Technology-assisted compliance is not an entirely new concept in India.  Way back in the 1990s, taxation departments used technology for tax administration. However, this was mainly as a backend mechanism. A major shift in behaviour occurred when online filing of returns was introduced. This was largely a result of different computer systems being integrated, thus enabling taxpayers to directly interact with the tax department.

Under the current taxation system, data or information broadly flows in one direction to the Government, which we can describe as a B to G or Business to Government data flow.  With the use of technology, the time and cost has reduced significantly while accuracy of compliance has been greatly enhanced.

Technology for GST compliance – what is different this time?

With technology already a driving force for compliance today, what then is the need to revisit issues that concern the right technology for GST implementation and compliance? Why will technology play a pivotal role in GST implementation and administration from both a government and business perspective?

With GST, the two major goals that the government intends to achieve are:

  • Reduce tax evasion
  • Simplify compliance for taxpayers

In the prevailing tax systems, there are several cases where the government has not been able to detect evasion and loss of tax revenues. As a result, it has become a challenge for the department concerned to track the input claims against the liability of the seller. There have also been numerous cases of duplication of claims on input tax, fraudulent claims, input tax claims that do not correspond with tax liability declared by the seller, or seller who has not furnished his tax liability.

In order to overcome this, GST has introduced invoice matching of buyer and seller. It has been estimated that the taxpayer base under GST is around 8 million. With billions of invoices to be matched on a monthly basis, there is a critical need for a real time invoice matching capability, supported by robust IT infrastructure.

There is no way invoice matching at this scale can be achieved manually.

What is GSTN’s role in simplifying compliance for taxpayers?

The GSTN  is currently working on rolling out state-of-the art IT infrastructure that will introduce changes that are significantly different from the current system.  Equipped with an open API (Application Program Interface), the GSTN server will seamlessly connect with third party applications used by taxpayers, thus providing an all-user interface, and convenience via desktops, mobiles, and tablets.

This will assist taxpayers to automate their invoice matching from within their software rather than by logging onto the portal. This will save time, and drive simplicity of compliance procedures. GST will drive a lot of discipline in filing returns at regular intervals, and automation will help businesses achieve this with less pain.

Use of technology will also enable efficient tax administration for registration, returns filing, data exchange, and effective investigation, monitoring, auditing and performance analysis with little or no human intervention. It will also provide several user-friendly features such as offline capabilities, alerting capabilities, mobile/tablet interface, and additional mechanisms to avoid duplicity of data.

As this tax system is being implemented for the first time in India, businesses will encounter several challenges during the initial stages of implementation. However, once systems are streamlined, the two important objectives envisaged – curbing tax evasion, and increasing tax revenue and ease of compliance for taxpayers will be achieved.

The success of this transformation will help our nation create history in the world of GST compliance.

So what should businesses do now?

The GST regime which begins on July 1, 2017, will ride on the strength of technology with seamless interface with the GSTN server. Businesses must automate their manual systems, and install software that is robust enough to interact with the GSTN system, and assist in immediate, accurate, and reliable compliance.

Invoice matching is a very critical requirement of GST. Because of the clear timelines dictated by GST, compliance will no longer be a month-end or quarter-end activity. Therefore, invoice matching and other compliance related activities cannot be achieved using a manual or a low-tech system. Speed and accuracy are both critical.

Businesses will have to start interacting frequently with the GSTN system. This will require a GSTN-enabled business application or accounting software so that the task ahead become seamless and efficient.

As a business, you should:

  • Start trying to understand the impact of technology on GST, and on your business
  • Appreciate the need for compliance discipline
  • Focus on the right choice of software to help achieve compliance