Even as the government machinery is gearing up for a smooth roll out of the proposed goods and services tax (GST), with the prospects of this indirect reform now brighter than ever before, a key constituent of the new regime looking somewhat unprepared is the Corporate India. Technology and taxation systems of majority of companies may take time to adopt to the GST regime, corporates and analysts said.
For most companies, overhauling the entire IT systems is the biggest challenge and this process could take anything between 6 to 9 months. While the government has issued the first draft model GST law over a month ago, further details are awaited on aspects relating to compliance such as invoice formats and return details. “We anticipate several teething problems in transitioning to the GST regime. In the initial months, we anticipate that a parallel system for undertaking compliance will be required ie both manually as well through the necessary IT systems. The complexities are far more for services companies, such as IT service companies, where a lot of ground needs to be covered to get clarity on taxation of pan India contracts involving multiple states,” said Mahesh Jaising, Partner, BMR & Associates LLP.
FMCG major Emami on Wednesday said it has hired consultant PricewaterhouseCoopers (PwC) to assess the impact of GST regime on the company and chart a roadmap to realign firm’s strategy accordingly. “A detailed study by the consultant will give a clearer picture and the consultant will advise us what we should do and realign our strategy accordingly,” Emami director Harsh V Agarwal said, as per a PTI report.
On their part, the Centre and states have jointly promoted Goods and Services Tax Network (GSTN) as a not-for-profit, non-government company for smooth roll out of the GST. GSTN is working on a common GST portal providing front-end services of registration, returns and payments to all taxpayers, as well as the back-end IT modules for certain states that include processing of returns, registrations, audits, assessments, appeals, etc.
“There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed,” the finance ministry said on Wednesday. Corporate India will have to align their taxation systems with the platform provided by the GSTN.
The Rajya Sabha on Wednesday cleared the Constitution (122nd Amendment) Bill, 2014 for introduction of the GST, which will create a common national market by subsuming a multitude of taxes into a single tax. “With the passage of the Bill in Rajya Sabha, the action will now shift to the corporate world. Due to the uncertainty on the fate of GST, many of the firms remain unprepared for the implementation of GST. The challenge before many, is how to get ready to implement GST, before 1st April, 2017,” said Sachin Menon, Partner and Head, Indirect tax at KPMG India. “Many in the corporate world mistook GST as a tax reform and ignored the impact of it on the other aspects of business such as IT, supply chain, sales and marketing. This will prove costly for those who have yet not taken it seriously as the transition will take between 9- 12 months,” Menon added.