The government recognised the need for the IT infrastructure for the GST implementation proactively and has taken adequate steps for the same. The formation of the GST Network; the 5-year contract with Infosys to develop and run the IT infrastructure, and handholding of the 16 states that lagged in IT infrastructure to bring them at par with other states, are some of the actions taken in time by the core team. However, it seems that the private and public sector industry seems to be lacking in its preparation for the IT infrastructure requirement for the GST implementation.
The organizations are on the lookout for clarifications on certain critical issues that relate to GST. These include the regulation defining a taxable event, a taxable value on which tax is to be charged, definition of a taxable person, the destination where tax is to be levied, and the time identification for levying the tax. These questions are likely to be addressed only after the draft act gets published. The companies will find it difficult to automate their systems till then.
Many small companies do not have accounting systems based on ERP platforms like Oracle and SAP and still rely on accounting software platforms like Tally. For all the small and large organizations the following accounting and reporting areas are a must to be addressed if the compliance for the GST has to progress smoothly.
- Linking of Tax credits, payments and accounting, and will involve the supply chain and the customers besides them.
- Do a thorough change assessment in accounting entries. This will include the revised chart of accounts, compliance with Indian accounting standards etc.
- The third most important area that assumes significance is that of risks and controls. Timely mitigation of the risks and strengthening of accounting controls requires a proactive approach.
Gearing up the accounting system in time to meet the GST requirements will help the businesses to leverage the opportunities that the new tax system offers. The accounting system upgrade may require an investment of time and money by the companies while they have to focus on running their existing business operations, thus posing a big challenge to them. However, the fact that a timely compliance will help avoid disruption of business and undue panic at the later stage should spur the companies to go ahead and accept this challenge.