From our observations, preparedness of organisations seems to vary. Many large organisations have been proactively following the changes including dissecting the latest Model GST Law; we have seen that there are corporates in the MSMB sector that will adapt to changes that are underway.
To be GST compliant, organizations will have to broadly manage their changes under these heads:
1) Corporates will have to manage their tax engine to run with GST as well as with Excise and Sales Tax. While most of the goods will be under the new tax regime, there are few goods that aren’t included currently in the GST list, but are essential for business
2) Aligning business processes to suit business needs rather than meeting tax needs
3) Understanding and complying with a new process of submitting all sales invoices online (through a portal or via GSP) and managing returns online
4) SAP is committed to support the implementation of GST in India.
Our engagement with stakeholders be it our customers, the government or policy-maker is three-fold:
a) A deeply involved engagement with customers and partners of corporate India, to enable a smooth transition into the new tax regime at the earliest so they are able to conduct business as usual without any disruption.
b) A collaborative commitment with and across industry bodies to identify and assist corporate India (beyond SAP’s customer base as well) to help them better understand nuances of the new law and changes to be incorporated into their systems.
c) A consultative engagement with the GSTN to ensure the digital tax office is a success from the point of view of the government and is beneficial to businesses.
We have made significant investments to build awareness on GST across our customer base. We have also published a GST approach document which is publicly available. Last year, we held a GST forum in Delhi to address around 2000 customers and partners. With the GST law being passed, we will come into force, and will roll out the final solution and processes to enable smooth transition of our customer into the new GST regime.
Challenges for organisations
Data Management: Master Data management is key in order to avoid hampering the efficiency of the ongoing business operations. One of the biggest challenge in this migration is managing the large chunk of data and integrating the new system into the processes seamlessly.
1) Advantageous Supply chain set up based on business rather than managing taxes
2) Input Tax Credit dovetailed with IT compliance capability of vendors
Moving to a unified tax approach
GST is a single tax on the supply of goods and services. Those who are paying only service tax will see a change as there will be a state specific authority tax implied. For those who fall under the excise and vat regime, there won’t be any difference in their transactions. One broad change for all is the last mile digitization in the GST regime. GST is a move towards a system of proof that ushers in operational ease and greater transparency.
Financial burden and change in IT systems: It is an exaggeration to say that the “whole IT system” has to be changed. Software development has evolved and most ERP softwares are based on configuration and switches. There will be costs for managing the change though.
I will call it prudent investment on the part of companies to set aside a budget though. Replanning supply chain logistics and investing in data analytics to better business (rather than manage them) will be necessary.
The author is Vice President, Globalization Services, SAP India