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How the Implementation of GST has impacted the ERP – Enterprise Resource Planning Systems

How the Implementation of GST has impacted the ERP – Enterprise Resource Planning Systems

It has been quite a challenge for businesses to switch over to the GST system initially. Those players that had an effective action plan for their ERPs to migrate into the GST regime were the winners of this makeover. Data migration is a daunting task that impacts the master data and the transaction data alike and needs the deployment of adept resources. For this reason, it is essential to evaluate and recognize the areas in the ERP system which could be affected by the GST implementation.

Some of the Key Functionalities that are affected Under the GST System

Here are some of the functionalities that are affected by the implementation of GST.

  • Master Data Details – The GST law puts forward rules regarding the tax charges, location of supply of goods and services, and the time of supply. The tax rates concerning the different goods and services also vary as per these rules. To deal with such scenarios, there arises a need to re-enter the master data which includes the client’s billing and shipping addresses, inventory and warehouse details, item masters, etc. In fact, this has streamlined the different tax procedures as well as the reporting process in the ERP system
  • Chart of Accounts – Previously under the VAT system, the companies that sold goods and offered services at the same time needed to have separate account codes for transactions related to Value Added Tax (VAT) as well as Services Tax. Further, these account codes are combined under the GST system. It was mandatory for the taxpayers to carry forward the tax credit balance from the previous accounting codes to GST account codes in order to maintain the tax credit paid under the earlier system. Later on, the reconciliation of the same was made possible.
  • Reporting and Workflows – Another key change that occurred with the implementation of the GST system was related to the reporting framework and workflows. The already existing reports formatted as per the indirect tax system under the VAT regime have become out-dated and those must be re-designed according to the GST law. The merging of the tax data with the ERP system is susceptible to failure as it acts as a single point for the entire reporting process. Hence there arises the need for the implementation of more robust workflows.
  • Tax Rule Engine – A majority of the ERP systems maintain a separate tax rule engine which serves as the master repository of all the information available inside the system. This consists of details regarding tax jurisdiction, tax compliance, tax rates, and reporting. A lot of re-engineering has gone into developing this tax engine as per the GST system, and it is still undergoing up-gradation on a regular basis.
  •  Requirement of a Smart Reconciliation Tool for the ERP systems – At present, as the amendments are not made in the returns, but would be reflected only in the next month returns, it is essential to have a robust reconciliation tool implanted in the concerned ERP system in order to track changes so as to evade duplication in data. Further, the GST system is all about matching data between numerous returns like GSTR-2A with GSTR-3B returns, GSTR-1 with GSTR-3B returns, etc. To handle this situation, it requires a powerful tool that can offer details about the mismatch in the reports, recommend actions, and circumvent duplicate entries in the books. In fact, matching entries in books and returns is another strenuous task that the businesses have to encounter if the tasks are not automated. A comparison between GSTR-2A return and the purchase register is quite important, as it helps the taxpayer to claim 100% of the ITC (Input Tax Credit) for which he is eligible.
  • Communication Tool for Vendors – The adoption of AI and Machine Learning technologies can be of great help to the larger enterprises in managing the vendor accounts easily. As the GST regime involves uploading the invoice details on to GSTN and matching GST returns between the recipients and suppliers of the supply transactions, it may include regular tracking of vendor ledger accounts using the GSTR-2A return, which is auto-generated on the GST portal. Developing an automated communication tool for vendors which is embedded within the ERP system is the need of the hour that each taxpayer might be looking forward to. This is because it guarantees the timely claiming of ITC and avoids the last minute and later disputes with the vendors regarding any mismatches.
ERP-for-GST-Software

Looking into the Future

Making your organization GST ready could be compared to the implementation or re-implementation/up-gradation of an ERP system from a lower version to a higher one. In fact, it is not that simple as affecting changes in invoice tax calculations; rather, it requires a complete review of the business processes as well as makeovers. Though it sounds complicated, it is not essentially so if the fundamental concepts are understood well.

There are major changes involved in the functioning of the businesses following the GST wave. In fact, with the introduction of GST into the system, there is the same tax structure all over India, unlike it was previously when the businesses had to consider many aspects pertaining to the different states.
 
It is a well-known fact that businesses flourish when there is a well-structured process in place, along with proper reporting and accounting systems. Further, IT plays an important role in running a business successfully. Following the implementation of GST, a revamping of the entire business processes has become mandatory. 

 
Moreover, as the frequent changes in the law are becoming a tough thing for the businesses to handle and interpret, it would be necessary to conduct an impact analysis on their business processes and embed the same in their ERP systems. A major challenge is to make sure that the software is configurable and flexible to deal with such requirements so that the enterprises can implement the changes without any interruptions.

