Goods & Services Tax (GST)-SAP Business One
India has taken a giant and bold step to implement GST .For sure, it is an important step to simply tax regime in the country.It is incumbent on everyone to be GST educated and thereby GST enabled.
To achieve this, we have also committed ourselves to spread the message loud and clear and also to help achieve the GST enabling for your company.
In simple terms, the broad level action items may look as follows:
Develop understanding about GST and create awareness in your company
Understand the basics of the proposed law
Familiarization of GSTN
Acquire knowledge about different reports and returns that will be needed
Assess how it can impact your business strategically and plan for appropriate actions
Impact on your revenue and cost streams in new tax regime (price changes, passing of benefits to customers, competitive analysis etc.)
Review you existing supply chains for bringing more efficiencies (for example, consider centralization of manufacturing supported by delivery points or warehouses across your market, instead of having multiple manufacturing locations)
Impact on your own books of accounts, tax liabilities, tax credit etc.
Plan to upgrade your system on SAP Business One system to make your application compliant with GST
Setting up a task force that will manage the change within your company
Existing tax practitioners of Excise, VAT & Service tax are getting equipped to handle consulting requests from customers on GST. They can help a company make good progress on points 1 thorough 4 in the above list.
Companies, especially in the SME sector, need to get their act together now in order to be ready to adopt GST as GST is knocking at door. Impact of GST is widespread across business profitability, supply chains, accounting and last but not the least the enterprise Information technology, which enables the rest.
IN-DEPTH ANALYSIS of different aspects of GST in INDIA and its impact on ERP
SAP Business One an internationally acclaimed software package capable of handling GST compliances
The Goods and Services Tax (GST) promises to bring a single unified tax regime for India, which will consolidate many different taxes into a single tax regime.
Some of the taxes to be subsumed into GST
- Service Tax
- Entertainment Tax
- Entry Tax
A single tax regime will bring predictability and lower operating costs for businesses because the GST will reduce the overall tax burden by reducing the impacts of cascading taxes and allow the cross-utilization of tax credits across the supply chain.
IT teams across India are busy planning and implementation stage to update and review ERP systems to be ready for the GST. Now these changes could be as simple as updating the version but in most cases it is not so simple. A change in an ERP requires a coordinated effort between tax, IT and other departments to ensure success. The on-going GST and ERP Challenges has been a situation where the implementation date and requirements keep shifting. Over the last several months, many projects have started to upgrade, fix and design new functions and processes in ERPs to prepare for the change. This continuous effort is costly and spends countless hours and so far systems are not yet ready for the GST.
Generally speaking, the GST will require businesses to revisit the following areas in their ERP:
- Procurement or Materials Modules
- Sales or Supply Chain Modules
- Financial Management Modules
Each of these modules are impacted with the change to GST.
One of the challenges with the GST, will be a widening of the taxable basis because now the provision of almost any type of good or services is taxable. GST transitions the taxable event from sales, distribution, manufacture, and provision to simply the event of a supply.
When considering the number of rates which can apply to a supply there could be a reduction in the total number of rates and variations because the GST Council will approve all rate slabs. Any change in rates is still a major ERP event because you have to create new tax codes, conditions and update information about products and materials.
Businesses which used to only be involved in the provision of certain types of supplies will make sure all their ERP processes are considering tax. It is important to spend time reviewing existing process or business flows to understand where tax consequences could change. For example, in the case of the supply of goods between two units of the same business the change could be that it went from 2% CST on the sale to 18% IGST on the supply of the goods. [Can we have a graphic for this showing how a supply from MH to TG is 2% today but could be 18% when GST comes?] This change has impacts on how orders are taken, goods are received, materials and reporting for internal purposes and compliance reporting.
Specifically, for tax compliance, ERPs should produce data which can be used to create the appropriate entries into the GSTN for outward and inward transactions and make sure valid tax invoices can be created. The requirement to upload data to the GSTN pushes the requirement to create accurate tax specific data up the chain to the ERP rather than trying to fill in the data at a later point for compliance. ERPs need to capture the relevant data or can fill in missing data as the process runs through before the compliance begins. If a business attempts to create the data at the time of compliance this can lead to delays and mismatches with invoices which are already created.
