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The seventh anniversary of the Goods and Services Tax (GST) is opportune time to reflect on how this path-breaking reform not only changed the indirect tax landscape in India but also ushered a digital tax revolution. GST, as we all know, unified the country’s complex indirect tax system from multiple levies to one single levy.
This gave the Government an opportunity to bring technology to the forefront of administering GST – from formulating the Goods and Services Tax Network (GSTN), a unique body, which designed and developed the whole technology landscape for compliances, to introducing concepts such as GST Suvidha Provider (GSPs) and Application Service Providers (ASPs). For the first time, there are comprehensive technology solutions which can be implemented to assist in GST compliances.
The Government is increasingly moving towards transaction-level, real-time compliance. The same is clearly evident from the introduction of e-waybills and e-invoices, which have provided the Government complete visibility into all major transactions undertaken by a taxpayer.
With the convergence of data from different tax systems, including the Customs portal (ICEGATE), as well as exchange of information with the Central Board of Direct Taxes (CBDT), the Government has a 360-degree profile of taxpayers.
Using data analytics, artificial intelligence (AI) and machine learning, GSTN has enabled tax authorities to identify anomalies on a more real-time basis.
The above has enabled better compliance enforcement across the ecosystem and detection of tax frauds, thereby contributing to better tax collections for the exchequer.
In recent times, GST compliance requirements are becoming more stringent and complex. Companies are facing numerous data-driven notices and multiple requirements arising out of ongoing audits/assessments/investigations. There is an increased focused on vendor management as companies’ GST credits are linked to their vendors’ compliances.
Even though companies have initially opted for basic GST tech applications to comply with GST requirements, the above developments have forced them to relook at the current technology landscape. The focus is how technology can be leveraged to handle large data sets, have better control over data, and proactively meet compliance as well as audit-related requirements.
For this purpose, in our experience, some of the critical areas in which companies are evaluating technology enablement include:
* Vendor management: This is an area of top priority across businesses. Companies are struggling with the direct impact of denial of credit due to their vendors’ non-compliance. This has led to building controls within the source systems/ERPs/vendor portals to build checks from the time a vendor is on-boarded till the GST amount is paid to the vendor. Such controls/checks will mitigate the risk of vendor non-compliance on the company’s P&L.
* Tax in ERP: Developing bespoke GST-related reports (such as vendors not paid within 180 days, job-work related reports). Building controls/validations within ERP both at master and transaction level.
* Reconciliations: Need for multiple types of reconciliations to ensure control over data and ensure correct filings. These include reconciliation between purchase data and GSTR 2B, e-invoice data and sales data, e-waybill and sales, inward e-waybill and purchase data, and GL reconciliations. Managing such transaction-level reconciliations across multiple sources of data using technology has become necessary.
* Litigation management: Proactive preparation of audits by developing customised reports generally sought during audits. Tracking of notices/audits/litigations.
* Analytics: Building analytics/dashboard to identify possible areas of concern/anomalies and opportunities, and assistance in taking critical decisions.
The above would improve the quality of data generated from ERPs and reduce manual efforts and the risk of errors, enabling people to do more with less and helping in taking better business decisions.
In the last one year, the focus has also shifted to how AI can help adopt the above agenda even faster. Companies are trying to understand possible AI use cases that are specific to them. From the initial assessment, it is quite clear that AI is here to stay and one should consider it as an additional smart resource which can help undertake at least the initial groundwork and support senior members of the tax function.
Companies realise that they need to think with a ‘technology first’ mindset while solving any tax-related problem. It is important to drive this message among in-house tax teams in order to improve efficiency and bring in a greater focus on value add. There could be initial teething issues while implementing any new technology but the same should not deter companies from taking steps in this direction. The idea should be to build a technology platform which integrates with companies’ source systems and helps them across tax reporting, compliances, litigations and decision making.
From the standpoint of technology adoption for management of GST, the Government is far ahead of the industry. The scale at which the whole GST system, including a real-time transaction-level system, has been implemented is pathbreaking and an example for various jurisdictions across the globe.
Having said this, the journey has just begun and the Government should continue to strive to do more in terms of enablement for taxpayers as well as the authorities. Some of the key areas could include:
* optimal use of data collated by GSTN for better business decision making by other Government departments as well as industry (without risking privacy)
* GSTATs are soon going to be functional; the Government should work on using technology to improve the taxpayer’s as well as the judiciary’s experience
* identifying areas where integration or data exchange is still not enabled, such as notices published on GSTN, filing of whole refund application
* expanding the ambit of e-invoicing to B2C in at least certain sectors like e-commerce
* using the GST experience to bring similar enablement under Customs (on ICEGATE) or in income tax whereby taxpayers can access relevant information seamlessly using technology.
In conclusion, as India celebrates seven years of GST, it is clear that technology has been a pivotal force in the tax reform’s success. While there have been challenges, the proactive measures taken to address them have paved the way for a more robust and transparent tax system. As India continues to refine its GST model, the focus on technological innovation undoubtedly remains central for both Government and industry to ensure smooth administration of and compliance with GST requirements.
About the Authors: Siddharth Mehta and Prashanth Agarwal, Partner – PwC India
Disclaimer: The views expressed are solely of the authors and ETCFO.com does not necessarily subscribe to it. ETCFO.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
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