When the Goods and Services Tax (GST) was introduced, it was touted, with much fanfare, as a measure that would streamline the complicated tax processes that Indian businesses were subjected to.
The result, however, has been mixed. The GST greatly simplified taxes by scrapping the various excise duties and VATs that were levied on businesses, which were partly responsible for widespread tax fraud, reduced tax collections and burdensome compliance procedures. Despite this, there are many compliance issues that businesses have to comply with under the GST regime, such as registration, invoicing and returns. Seeing the opportunity, tech companies are cashing in on offering ways to simplify these processes.
“Invoicing and filing taxes while being compliant with the GST regime still involves some minor juggling. There are three categories for taxes to be paid, invoices must be in a GST compliant format with several formats introduced for various situations, E-Way bills have to be generated in case of goods being moved, and there are new provisions for claiming refunds which needs to be adhered as per the new compliance requirements,” remarked Krupesh Bhat, Founder and CEO of SignDesk.
He says that the procedures under GST are clear and concise, and with the clarity in regulations comes the opportunity for innovators to step in and offer the needed assistance in managing GST compliance.
“Since the introduction of GST, we have seen a lot of private players offer automated compliance management solutions. Streamlined regulations under the GST open up avenues for innovation to private players. Specifically, the instance of innovators helping ease GST compliance serves as proof that regulators and the private sector can indeed collaborate intentionally or otherwise to improve the quality of compliance for everyone involved,” added Bhat.
Experts say that the government and tax authorities across the world are implementing technology-driven compliance. The main aim of introducing GST and e-invoicing in India is to reduce tax evasion, increase compliance and quickly implement policy changes. This would mean that the systems that businesses use must have GST compliance wrapped around their day-to-day tasks.
“Regardless of where, and between whom the transactions take place, the compliance should be automatic with minimal intervention from the user, based on certain preset configurations. The only thing that is constant when it comes to tax rules and regulations is change. To address this, the internal business systems must be compliant by design. So that the systems not only help with today’s compliance needs but should also be future-oriented,” said Prashant Ganti, Head of Products-Tax, Accounting and Payroll, Zoho Corporation.
Of late, the need for tax technology solutions that can help organisations solve compliance requirements is growing, more so during the new normal. The government has been pushing AI through initiatives such as Ayushman Bharat for a while. There has been a major focus on GST fraud detection. With every GST council meeting, laws are being better structured and reformed to become more accessible and easy to handle for the taxpayer. The introduction of GST, e-way bills, e-invoicing have highlighted the importance of seamless automation and integration for better compliance.
“We need to keep investing in technology upgrades and solutions as GST complexities are likely to continue until there is better standardization and harmonization of processes. Setting up in house tax automation solutions can be cumbersome and expensive for businesses. In October 2020, the implementation of e-invoicing created a sense of urgency among businesses. Businesses are actively looking to conform with the new legislative reform and providers like us are working to address the new compliance needs. To comply with the government’s reform, we introduced Avalara India GST e-invoicing, an end to end solution that helps companies manage their e-invoicing requirements. It helps by validating, storing, and managing invoices, and in providing the option to automate GST returns and e-way bills." explained Manjula Muthukrishnan, Managing Director, Avalara Technologies Private Limited, Indian operations of Avalara, Inc.
One key concern for businesses of all sizes has been to ensure that appropriate input tax credit (ITC) is being claimed. This is especially true for large businesses; where the loss due to delay in ITC could lead to a substantial impact on an enterprise's working capital requirements. ITC can only be claimed if suppliers of a business have done their compliance, uploaded invoices and filed their returns on a timely basis. Having non-compliant suppliers can lead to a loss of ITC and enterprises are wary of making payments to them.
Players such as ClearTax have launched products that help an enterprise identify and plug ITC leakages and maximise input credit availability at the same time link vendor payments with vendor compliance; leading to savings of lakhs of rupees for them. Archit Gupta, CEO and Founder, Cleartax, says a key area of concern has been to ensure that the information between various GST return forms matches, so that the risk of receiving a notice from the department for a particular GSTIN is reduced. There is a new regulation according to which a business may receive a notice where information between various GSTRs does not match.
“Our software can run super-fast analysis helping businesses do multi-way reconciliation between GSTR-3B, GSTR-2A, GSTR-2B and help them ensure that mismatches are captured, communicated (to suppliers) and corrected. We also have a ready solution for e-invoicing. This can be plugged into an enterprise's Enterprise Resource Planning (ERP) and can be customised based on the size and requirements of an enterprise's business. Besides this, the several changes in the GST law can be quite confusing for businesses. We have noticed that businesses struggle to keep up with the multitude of changes that keep happening. We have also been running several webinars, training, certifications that help tax professionals and businesses stay up to date with relevant changes in the law." Gupta told THE WEEK.