Tax teams need to either take on the responsibility or engage advisors depending on the complexity of the business to understand which business processes will remain the same, which can be optimized under the GST and which will no longer be relevant. These findings need to be consolidated and presented across the organization. Then it will fall to a combination of Tax and IT to develop the implementation and testing plan, implement it and then test to ensure it is working.
All components of the ERP require maintenance and so as the GST stabilizes there will be an increased strain on Tax and IT teams to continuously update, test and re-visit scenarios as the business processes evolve after the GST. Any ERP migration strategy should include an increase amount of time for maintenance and re-evaluation until at least 18 months after the operation of the GST.
All these discussion leads to a moot and a crisp point that there is dire requirement of an ERP software which is capable of handling all of the requirements. And when we see in comprehensive and holistic manner SAP Business One stands like a banyan tree in the midst of circumstances which has already catered to any such needs. It being an internationally acclaimed ERP package has already been tested for GST compliances in other countries. As India has aimed to adopt it SAP Business One had to be made GST compliant and in that spirit it has achieved the feat already.
Potential impact of GST on Enterprise Resource Planning (ERP) systems which has been catered in SAP Business One.
- Adaptability of the ERP system:The SAP Business One has released the appropriate version and an upgrade needed to make the system GST compliant.
- Business process refinement:All the tax-related inward and outward processes required has been reviewed and aligned, as applicable, to GST requirements. Business processes such as interstate stock transfers, subcontracting, etc. which requires close evaluation, since in the proposed GST framework, taxes are also levied on such transfers has been already met. In addition to this, the process for tax utilization at the end of the month also has been setup as per the new policies.
- Tax configuration and computation:The tax calculation procedures which require a major change to accommodate the proposed taxation requirements has been considered in SAP Business One. Appropriate considerations have been made into account to fulfill the requirements of monthly tax returns. While making the configuration changes, due consideration have been given, such that the system is not only GST ready, but is also scalable and adaptable to future changes in the Indian financial environment.
- Document numbering: A unique sequential numbering for outgoing GST invoices have to be specified, which need to be configured as per the directives of the tax authorities.
- Master data amendments: Various master data such as the chart of account, material master, vendor master, customer masters, price masters, etc needed to be updated as per the new requirements have been taken care of. In this context, vendor and customer GST registration numbers will become mandatory for availing or passing the credits and reporting purpose.
- Reporting and printing requirements: Appropriate reports are major pillar that has to be developed based on the regulatory requirements are already taken care of. The necessary changes may also be required in existing forms such as contracts, purchase orders, quotations, invoices, etc. are also considered in SAP Business One.
- Tax credit migration: Tax credits from existing deductible taxes such as excise, service tax, VAT, etc. needed to be updated or distributed to the appropriate account as per the directives of the new regime are considered in SAP Business One.
- Closure or reversal of partially open transactions: Partially-open transactions such as goods received but an invoice has not been booked, or goods issued for sale but not received by the customer, etc. need to be closed or reversed and migrated to the new system are also considered in SAP Business One.
- Migration of open transactions: Open transactions, including contracts, purchase orders and sales orders, may have to be migrated so SAP Business One has already adapted to take of this.
- Managing exceptional transactional requirements: Managing the transactional requirements in scenarios such as the return of goods sold or purchased before GST and returned after GST implementation, stock in transit during the cutover activities, etc are important and which has already been considered in SAP Business One.
Significant changes are to take place in ERP systems on account of implementation of GST. These changes may be visible in areas related to master data, business process changes, interfaces and reporting requirements for GST migration. Specialised IT Squad has adopted a proactive approach in understanding the potential impact of GST on the businesses and with its expertise in SAP Business One has already taken step to make our esteemed clients GST compliant.
When other ERP packages are in process and different stages of compliances for GST, SAP Business One has taken a giant leap to cater to every need. So it completely in the interest of companies to adopt for an ERP package SAP Business One which has capability to handle short term as well as long term goals.