Tech Cottage Industry For Spawn For India’s GST Launch Compliance

Massive changes for small businesses in India would have to be faced by the implementation of India’s new Goods and Services Tax (GST) as they will have to go online to file their taxes, even as the GST is set to become the biggest tax reform since independence and will unify a $2 trillion economy into a single market.

Teaming up to market GST compliance products to firms large and small are major software and service players, IT companies and tax advisers.

The new GST Network comprises of a vast IT back-end system that will crunch up to 5 billion invoices a month and the new requirements have also led to the emergence of boutique players offering to help firms connect to GST Network.

On July 1, at a stroke, at least 6 million companies will have to start filing taxes returns online through GST and Rahul Garg, a former Google executive, is positioning his e-commerce firm Moglix for the GST’s launch.

Moglix is a marketplace for industrial equipment that links 200 large manufacturers and 40,000 small- and medium-sized enterprises, or SMEs and was founded in August 2015 with $5.9 million in venture capital. Garg sees a wider opportunity even though for now the company will offer a GST compliance product to this ecosystem for free.

“We’ll put it out as a commercial model that will be a no-brainer for all SMEs,” said Garg.

Through their secure data pipes, the design of the tax is creating a new class of businesses that enables firms to connect to the GST Network even as a public-private partnership will run that network.

Accreditation has already been given to 34 of these so-called GST Service Providers, or GSPs.  And including Moglix, another 160 have applied for accreditation.

Application Service Provider, or ASP, a software interface that ensures invoices are properly formatted and reconciled with those of counterparties is the other key element of the GST’s architecture. Some companies are marketing “bundled” software that includes both ASP and GSP solutions in a bid to reach smaller businesses.

With four separate tax rates for different classes of goods and services: 5, 12, 18 and 28 percent, India’s GST is the world’s most complex. Three tax returns a month must be filed by a firm. The compliance burden can quickly multiply for those operating across state lines.

consulting and software “patches” that enable their bigger clients to manage the transition to the GST are being offered by major IT companies like SAP, Oracle or Microsoft.

While HP Inc has linked with KPMG to sell a GST laptop with two years’ support for a flat fee of 33,990 rupees ($530), Microsoft has teamed up with tax firm EY to offer DigiGST, a cloud-based solution.

So that compliance costs stay low and to avoid market monopolies, many service providers are desired to be step up, feels GST Network head Prakash Kumar.

“The market has to take care,” he told a recent GST seminar. “Let’s get out of this ‘Licence Raj’ situation.”

SAP is working with larger clients to get their sales, procurement, manufacturing and supply chain GST-ready and compliant and it reckons that its systems will handle 40 percent of all invoices uploaded to the GST Network.

SAP says it is also “GSP agnostic”, meaning it is willing to connect with new market entrants, like Moglix and also offers products for smaller firms.

Many smaller firms that adopt basic GST packages are seen to graduating, eventually, to SAP’s premium range, according to Neeraj Athalye, head of SAP’s GST adoption drive.

“Although they have a competing solution, the reason we have decided to go together is because, jointly, we have a more compelling reason to work together,” said Athalye.

(Adapted from Reuters)


Categories: Creativity, Economy & Finance, Strategy

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