After a prolonged waiting period, both the houses of Indian parliament have voted for the rollout of the revolutionary unified Goods and Services Tax (GST) law, ushering an era of Indian common market with simplified single point taxation, replacing provincial multiple taxation regime that has been prevalent all these years. Expected to be fully rolled out by April 2017, the new GST regime will require a majority of organizations to alter their business processes to be in compliance with the new regulatory and reporting standards. Consulting, technology, and accounting specialists are already being hired the by organizations across India to get themselves ready before the law comes into effect.
While a few businesses are ready for the GST rollout, others as usual would have to wake up at the last minute. Experts from countries such as Australia and Singapore, where unified GST has been adopted successfully, are also being consulted by some large enterprises. Experts from auditing, indirect taxation, IT and accounting domains usually comprise these GST readiness teams. New tax regime may mean substantial revenue for IT companies as well as tax advisory services from FY 2016-17 onwards. A smooth transition from present value added tax (VAT), central sales tax, and state level taxes to unified GST would mean IT vendors would have to work on creating a new software versions based on the new tax rules. Apart from tax calculations and input tax refunds, consultants would also have to take a look at warehousing strategy and optimum supply chain systems in light of changes in the tax structure.
Skill Sets Needed for GST Implementation
Formulating the IT strategy for GST is a major challenge. As per the plan of the Indian Government, there will be a common GST portal, with GST network connecting all stake holders. The solution architecture is designed for information flow and funds flow between tax payers, state tax authorities, and central tax authorities.
As such, existing IT systems have to be reconfigured to be able to connect and work seamlessly with the new GST portal. Moreover, besides IT personnel, consultants with the following skill sets will be needed to retool business processes to comply with GST standards:
- Tax accounting
- Supply chain and logistics
- Change management
- System integrity management
- Risk assessment
- Project management
- System administration
- ERP (SAP, Oracle, etc.)
Firm Level Actions
For a smooth transition to GST, enterprises will have to:
- Reconfigure their tax/accounting software to run parallel with the news GST taxes as well as with Excise and Sales Tax applicable to those items that do not fall under GST
- Realign and optimize their business processes as per tax compliance requirements
- Train internal personnel as well as vendors/suppliers to understand and comply with the required procedures of entering sales invoices, claiming input tax credits, and computing tax returns online
HR’s Role in Implementing GST
HR managers will be required to source and recruit talent with specific IT skills such as Accounting, ERP, Project Management, etc. Training will have to be organized across the organization as well as suppliers and supply chain partners for creating awareness of new tax regime and the transition plans. Risk of non-compliance, tax requirements, introducing system integrity, and contingency should be understood correctly for smooth transition to the new tax regime.
Unified GST implementation across the whole country can, to some extent improve the “ease of doing business” factor in India and act as a stimulant for investment needed for industries to grow, thus aiding creation of jobs. According to experts, “The Make in India” program may get a boost as corporates would be willing to build manufacturing hubs all over the country as GST could minimize the barrier of state taxes and restrictive regulations. Industries in fast moving consumer goods, automobile, logistics, real estate, and media sectors could lead in job creation.
Many firms generally overlook the role of the Human Resources department in driving and facilitating significant changes in business processes and organizational transformation. Apart from transactional aspect of changes required, HR can get involved in employee adoption and training, transition management, and transformation of the organization for success of the project. Firms should involve and leverage the HR team members’ capabilities and skills throughout duration of the project.
We recommend the following steps be taken:
- Recruit HR professionals with operational improvement background
- Automate routine HR transactions
- Lay the groundwork for Organizational Development
IT’s Role in Implementing GST
IT personnel and solution providers can contribute to GST implementations in the following ways:
- Collaborate with cross-functional teams from various business teams in designing necessary changes to existing IT infrastructure
- Collaborate with various industry bodies and governmental agencies to ensure smooth transition to the new tax regime
- Provide training to key business stakeholders on the transition
- Strengthen analytics related to logistics and supply chain