MSMEs), retailers, distributors and manufacturers will have to turn to IT solutions for doing business. Integrated business software solutions companies of repute can provide customised business solutions for small and medium sized businesses and take care of their accounting, inventory, and business-related needs in a cost-effective manner.
It is also expected that GST will transform the present system of production-based taxation into a consumption-oriented structure. While organisations face newer challenges such as alignment of accounting and taxation systems with the new processes, they will need to embrace IT into the entire workflow.
Industry experts foresee that complex billing and invoicing requirements will arise due to the valuation provisions of GST bill which may complicate filing of tax returns and make credit flow mechanism little difficult in general.
Under the GST regime, from having one single point of taxation and registration at present, and owing to three new tax points post-GST, namely the Central GST, Inter-State GST, and State GST, the total number of points of tax collection across the country will rise up to 111.
When it comes to GST systems, if your business earning is not input taxed, it will likely become taxable. There are a lot more issues like this one which may crop up
during or after the GST transition. Gearing up for training, and developing compliant IT systems will become imperative for businesses.
Customisation of IT will empower organisations to handle challenges such as increase in compliance costs. Soon enough, enterprise resource planning (ERP), a sub-category of business management software systems in accordance, will undergo a sea change in functioning, even as the SMAC (Social, Mobility, Analytics and Cloud) concept takes a backseat.
Betting big
The SME market which is betting big presently on GST for providing the much-needed push to trade from the micro perspective and bringing it on a level-playing field with big industries (by doing away with tax differentiation), needs to have a reasonable IT infrastructure in place in terms of business process reinforcement, tax configuration, inventory data storage, document numbering, data amendments, impact analysis on interfaces, reversal of open transactions, and so on. All these could turn into business opportunities for the IT sector.
Upgrading tax modules for the new tax scheme transition to work out successfully can be an exhaustive task amidst the continuously evolving framework of GST. Being the leading providers of integrated business software solutions providing customised business solutions for all types of businesses in a cost-effective manner, several companies are now organising holistic campaigns at regular intervals, especially for small businesses and entrepreneurs, to point out the significance and impact of GST on the revolutionary transformation of economy and trade.
As mentioned earlier, GST transition will be smoother if companies understand the importance of integrating technology and software solutions into their businesses, and the sooner the better. “The GST will change the way Indians live and spend in future”, remarked the Finance Minister Arun Jaitley recently.
Let’s admit it—overdependence on paperwork and narrowness of the tax base has hindered the ease of doing business over the years. But post-demonetisation, with the government’s attempt of making Digital India a reality, implementation of GST indeed seems to have a bright future. And with it the IT sector too.
As enterprises work proactively to understand the changing business dynamics with GST and grasp the growth potential under the new tax regime, India will move towards an IT- enabled, better, bigger, and cleaner economy. Deeper penetration of IT and digital services will mean business boom for the IT industry.
(The writer is MD, Marg Compusoft, New Delhi)