View from India: GST unlocks $1bn opportunity for IT industry
India's Goods and Services Tax (GST) will complete one year on July 1 2018. It has opened out a $1-billion opportunity for the Indian IT industry, as every process is digitised, right from initial registration through to the filing of returns.
Businesses are looking for GST-ready solutions to make their operations compliant with the system. IT firms have explored the market by developing customised software that is GST complaint.
This fiscal year carries the promise of new business breakthroughs. Goods and Services Tax Network (GSTN), which is the IT backbone of GST, has launched a tech-based anti-evasion measure called e-Way Bill, or electronic bill. While this is a means of bringing small businesses into the fold, it also ensures that they become tech savvy.
The e-Way Bill, which has come into effect from April 1 2018, facilitates inter-state and intra-state transportation of goods. The bill is generated when goods worth more than Rs 50,000 have to be transported.
It is being rolled out across states and union territories. Until May 13 2018, over four crore and fifteen lakh e-Way Bills have been successfully generated, including more than one crore e-Way Bills for intra-state movement of goods. A phased launch, the latest move is that the e-Way Bill system has been implemented in Assam from May 16 and Rajasthan from May 20.
The e-Way Bill, which is a compliance mechanism, has a digital interface. This means that the bill can be generated or even cancelled through mobile-based digital platforms like SMS, Android App and by site-to-site integration using an Application Programme Interface (API). Users can log on to the e-Way Bill portal, upload the data and generate the bill. Once the details are keyed in, the e-Way Bill will display the e-Way Bill Number (EBN) and this is available to the supplier, recipient and the transporter.
The bill helps ensure a nationwide single e-Way Bill system. Incidentally, the total revenue collected under GST between August 2017 and March 2018 is Rs 7.19 lakh crore, according to a press release issued from the Ministry of Finance, Government of India (GoI). This revenue is estimated to be much more next year.
“The e-Way Bill on small and medium businesses (SMBs) is expected to be a deterrent to tax evasion and also help create a trail of movement of goods across India. It will enable seamless movement of goods between different states and is expected to save tons of paperwork and sidestep various inter-state clearances for buyers, sellers and transporters,” said Nikhil Rungta, managing director, Intuit QuickBooks India. QuickBooks is used by thousands of small businesses in India to control their finances and grow their businesses.
The transition to GST has been difficult for many tax payers, especially for small businesses, which includes micro, small and medium enterprises (MSMEs). This sector cannot be ignored because (as per the data from the Ministry of micro, small and medium enterprises) India is home to 50 million MSMEs, which means it has one of the world’s highest concentrations of MSMEs. To an extent, the tech challenges have been addressed by the e-Way Bill.
“With the onset of GST, businesses have seen seamless movement of goods and services across states and a significant decrease of costs in certain areas,” explained Swapnil Jain, managing director, Intellimation Solutions Private Limited, a system integrator for luxury home automation and entertainment products.
“GST will make invoicing simpler, as the tax rates are consistent across states. Initially companies were facing difficulties to understand and be complaint with the tax structure, and some of our concerns were about increased compliance costs and numerous returns. However with simplification of GST return filings, compliance burden of businesses will reduce.”
“The government also has taken a lot of steps to understand the problem and simplify the GST processes for the business,” he continued. “Overall, in my view, GST has impacted businesses positively and once things are stable, businesses will be hands-on with the tax structure.”
The Indian small business system has grown significantly over the years, becoming the backbone of the Indian economy. With growing investment options and the adoption of technology, Indian small businesses are emerging as important market players.
GST is one of the biggest inflection points in the history of business in India. It is expected to help ease doing business in India by simplifying taxes under its theme of 'One Nation, One Tax, One Market'.
GST has led to the digitisation of the business workflows and more businesses (including small ones) will adopt automation as they are required to maintain and file all invoices electronically. Hence, the technology must be conducive to different IT infrastructure environments. It should also be user-friendly, so that files can be created either for a single invoice or multiple invoices, depending on the size and nature of transaction. Speed and flexibility must be its hallmarks in order to execute high volume of transactions. Emerging technologies like big data analytics, automation software, artificial intelligence (AI) and Internet of Things (IoT) need to be leveraged.
“GST has eliminated the cascading effects of taxes, as now both IT companies and the clients are eligible to claim full credit of GST. GST promises to change the way India does business and give a major fillip to the Indian economy. A crucial factor in ensuring its smooth implementation will require a robust technology infrastructure,” added Rungta.
“Prior to GST, under service tax the exemption limit for tax registration of service-based businesses was Rs 10 lakh (annual turnover). Now with, GST the exemption limit has gone up to Rs 20 lakh, thereby opening out avenues of growth for many businesses and startups”.