Why Tax Automation is Critical for Business Success Under GST?
Before GST pushes Indian economy towards record growth, businesses must be prepared for the transitional hurdles. Challenges for taxpayers begin with understanding transitional provisions and extends to redesigning supply chain and distribution strategy, forming new business policies and framework, studying the impact on cash-flow and profitability, and addressing sector specific issues.
Besides such functional challenges, taxpayers for the first-time face technology challenges, since Government has used technology in an unprecedented manner to facilitate indirect taxation of the country. GST regime necessitates a high level of synchronization between tax payer’s application, i.e. an ERP, an accounting or an invoicing software, and the GST system, which without automation would be a difficult task. Item level detail in invoices, maintenance of trail of all amended entries, with reconciliation of sales and purchase register with vendors and buyers, on a minimum three monthly returns, other events such as auto reversals demand automation of tax compliance process within any tax entity. If anything is amiss, business’s compliance rating will take a hit and act as an indicator of whether to deal with that business or not for the buyers, lenders and insurers. Timely tax compliance will be critical for business success, therefore a robust solution will be required to manage GST compliance.
Taxpayers can use the solution provided by either the Government or private entities called GST Suvidha Provider(GSP) and Application Service Provider(ASP) to do GST compliance. Government has built an intuitive solution, however it does not have reconciliation functionality which will be needed for error free filling of GSTR2 and GSTR1A. It is also not possible to automate the filling process using the Government Portal. Such functionality along with other value added features may be available in offerings by GSPs and ASPs. Till now, 34 GSPs have been appointed by GSTN to offer GST APIs. GST APIs are needed to exchange information with GSTN’s servers. Functionalities available through GST APIs includes registration of tax payer and tax consultants, return filling (GSTR1 up to GSTR12), payments, ledger maintenance, etc. Then there are ASPs which is a generic term for entities building return filling applications. An ASP need not be accredited by GSTN, although it must contract with a GSP to access GST APIs. Interestingly, almost all GSPs are also ASPs.
Since failure to comply can directly impact business success, a taxpayer should consider creating an evaluation criteria to select the right technology vendor. Factors such as intuitiveness of reconciliation, validation and tax determination engine, data security, storage and privacy policies, business continuity and disaster recovery plan, among other things, should be considered.