In short, making necessary changes in an ERP environment while syncing with the GST system is an intimidating task which is to be dealt with carefully to run the business smoothly.

Seven major benefits of Goods and Services Tax

Seven major benefits of Goods and Services Tax

Goods and Services Tax (GST) aims to make India a common market with common tax rates and procedures and remove the economic barriers, thus paving the way for an integrated economy at the national level. By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve liquidity of the businesses.

Here are some of its major benefits:

1. GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers, thus paving the way for an integrated economy at the national level.

By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve liquidity of the businesses. GST is a destination-based tax. It follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management.

2. GST is largely technology driven. It will reduce the human interface to a great extent and this would lead to speedy decisions.

3. GST will give a major boost to the ‘Make in India’ initiative of the Government of India by making goods and services produced in India competitive in the National as well as International market. Also all imported goods will be charged integrated tax (IGST) which is equivalent to Central GST + State GST. This will bring equality with taxation on local products.

4. Under the GST regime, exports will be zero-rated in entirety unlike the present system where refund of some taxes may not take place due to fragmented nature of indirect taxes between the Centre and the States. This will boost Indian exports in the international market thus improving the balance of payments position. Exporters with clean track record will be rewarded by getting immediate refund of 90% of their claims arising on account of exports, within seven days.

5. GST is expected to bring buoyancy to the Government Revenue by widening the tax base and improving the taxpayer compliance. GST is likely improve India’s ranking in the Ease of Doing Business Index and is estimated to increase the GDP growth by 1.5 to 2%.

6. GST will bring more transparency to indirect tax laws. Since the whole supply chain will be taxed at every stage with credit of taxes paid at the previous stage being available for set off at the next stage of supply, the economics and tax value of supplies will be easily distinguishable. This will help the industry to take credit and the government to verify the correctness of taxes paid and the consumer to know the exact amount of taxes paid.

7. The taxpayers would not be required to maintain records and show compliance with a myriad of indirect tax laws of the Central Government and the State Governments like Central Excise, Service Tax, VAT, Central Sales Tax, Octroi, Entry Tax, Luxury Tax, Entertainment Tax, etc. They would only need to maintain records and show compliance in respect of Central Goods and Services Tax Act and State (or Union Territory) Goods and Services Tax Act for all intra-State supplies (which are almost identical laws) and with Integrated Goods and Services Tax for all inter-State supplies (which also has most of its basic features derived from the CGST and the SGST Act).Get Government approved standards GST Compliance Software In India with secure manner ready software with great user interface for all type of enterprises.

Benefits of GST (Goods and Services Tax) For Industry and Consumer

Benefits of GST (Goods and Services Tax) For Industry and Consumer

There is much hype about the GST (Goods and Services Tax). The governments have struggled a lot for this. Let us understand The benefit of GST. We should know whether it is beneficial for consumer or not? What benefit would industry get? How will it affect the small businessman?

Let us know about the classes which would be affected by the GST.

Following these classes which would be affected by the GST.

  1. Corporates –Because it pays the excise duty. The GST replaces excise duty as well
  2. Transporter– Because it pays Octroi/entry tax. The GST subsumes this tax.
  3. Distributor– It pays VAT. The GST replaces VAT.
  4. Retailer –It pays VAT and service tax. The GST Replace these taxes as well
  5. Consumer –Because indirect taxes affects the price of a product.

GST Benifits

GST Benefits For Business and Industry :

The Goods and Services Tax would benefit the industry most. That is why the industry was demanding it for a long time. A study tells that Because of the GST, the industry would grow rapidly. Which in turn would increase the GDP by 2%. Following are the benefits of GST to the industry and Businesses

Reduce Hassle and Expense:

The GST not only replaces various taxes but also It would be easier for the businessmen. Currently, a Businessman has to various taxes, file return and reply for the scrutiny. The businessman has to visit many tax offices. The GST would end all these hassles.

There would be an advanced IT platform for the GST. It will handle the all related issue of GST. This platform would be used in the whole country. This platform would facilitate Single registration, Single payment, and Single return. All the process would be online. It would make the whole system of GST payment and return filing easy and transparent.

One GST Rate And One Mechanism:

GST ensures that indirect tax rates and structures are common across the country. A product has one GST rate across the country. Businesses are not required to calculate differently for different states. The Same Rule and the Same rate Across the country.

No Overlapping of Taxes:

If a product is produced and sold to the consumer, there would be a single indirect tax. There is no overlapping of taxes. If the GST rate is 20% and product is sold to a consumer for Rs 200, the GST would be Rs 40.

The total GST paid by the manufacturer, distributor, and retailer would never exceed the Rs 40. Out of this Rs 40, every player would pay their part of GST.

