GST Impact and Readiness with ERP

What Changes Will Come After GST?

The proposed Goods and Service Tax will lead to the evolution of a harmonized tax system in the country. Successful integration of GST would give India a world-class tax system and will boost the tax collection. It will also end the pending distortions of different treatments to the manufacturing and service sectors. For example, after GST, a retailer can set off the input credit of CGST and SGST on procurement of services like rentals, freight, advertisement, which currently attract service tax, against the output tax levied on the sales of goods from his premise. With the introduction of GST, the issue of inability to offset the input taxes should get resolved. Change in the indirect taxation structure will impact all industry sectors. Starting from the taxes paid on raw materials by a manufacturer to the invoices raised by a retailer for an end consumer of a good – all steps of the value change will experience a change in how taxation takes place.

Readiness of Enterprise Resource Planning (ERP) Vendors for GST

GST will have multifold impacts on ERP systems, some of them are anticipated in advance and some post implementation consequences remain unknown. Since the ERP vendors are rigorously preparing for the new GST environment, the rules must be followed and necessary changes be made in their business environment without causing inconvenience to their customers. In the due course of this transition, the vendors must test their preparedness on the following parameters.

  • Adaptability of GST in ERP to eliminate the chances of system collapse
  • Business process refinement for processes like, interstate stock transfers, subcontracting etc. as per proposed GST framework
  • Tax configuration and computation should accommodate the proposed taxation requirements
  • The system should be capable to cater the needs of Reporting and printing requirements based on the regulatory requirements
  • Impact on interfaces must be verified by the vendor, whether to a third party or your own ERP
  • Tax credit migration, for taxes such as excise, service tax, VAT, etc
  • Closure or reversal of partially open transactions before migrating to the new system
  • Managing special case transactions in scenarios such as the goods sold or purchased before GST and returned after GST implementation, will be handled by ERP vendors depending upon the requirements of their respective clients