The Goods and Services Tax (GST) regimen likely to be effective from 1 st July 2017 promises to bring a single unified tax regime for India, which will consolidate many different taxes into a single tax regime.
Some of the taxes to be subsumed into GST will be
- Service Tax
- Entertainment Tax
- Entry Tax
A single tax regime will bring predictability and lower operating costs for businesses because the GST will reduce the overall tax burden by reducing the impacts of cascading taxes and allow the cross-utilization of tax credits across the supply chain. IT teams will be wondering what they will need to be doing from a planning and implementation stage to update and review ERP systems to be ready for the GST. Now these changes could be as simple as updating the version but in most cases it is not so simple. A change in an ERP requires a coordinated effort between tax, IT and other departments to ensure success. Generally speaking, the GST will require businesses to revisit the following areas in their ERP:
- Procurement or Materials Modules
- Sales or Supply Chain Modules
- Financial Management Modules
Each of these modules are impacted with the change to GST. One of the challenges with the GST, will be a widening of the taxable basis because now the provision of almost any type of good or services is taxable. GST transitions the taxable event from sales, distribution, manufacture, and provision to simply the event of a supply.
Any change in rates is still a major ERP event because you have to create new tax codes, conditions and update information about products and materials.
Businesses which used to only be involved in the provision of certain types of supplies will make sure all their ERP processes are considering tax. It is important to spend time reviewing your existing process or business flows to understand where tax consequences could. This change has impacts on how orders are taken, goods are received, materials and reporting for internal purposes and compliance reporting.
Specifically, for tax compliance, ERPs should produce data which can be used to create the appropriate entries into the GSTN for outward and inward transactions and make sure valid tax invoices can be created. The requirement to upload data to the GSTN pushes the requirement to create accurate tax specific data up the chain to the ERP rather than trying to fill in the data at a later point for compliance. ERPs need to capture the relevant data or can fill in missing data as the process runs through before the compliance begins. If a business attempts to create the data at the time of compliance this can lead to delays and mismatches with invoices which are already created.
All components of the ERP require maintenance and so as the GST stabilizes there will be an increased strain on Tax and IT teams to continuously update, test and re-visit scenarios as the business processes evolve after the GST. Any ERP migration strategy should include an increase amount of time for maintenance and re-evaluation until at least 18 months after the operation of the GST.
We at CSA Consultants are backed by a team of Solid Finance Professionals in our ownership and Management apart from our multi-dimensional IT acumen and are in most advantageous position to help your organization meet and maintain the GST challenges to convert them into an opportunity for your organization in any Tier I ERP.