GST anniversary: The impact on Indian enterprises

With multiple challenges around compliance, stakeholders across the various sectors are pushing the GST Council to make a foolproof centralized registration mechanism and expedite tax refunds. 

Jul 09th 2018

GST kicked in a year ago to unify tax systems, prevent the problem of double taxation and make tax collection more efficient by reducing fraud. Since then, the new tax regime has proven to be a major operational hurdle for thousands of enterprises. From IT glitches to delays in receiving refunds, there have been many developments in the evolution of GST since it was first introduced. 

In the beginning, registration and migration proved to be major roadblocks for enterprises. Now, the physical submission of documents during each time of filing returns has been removed and automated to ease the migration burden. The move by the government to simplify and automate this process has been a step in the right direction; but challenges related to migration still remain. 

The GST network has seen technical glitches, which were made worse by last-minute rush to file returns. Such incidents led the GST Council to stretch the return-filing deadlines on many occasions. The government has decided to help by simplifying tax filing and make it a monthly event. This is also expected to ease the burden on the IT infrastructure of the GST network and help with compliance. 

GST: The challenges 

  • Migration and new registrations, particularly from SMBs
  • Delayed Tax refunds blocking liquidity of competitive sectors
  • Downtime of the GSTN during last-minute filing
  • Security of sensitive data derived by millions of business entities

"During initial days, there was challenge in filling the return due to absence of clear definition of laws. The GST Infrastructure took months in getting stabilized. As it was not ready, the availability of GST tested solution for our business ERP from corresponding OEM was not ready. This took time in enabling our ERP System in tune with the new taxation system smoothly. The same caused additional efforts of man hours with instant additional investment in arranging standby infrastructure with OEM software licenses for setting up test environment for ERP solution," says Debojit Maitra, CISO at Aditya Birla Fashion and Retail.

The Indian IT/ITES industry which mostly includes service exporters have certainly found GST challenging. The refunds on the input GST on their procurements have been delayed for months. The competitive nature of the sector has certainly taken a hit. To mitigate this, a special provision to give a 90 percent refund within seven days has been enforced to solve blockage of working capital of exporters. 

“GST has smoothened the taxation process. Initially, there were lots of challenges in GST Server Systems. Now, these all are settling down and most of the taxations procedure steps are automated with ERP solution.”

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     Debojit Maitra, CISO, Aditya Birla Fashion and Retail

The financial sector has certainly embraced GST as it has helped automate the entirety of tax-related transactions in the country, making the economy more transparent and agile. According to Sumit Lunker, Partner- Indirect Tax at PwC India, "the automated and online GST system would improve tax collection and promote a digital economy, resulting in more banking transactions and growth of the financial sector. As GST stabilizes, doing business will become easy. This will contribute to the government’s drive towards ease of doing business." 

There has been a lot of optimism regarding the future of the new tax regime as the roadblocks both in terms of IT and legislation have been cleared. With challenges related to GST compliance are being cleared up one by one, the benefits are now becoming clearer. "GST has smoothened the taxation process. Initially, there were lots of challenges in GST Server Systems. Now, these all are settling down and most of the taxations procedure steps are automated with ERP solution. I believe, this will help in generating additional Alfa of margin and help in scaling the business at PAN India with not much additional taxation clearance from local body/government," stated Debojit Maitra.