GST has become a buzzword today, as businesses anticipate its effect on their profits and the consumers wonder whether they will have to shell out more money for their purchases. However, the government is confident that the reforms will be beneficial to everyone.
Now, even though the general consensus is that GST will help curb tax evasion and make taxation system simpler, there is a lot of confusion. The government has tried its best to be transparent about the changes that business owners should expect with GST implementation. However, they have not succeeded so, at least apparently.
For instance, many business owners don’t know what a supply constitutes to? Or how will they file returns or use input tax credits? Well, much of this can only be cleared once GST is implemented and the gears start grinding. However, switching to GST-friendly software can certainly help with the transition, at least to some extent.
How Tax Computing is Done Today
Most of the competitive enterprises use an Enterprise Resource Planning (ERP) software which runs on a real-time basis and offers a suite of integrated applications that the enterprise can use for managing, recording, and updating the data obtained from all kinds of business activities. The software, being tailored for the country’s regulations and compliance standards, makes the calculation of taxes and expenses, and receiving payments from the clients easier and simpler.
How GST Will Impact ERPs
Enterprises that are using old ERPs won’t be able to adapt to the Goods and Services Tax regime as easily as those that are using GST-friendly business suites. This is because GST is not just not one reform or one tax, it’s a complete overhaul of the current taxation system.
Once GST is launched, there will be no VAT for goods or Service Tax for services. The taxes won’t vary from one Indian state to another, and all the goods and services will fall into only four tax slabs: 5%, 12%, 18%, and 28%. There are hundreds of categories, dozens of compliance requirements, invoice format changes, and more. Clearly, a traditional pen and paper based management system won’t survive one day under the new regime, especially because GST is a completely electronic system. The invoices have to be recorded in digital formats, and the returns have to be filed through the GST portal. All this can pose a number of difficulties unless you replace your resource planning system with one that’s GST-ready.
The following are some of the ways a GST-ready ERP Software can make the transition to the new regime smoother:
- Calculations Made Easier
One of the most important reasons to switch to a good ERP software is that it will make the calculation of sales and taxes easier. There are so many moving parts in the GST system that maintaining accuracy can easily become challenging, if not impossible. Even a seasoned accountant can’t expect to keep records without making an occasional mistake. However, since a single mistake can often result in a disaster, bringing in a GST-ready ERP software can be far more assuring than becoming fully dependent on manual calculations.
GST Bill was designed to curb tax evasion and increase transparency in the system through stern compliance standards and regulations. In fact, the government is going to monitor businesses’ activities closely which is why it has already notified about different kind of penalties for non-compliance. In some cases, a taxable person could face jail time too. A GST-ready ERP software will ensure that compliance standards are met, and minimize the risk of penalties or any other kind of legal action.
- Record Maintenance
As per the GST regime, a taxable person has to maintain and keep the appropriate records for 5 years from their last date of filing annual returns. These include ITC availed, the stock of the goods, the inward and outward supply of goods and services, etc. Even for a modest business, 5 years’ worth of records can be substantial. A GST-ready ERP system can make keeping records easily, help adapt to digital-only GST system, and also make searching individual entries in the database easier.
India is one of the fastest growing economies in the world, and a portion of the credit goes to the government’s push to digitization. GST is one of the movements for the same drive, and an enterprise can greatly benefit by putting a proper GST-friendly ERP software in place.