Technical Implications of GST on ERP

Jul 26, 2017 | By Sera Andrew

Finally, the much debated Goods and Service Tax (GST) has been implemented and has come into effect from 1st July, 2017. The GST has now replaced the several indirect taxes that were in existence. There were many uncertainties associated with the GST and how it would impact the flow of businesses. For want of more clarity, the GST has been brought into effect as an exhaustive indirect system of tax that is applicable across the nation and will be enforced at the point of manufacturing, sale as well as consumption of goods and services throughout the country. The objective behind GST was to setup a single indirect tax system for the whole nation that would render India as a common combined market. GST will be charged and collected during every phase of sale or purchase of goods as well as services on the basis of the method of input tax credit. It is designed to add more efficiency to manufacturing as well as transportation of goods between states.

As a direct impact of this tax reform, it has been projected that the Gross Domestic Product (GDP) of the nation will witness a surge by 1-2%. Though certain segments of the industry can expect positive gains where the rate of tax would be reduced, other industry segments will be negatively impacted with GST. This is particularly true for organizations that were exempted from paying any excise duty or other tax forms. In fact, activities pertaining to e-commerce which includes blogging would now be taxable at the rate of 18%.

Though much of the initial brouhaha about GST has now passed, the next big concern that organizations large and small are confronted with is implementing and incorporating the tax reforms as warranted by GST. There is a need to overhaul their existing Enterprise Resource Planning (ERP) systems with a view to streamline their operational procedures and to ensure a smooth transition from the previous tax system to the new system. While most large organizations are poised to modify their existing ERP software systems, they are still confronted with major challenges with regards to the transition.

The process of data migration is one amongst the several challenges that organizations have to tackle. The data migration process is extensive and can have an impact on transaction as well as master data and would warrant expert resources to be deployed. Further, under the previous tax system, organizations providing goods and services were expected to maintain individual accounting codes for Value Added Tax (VAT) and transactions related to Service tax. Following the implementation of GST, these accounting codes are now supposed to be merged.

Existing ERP software that is presently being used by a large number of organizations is embedded with a distinct tax rule engine which happens to be a key source for all logic within the ERP system. This logic would also comprise of tax compliance, reporting, tax charge rates and tax jurisdiction. The impact of GST on ERP is such that it necessitates the need to alter the tax rule engine. Similarly, another area within the ERP that would be impacted by GST and is a major concern for organizations would pertain to the framework for workflows and reporting. All reports that already existed prior to the implementation of GST would now be rendered obsolete and there is a need to formulate new reports that is in alignment with GST.

All these challenges can be easily circumvented with the help of ERP software provided by Agaram InfoTech. We are an organization offering ERP software solutions to diverse industry sectors. The organization has on its panel renowned and reputed experts who are familiar with the technicalities of GST and on the basis of their extensive knowledge offer ERP software that is GST ready and can easily tackle all the challenges that you are facing in terms of GST. By engaging us for your ERP related requirements, you can leverage the immense potential of our ERP software which will help you to align your organization with GST and incorporate the changes in a smooth and efficient manner.