From tomorrow a new financial year will start. It is true, Centre may not be able to
implement goods and service tax (GST) from 1 April but now target date is 1 July. The Lok Sabha on Wednesday passed Goods and Services Tax (GST) bill which would bring the country under single tax net for the first time. At the same time different organizations have to change themselves too. Prasad Kulkarni – Partner and Head, Enterprise Resource Planning and Arnab Mitra– Director, Enterprise Resource Planning at KPMG in India discussed with Kolkata24x7.com on these issues and highlights the ways – how to manage the system in future for GST compliance.
Q Do such fiscal reforms need different organizations to shift from present ways of doing business?
It is imperative that imposition of GST would call for paradigm shift in terms of defining the process of doing business. Organisations need a structured approach to deal with this new ordeal. This calls for a change not only in the strategic intent of the organisation but also on the processes and enablement initiatives. Technology landscape needs to gear up to be compliant with this statutory requirement. Needless to say that organisations are up for a transformation.
Q Such a change do you think any risk for the organization. ?
Any transformational change is exposed to certain amount of risk. A structured approach would help organisations deal with it in a more meaningful manner.
Q How can it be overcomed?
As a first step towards this journey, organisations need to study their systems and processes the way it is on the basis of indirect tax compliance. This should be followed by the impact assessment from the tax perspective as well as Information Technology perspective. Organisations need to formulate their implementation plan and then execute the implementation plan effectively. The adoption plan is also important and certainly this would call for a definitive change management within the organisation. The rate of adoption (process of diffusion) has to be laid down in a meticulous way.
Q Do you suggest those organisations need any workshops?
During the introspection stage, the organisation needs to conduct workshops with key stakeholders of the company, to understand various business practices. The objective is to create a base to build the business scenarios relevant to GST Implementation from tax as well as Information Technology perspective. The introspection process should have the entire value chain within the scope.
Q. Can you explain the whole process?
The key objective is to identify the transactions, carried out by the different department of organisations. This may entail- Lines of Business, Geographical Locations of Operations.
The process of procurement needs to be looked upon from the perspective of nature of goods and services along with the procurement pattern. The sales and distribution also needs to be looked into from the perspective of invoices vis a vis types of goods and services being sold in the market along with its distribution channel. The organisations need to realise the broad Indirect tax implications in minute detail from GST perspective, for example the invoicing system needs to be looked into from the perspective of format of invoices, the issuance and adjustments of debit note and credit notes etc. It is also important to have a look at the accounting of input credit and output liability. Stock transfer to other branches needs to be looked into as that would have tax implications in GST regime. Filing of periodic return is also an important aspect.
The impact assessment would have key objectives in terms of assessment of GST impact on the operating model of the organisation as well as its considerations.
Large organizations depend on their enablement system heavily to plan efficiently their resources. A review of their ERP is a must from the perspective of business processes, applying the notes released by the OEMs to make their system compliant with GST regime. It is also important to assess the impacts from the perspective of master data. One of the key areas of review would be to come up with the plan to deal with their open transactions on the first date of the GST regime. The impact assessment or review from information technology perspective would also entail development of standard SAP reports and registers. Several customised objects may get impacted during the implementation process.
The entire GST enablement initiative should have four major considerations –
Distinctive scenarios – the scenarios need to be identified to minimize risk of implementation of the system.
Rapid User Adoption – Proper change management plan should be laid down with the training encompassing the changes in the system
Data accuracy is the key, which needs to be addressed followed by business continuity.
We need to understand that organisations need to make sure that continuity in their way of operation doesn’t get disrupted affecting the top line severely.
Q Which are the areas and explain its impact on those?
The areas which would have an impact are 1) Tax Registration 2) Master Data Maintenance, 3) Tax Configuration & Computation 4) Document Numbering, 5) Business Process Localisation, 6) Tax Postings,7)Tax Utilization 8)Reporting 9) Message Outputs
Besides, other Impact areas would be –
– State Level Registration would call for separate registration for different lines of business.
– The organisations need to obtain three separate state level registration based under CGST, SGST and IGST.
The organisations also need to determine the place of supply for different transactions. Transactions under different revenue stream are to be invoiced at the state level.
Expenditure to be recorded at state level and activity level. Information system landscape to allow recording and reporting of expenditure at the state level.
Valuation may be a challenge including for stock transfer. Clear mechanism for multi-state services required to address the statutory requirement.
The organisations need to address filing of returns and assessment at state level. It is imperative that the information technology backbone should provide data on revenue and expenditure to allow smooth filing of tax returns and achieve ease of compliance.
(All views and opinions expressed herein are those of the authors and do not necessarily represent the views of KPMG in India)