GST revolutionizing Indian Business

2016 witnessed a historic transformation to the Indian Tax system with the proposition of the Goods and Service Tax (GST). Once implemented, it will be one of the biggest taxation reforms to take place in India. GST entails a major shift from origin-based taxation to a destination-based tax structure, affecting the various facets of business such as pricing, profitability, cash flow, sourcing, supply chain and Enterprise Resource Planning (ERP) systems. The sole intention of this reform is to facilitate a single, cooperative market, which will eventually help create a robust business infrastructure and economy.

Currently, India’s total tax collection (direct & indirect) amounts to INR 4.6 lakh crore, out of which 34 per cent constitutes to indirect taxes, with INR 2.1 lakh crore coming from service tax, and INR 2.8 lakh crore from excise. With the new taxation regime, the entire complex indirect tax structure(state-level VAT, excise, service tax) is expected to evolve.

For businesses, GST will be a game-changer. It will leverage organizations by realigningand assessing their business models, which will subsequently help to generate greater profits, drive efficiencies and ultimately gain a competitive advantage in the industry. The inevitable business makeover triggered by GST would entail identifying, addressing and leveraging various tax and business drivers including taxability and rates, exemptions and concessions, supply chain network,cash flow and refunds, governing policies and regulations and compliance framework.

Here are a few prominent changes traders and businesses can expect with the eventual implementation of GST:

Removal of tax barriers with a uniform GST across the country will ensure seamless credit and consequently expand trade and commerce. This will facilitate a common market in the country resulting in an increase in the scale of production and efficiency in supply chain.

GST will eliminate the cascading effect of taxes embedded in cost of manufacturing and producing goods and services. This will drastically reduce the cost of indigenous goods and simultaneously promote the Make in India initiative.

By integrating multiple taxes into single GST, there will be considerable reduction incost of tax compliance and transaction cost. Hence, GST will facilitate ease of doing business, where a stable and transparent tax regime will proactively encourage local and foreign investment in India and create significant job opportunities.

Digital processing of tax returns, refunds and tax payments will take place through IT platforms. Since it negates human intervention, it will reduce corruption and tax evasion.

Although, it will simplify the complex tax structure, GST will increase the burden of procedural and documentary compliance. Number of returns will increase significantly.  Here, IT platforms will pave the way to smoother, efficient processes, right from filing returns to providing effective IT solutions to businesses who need major structural alterations.

GST will create a unified, centralized system and will allow flexibility in transfer of goods across states by lowering the multiple taxes imposed by state and central government.

Role of IT

To support the GST architecture and provide ease to the taxpayers, an API based platform has been set-up by GST Network (GSTN), which will provide all user interfaces and convenience via mobile, desktop and other interfaces, thus enabling seamless interaction between taxpayers and the GST system. The third party applications will connect to GST system via secure GST System APIs. These third-party service providers are termed as GST Suvidha Provider or GSPs. The GSPs have been entrusted to ensure convenience, through innovative methods, to taxpayers and other stakeholders in interacting with the GST Systems, and guide them right from registration, uploading of invoice details to filing of returns. For this, GSTN recently finalized 34 organizations as GST Suvidha Providers, which will lend support and services to help tax payers and businesses in compliance.

The convenience of taxpayers is a key factor influencing the success of the new tax regime. GSPs will be providing businesses and traders with a myriad of interface choices including mobiles, desktops and laptops to connect with GST system.

After an intricate tax structure, the introduction of GST is expected to bring a paradigm shift in the way businesses perform and function. The impact of a simpler taxation system will be witnessed by all business segments encouraging positive outcomes by a single point tax, availing input credit and elimination of cascading tax system. However, traders and businesses need to accord high priority on the transition in order to realise the full-scale benefits of GST.

In the time when most businesses would require major structural change, IT service providers come into the picture, with their prolific solutions that simplify and streamline all processes, and eventually facilitate a robust eco-system for taxpayers. Undeniably, IT will be playing a crucial and dynamic role in the successful implementation of GST.