The government ensures this by the system of the tax credit. In the above example, a retailer who is liable to pay 20% of GST would not actually pay the Rs 40. Rather, he can reduce some tax because manufacturer and distributor would have paid GST on the same product.

The GST paid for the same product can be claimed as the tax credit. The retailer would deduct this tax credit from its total tax liability. Thus, The retailer might pay only Rs 20 as manufacturer and distributor would have paid remaining Rs 20.

This system of seamless ‘tax-credits’ reduces hidden costs of doing business.

GST Improves competitiveness:

Reduction in transaction costs of doing business improves competitiveness for the trade and industry.

The GST helps those businesses which have been paying right taxes. Since GST will minimize the tax evasion, the good business would become more competitive.

Gain to manufacturers and exporters:

The GST would decrease the cost of locally manufactured goods because of the following reasons.

  • Most of the central and state taxes would go away
  • Central Sales Tax would not be charged
  • Complete and comprehensive set-off of the input goods and services

Because of the reduced cost of Indian industry, It would be more competitive in global market. It will give a boost to Indian Exports.

GST Benefits For Central and State Governments

 Simple and easy to administer:

GST replaces multiple indirect taxes at the Central and State levels. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State. All the management of GST would be handled by the GSTN. Also there are lots of GST e-filing software which can be helpful for file GST returns.

Better control on leakage:

Because of the Advanced IT platform, it would be difficult to evade GST. The system of GST also promotes the tax payment.

A businessman can claim tax credit only if it has the tax invoice for the purchase. If it doesn’t have tax invoice of a purchase, It has to bear whole tax. Thus, a retailer would ask tax invoice from the dealer and in return dealer would ask tax invoice from the manufacturer.

The in-built mechanism in the design of GST incentivizes tax compliance by the traders.

Higher revenue efficiency:

GST is expected to decrease the cost of tax collection. It will lead to higher revenue efficiency. The duplication of indirect tax collection would end after the GST. It would finally decrease the cost of revenue collection. Both, the centre and state government would benefit.

GST Benefit to the Consumer

GST Would Decrease Tax on Certain Product and Services:

Since there are only three rates of GST. Many products would come into lower tax band. Such as watching a film or buying luxury goods would be cheaper.

Since, there is no overlapping of taxes, the overall tax on a product would go down. It would also lead to lower prices.

Relief in overall tax burden:

Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

If GST manages to increase the revenue of government we can expect a lower rate on direct taxes.

How GST will help the consumers?

How GST will help the consumers?

Consumer

Goods and Service Tax is an indirect tax which the Government of India is planning to levy on all goods and services apart from those exempted by the GST law.

The GST taxation laws will put an end to multiple taxes like excise, CST, VAT, service tax etc., which are levied on different products, starting from the source of manufacturing, till reaching the end consumer. It will also stop distinguishing a goods from a service and will tax both equally.

For consumers, GST will help bring in the following benefits–

  1. Uniformity in Computing Taxes for Goods and Service-
    GST will lead to the elimination of multiple excise, CST, VAT, service tax calculations.
  2. Uniform Tax Regime-
    For both goods and services and less confusion in determining what constitutes a good or what is a service.
  3. Elimination of Double Taxation-
    Double taxation means the consumer pays tax on an item, on which already government has collected tax from the manufacturer under some other head.
  4. More Transparent Pricing-
    Currently hidden taxes actually push up the taxes on a majority of goods to anywhere in the 27% to 32% range. But with GST coming in, the % tax number is proposed to be much lesser – however the number has not been finalized yet.
Benefits of GST to Real Estate Sector

Benefits of GST to Real Estate Sector

GST could bring in transparency in the real estate sector, possibly reduce cost of home ownership, especially if GST rate is lower than current rates put together. It could also lead to lower compliance costs and input costs for builders. Getamber Anand, national president of industry body CREDAI says it could reduce harassment that is there due to multiple taxes today. But builders and consultants are concerned about a clause in the GST bill which says input tax credit shall not be available in respect of the “goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery.”

Real State Sector“This would mean multiple taxation on buyers as builder will pass on non-creditable tax to home buyers even as they pay GST on the consideration charged to them and then stamp duty for registration,” says Abhishek Jain, tax partner at EY India. According to back of the envelope calculations, home-buyers will end up paying around 20-22% in total tax compared to 14-16% if builder gets tax credit.

Here is what the industry has to say about the impact of GST on real estate:

Neeraj Bansal, Partner and Head, Real Estate and Construction sector, KPMG in India

The constitutional amendment bill paving way for introduction of Goods and Services Tax bill and rules in the parliament is a welcome step. The next step involve ratification of this amendment by majority states, post which GST bill will have to be cleared by both Central and State Governments. At an overall level the impact on the sector will hinge upon the effective GST tax rate post abatement allowed for the Land Value in property transactions.

