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How the GST Will Change IT Set-Ups in Organizations

The Goods and Services Tax or GST is expected to be a game-changer in the Indian tax system. As expected, there are bound to be many changes within the IT framework in businesses for this tax to be implemented. The main idea behind the GST is to do away multiple indirect taxes such as VAT, luxury tax, Sales Tax, excise duty etc that would have to be paid on goods. Now, only a single tax will be imposed on the goods or services used. So, the GST seeks to bring about uniformity in the taxation system, removing multiple tax barriers and revenue collection problems that were taking place between the states and the Center.

The GST will include the CGST wherein revenues are to be collected by the Center, SGST where state governments will collect revenues for the intra-state sales, and the IGST levied by the Center for inter-state supplies. In view of the fact that as many as 3.5 billion invoices will be processed each month by the GSTN or the Goods and Services Network, it is expected that technical problems would arise. In case the GSTN fails to function seamlessly because of technical glitches, it would turn out to be a cause of grave concern for the whole industry.

So, it is important to apply security patches to the sensitive data which is dynamically generated. Accounting systems have to be regularly updated to ensure a seamless transition to the GST. IT systems have to be upgraded accordingly and the IT systems and staff need proper training to guarantee a smooth shift to the GST regime.

How businesses can become GST-ready:

The GST will be driven vis-à-vis an online platform and this necessitates a robust infrastructure which can update data in real time. Since there will be huge volumes of sensitive data involved, it is important to have a stringent IT architecture that can comply with the security needs. The GST-ready set-up must also adhere to the compliance requirements prescribed by the GOI.

Accordingly, the ERP or Enterprise Resource Planning systems will also have to be remodeled, with rows added or deleted where entries are made. These changes will ensure that things are aligned to the new tax regime. IT personnel will therefore need time to update the accounting software or ERPs to make them align with GST specifications.

Besides the time needed by the IT sector, the trials and tests of the newly created software, like the new ERP systems have to be carried out to prevent future problems. The IT organizational set-up may also need to get new hardware for such development and testing purposes.

The ERP systems in organizations have to comply with the GST rules. This is necessary because the ERP will directly influence functions in every other department. So, at enterprise levels, ERP systems must be tested. The GST bills are going to affect the ways in which businesses run because all the tax related documents and processes have to now match the GST rules. When the companies register to get a GST identification number or the GSTIN, it will include the service tax registration, excise registration and also VAT registration. So, the tax processes will change completely to imbibe the new tax.

Transactions have to be started afresh. Partially open transactions and pending transactions must be closed or shifted to the new system. ERP firms such as the SAP has come out with GST related software to enable you to implement GST with SAP-certified cloud providers.

Since the GSP is digital, businesses must get rid of the manual vouchers and ledgers. There must be a shift to digitalizing records and conducting automated transactions. The SAP will extend ASP pr Application Service Provider services; it will offer the necessary interface for uploading invoices in the GSTN. It will work as an ASP within the GST environment. So, all GST-registered organizations will have to connect their business SAP to the GSTIN.

With the GST, business functions are also slated to undergo major changes. The tax computation processes have to be reconfigured and tweaked to comply with the new rules. All tax-related inward and outward business processes must be refined. Sequential numbering for the outgoing invoices must be adopted. Businesses have to adhere to the newly introduced printing and reporting structure. These lists of requirements will vary from one enterprise to another, depending upon the industry to which it belongs to, the legal entities which are involved in that business and the degree or complexity of business functions.

GST Triggers New Challenges in ERP

GST Triggers New Challenges in ERP

While the GST or Goods and Services Tax have been designed to unify the tax regime, consolidating many taxes into a single tax, there are bound to be new challenges. A single tax is meant to lower costs for businesses since it will lessen overall tax burdens. But IT teams have to now get down to making changes in their Enterprise Resource Planning or ERP systems to make it GST ready.

The changes which the IT professionals may have to introduce for revamping the ERP could be very simple like simply updating the ERP software version. But, in some cases, the task is likely to be complicated. To bring about any changes in ERP, the cooperation among different department, IT and tax departments is required. In case of the GST however, the requirements are found to be constantly shifting. In the recent past, many businesses have begun to redesign and upgrade their ERPs in preparation for this landmark change. But the entire process takes a lot of time and is highly expensive. Systems are far from being ready for the GST because it not very clear as to what the GST requirements are.

Understanding taxes and their effect on businesses is something that everyone knows. But implementation dates have been pushed back and every time it is missed, there is some new change to the law. On the whole GST is expected to trigger businesses into rethinking and redesigning their sales modules, procurement modules, and financial management modules. Perhaps the most important challenge which ERP is going to face with the GST is widening the tax base since now almost every good is becoming taxable.

When the VAT had been earlier introduced, there were three main rates namely, 12%, 1% and 4%. However, there rates are not the same across states today. Every time there is a change in the rate, it becomes a major ERP event. The IT staff has to get down to building new codes for the taxes and also update data about products. So, businesses that were hitherto involved only in provision of some specific supplies will ensure that all of their ERP processes are taking into account the taxes. You need to review the current process and how the business operates to be able to understand how this tax could change these. When there is a question of goods supply between two units belonging to the same business, this change may be from 2% CST to 18% GST. A change like this will automatically affect the way in which orders are taken or goods are received.

To comply with taxes, the ERP must generate data for use in creating correct entries in the GSTN for both internal and external transactions. It has to ensure that valid tax invoices are produced. Since data must be uploaded to the GSTN, the IT needs to have access to accurate tax data to include in the ERP instead of waiting to fill this information later on. The ERP must have this relevant data and it can fill in the missing information while the process is going on prior to compliance. When businesses try to produce this data at the time when compliance is scheduled, it may lead to a lot of discrepancies and mismatch in data.

So, the tax teams are expected to do this on their own or get advisors if the nature and complexity of business so demands. They need to determine which processes will remain unchanged, which may be optimized under this new tax regime and which can be done away with as they are irrelevant. The results will then be made available to the organization which will then decide how the IT department and tax department will collaborate in implementing and testing the plan.

Every aspect of the ERP software needs to be properly maintained. This means that when the GST slowly stabilizes, the IT and tax departments will feel more pressure to keep updating and testing the processes. So, any strategy for ERP migration will have to take into account greater time to assess the processes for a minimum of 18 months post-GST. Alternately, instead of designing and testing the ERP solutions, the tax data can be centralized and stored in a central location. This way the tax system can easily offer tax data to the ERP. The maintenance team will focus on the aspects at which ERP excels, like processing management and workflows whereas the tax system will look after computing and compliance. This will ensure that the sensitive ERP tasks are never disrupted because of government changes and compliance changes.

Although businesses may have to initially spend more to become compliant, in the long run it is cheaper than being non-compliant. The time has come for business owners to realize the value of this tax reform they must equip their businesses properly to be able to deal with tax compliances. When you can automate for GST reforms, you are likely to enjoy long-term benefits; the ERP system will offer businesses a helping hand to address GST-compliance challenges.

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