26th April 2017
Planned to be a ‘business friendly approach’, Goods and Services Tax is seen as the single most important tax reform initiative in India since independence. Simply putting it, GST is a streamlined version of indirect taxation on goods and services by the Indian Central and State governments. Organizations today are driven by specialized processes which are at times unique to their business. These processes often form the core competency and key differentiator in their operations. To assist and support these courses organizations have actualized enterprise-wide business software’s or ERPs which helps in running the workflow smoothly.
Enterprise Resource Planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software amalgamate all aspects of an operation — including product planning, development, manufacturing, deals and also promoting — in a single database, application and client interface.ERP software comprises of different enterprise programming modules that are separately purchased, based on what best meets those particular necessities and specialized technical competencies of the organization. Each ERP module concentrates on one range of business techniques.
Lok Sabha has finally passed the Goods and Services Tax Bill and it is expected to have a significant impact on every industry and every consumer. Apart from filling the inadequacies of the present system, it is also pointing at encouraging and uplifting of the Indian economy. It is a tax trigger, which will prompt benefits of business change to the very last bit of any significant commercial enterprise. It is all set to subsume a major set of central and state level indirect tax levies. GST will impact the ERP systems at various levels and will require major customizations for different set of transactions. This will lead to a re-defining of ‘master level’ as well as ‘transaction level’ data flows and reporting. Large enterprises have already geared up for the changes to be made in their existing Enterprise Resource Planning (ERP) systems.
Chart of Accounts- New accounts have to be added to track and trace the recovery accounts, liability accounts, interim credit account, etc. for tax codes. Everyorganization will have its own set of requirement as to how detailed their chart of accounts need to be. Earlier, organizations involved in the benefits of the business of selling goods and also providing services to the administrations at the same time were obliged to keep a separate record of account codes for Value Added Tax (VAT) and Service Tax related transactions. These account codes will get merged once the GST goes live in India. Heed must be paid while carrying ahead the closing balance of tax credit from current record codes to the new record codes.
Master Data Information –Master data represents the business objects which are agreed on and shared across the enterprise. It can cover relatively static reference data, transactional, unstructured, analytical, and hierarchical and Meta data. It is a singlesource of common business data used across multiple systems, applications, and/or processes. Model GST law has defined new rules with respect to charge of tax, place of supply of goods and services and time of supply. The assessment of tax rates appropriate for different transactions will additionally contrast on the foundation of these regulations. To address such scenarios, there arise a requirement to revisit the master data such as Customer’s Bill To and Ship To Addresses, Warehouse Information, Inventory and Item Masters etc. This will modify and organize the tax determination and reporting subsequently in the ERP framework.
Tax Rule Engine – A Rule system enables company policies and other operational decisions to be defined, tested, executed and maintained separately from application codeRule engines regularly help rules, facts, necessity (score), shared exclusion, preconditions, and other capabilities and functionalities.Most of the ERPs have a separate Tax Rule Engine which is a master repository of all the logic inside the system. This incorporates the tax charge rates, tax jurisdiction and tax compliance and reporting. A lot of re-engineering work would be required to build this tax engine for GST from scratch.
Reporting and Workflows- Every last bit of the existing reports pertaining of the present current indirect tax regime will become outdated. Furthermore new reports need to be designed as per the GST Law. Consolidation of tax compliance in ERP system will also result in vulnerability on timely submission, as it becomes single point of failure for overall reporting and hence, a greater amount of strong workflow necessities need to be planned and implemented.
Bringing out these changes in an ERP environment is not an easy task. Organizations must address these changes for an easy transition into the new tax regime. This may also require companies to adopt such software’s or ERPs which will automate GST compliance for them.
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