Further, Real Estate industry has to deal with multiple tax authorities such as Service Tax and VAT and passage of GST Bill may lead to reduction in compliance bring in efficiency whereby the credit input for excise duty etc levied on materials like cement, steel etc. Also the impact of offset of GST credit on construction of building with GST paid on Rents or leases will have to be considered.

From consumer perspective, it is premature to say if GST will bring down property prices. We will have to wait for finer details especially with respect to applicable rate for real estate sector.
Lastly, the Government must consider providing a breather time to the sector to understand and prepare for GST. Global experiences suggest that there is a gap of about 1 year between introduction and implementation of GST, with recent example being Malaysia. Industry however needs to start preparing themselves for GST and organizations must undertake a detailed review of the IT systems, contracts with vendor, suppliers etc.

Abhishek Jain, Tax Partner, EY India

India is on the brink of GST and this is considered as a sign of freedom from multiple taxes currently levied on the real estate sector and the end of myriad litigation owing to ambiguity in the legal provisions. However, eligibility of credits and concessions still remain a cause of worry for the real estate sector. The Model GST Law restricts credit on goods and services acquired for construction of immovable property (other than plant and machinery). This clause is interpretative which may lead to litigation and result in denial of credits in certain situations

Anshuman Magazine, Chairman, CBRE – India and South East Asia

This bill has been long awaited by the industry. This is a major tax reform for our economy, which will transform India into a single market. Once implemented, it is likely to have a positive impact on the real estate sector, which has linkages with over 250 ancillary industries. Unified taxation will also infuse the much needed transparency into our taxation system. While the complete effects of this bill will take some time to be realized in some sectors, overall, it is expected to have a long lasting and progressive impact on the economy, enhancing the prevalent business sentiment in the country.

Anshul Jain, Managing Director, India, Cushman & Wakefield

The clearance of the Goods and services tax (GST) Bill in the Rajya Sabha is a laudable step that would remove cascading taxes and make India’s manufacturing sector more competitive. Being a destination-based, indirect tax aimed at bringing in more efficiency and rational taxes, GST could actually help to lower manufacturing / processing, logistics and distribution costs, which could further revitalize the manufacturing and associated sectors (warehousing and logistics) by making them more price competitive and boost the overall Indian economy. This would definitely boost the PM’s ‘Make in India’ initiative and create more employment. The warehousing and logistics sector, which is essential to raise the competitiveness of India’s manufacturing sector, would be especially benefited by the GST as it would bring about increased supply chain efficiencies. GST will ensure the abolition of various central, state and local taxes, enabling easier transfer of goods between states, which would give way to larger, centralized and advanced warehouses that would serve as hubs to service various states.

Top 10 Advantage of Goods And Services Tax ( GST )

Top 10 Advantage of Goods And Services Tax ( GST )

GST Advantages

  1. One Nation One Tax:-

The one of the major advantage about GST in India that it is going to replace many indirect taxes like

  • Central Excise Duty
  • Additional Excise Duties
  • The Excise Duty levied under the Medicinal and Toiletries Preparation Act
  • Service Tax
  • Additional Customs Duty, commonly known as Countervailing Duty (CVD)
  • Special Additional Duty of Customs – 4% (SAD)
  • Surcharges, and Cesses

The following State taxes and levies would be, to begin with, subsumed under GST:

  • VAT / Sales tax
  • Entertainment tax (unless it is levied by the local bodies).
  • Luxury tax
  • Taxes on lottery, betting and gambling.
  • State Cess and Surcharges in so far as they relate to supply of goods and services.
  • Entry tax not in lieu of Octroi.
  1. Reduce double tax effect:-

Because of Input Tax Credit seller in one state will be able to take input tax credit benefit of the supplies received from other states.
However in VAT system credit was allowed for intra-state transactions only.

  1.  Increase Tax Payers Volume:-

GST will work on value addition concept and it is expected that new registration will come in existence to take to benefit of Input Tax in Transaction chain.

  1. Investment Booster:

It will help to bring new investments in market.

  1. Bring Transparency in system

Same billing in country will help to bring more transparency in system.

  1.  Boost for Make in India

One tax in place of many manufacturing duties will promote dealers/suppliers to manufacture goods in India.

  1.  Will Create Jobs

More Investment, More Industries will create jobs opportunities.

  1.      Help in GDP
  2.     E-Commerce Boost

It will shift the burden of payment and compliance of taxes from online seller to E-     commerce portal will help to bring more traders to sell their products online.

  1.        Fair Billing
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