Several Indian companies have begun discussions with their IT vendors and tax advisors to upgrade their systems to enable tracking of goods and analysis of tax and other cost implications once the goods and services tax (GST) regime comes into force.
Companies are mainly upgrading their enterprise resource planning (ERP) — a category of business-management software — so as to accommodate the complexities of calculating GST. ERP helps companies manage and monitor everything in the organisation, including supply chain, finance and even human resource functions. SAP and Oracle are the big players in the Indian ERP space.
Many companies will have to move from their current system, where every transaction is recorded separately, to an upgraded system where there is a correlation between every entry, according to industry executives.
“GST will mainly impact master data management, tax computation and business process localisation, among other things,” said Arun Subramanian, vice-president, Globalisation Services, SAP India. “Specific organisations will need to look into their versions of finance solutions and customer specific developments and plan accordingly.”
ERP systems are extensively used by goods manufacturers, especially for supply-chain management. For instance, many retailers use the ERP systems to check movement of goods from the warehouse to the retailer. So if a soap manufactured in Himachal Pradesh reaches a mall in New Delhi, the ERP records every stage of the movement, including the goods carrier’s passage through check points.
Under the current system, every state is treated differently, while GST aims to make India as a common market place. While most companies acknowledge the need for new IT systems, many are just waiting for the final tax rate. “We have not made changes to ERP systems as yet. Announcement of the tax rate is one of the crucial elements of how the ERP will be affected,” said Harsh Goenka, chairman of RPG Enterprises.
“It is a gradual process and the changes in ERP will need to factor various other parameters, including procurement, warehousing and impact on vendors and customers, among others. We are studying the overall impact and that will help restructure the ERP accordingly.”
Experts say companies have been looking at changing their ERP versions mainly around making tax modules GST-compliant. Industry trackers say many companies are getting ready on all fronts, and not just IT. Implementing the new IT systems could take anywhere between 12-14 months.
“GST rollout is one of the biggest tax reforms for India. Timely GST preparedness is a key to smooth transition for industry, and we have a huge and experienced talent pool that is fully geared for this,” said Pratik Jain, leader — indirect tax, PwC India.
Experts said it won’t be an easy job for IT vendors since one size does not fit all. IT processes for every company would have to be customised. Many companies are now working with SAP and Oracle and also with experts at tax consultancies.