After being subject to numerous days of haggling, the Goods & Services Tax bill finally had its historic day in the Rajya Sabha with the green signal, showing the way for concept of “one nation, one tax.” In India
The GST will have two components in line with the governing structure of India: the Central GST (CGST) and the State GST (SGST).
GST tax reform makes a paradigmatic shift in the Indian taxation system. The industry which is most affected would be software, the companies providing business applications as a service to enterprises.
There will be dramatic change in accounting software such as ERP which is used by the business world to generate invoices and payroll structure due to the change. The minor modification in the taxation can triggers to a domino effect, which reflects the change in entire accounting system from top to bottom. Which means the smallest changes can roll up sleeves of enterprise accounting software consultants to make clients tax compliant.
But the most important work over here is of the software that handles the accounting of the company. Most accounting software companies in India are designed keeping the regulation in mind. So the tax computing was not a difficult task. But with GST coming in picture, even the software will be affected in the following way:
Most systems are old and cannot handle more than standard accounting for the company. The advantages with this kind of software are that, they are small and can handle the smaller transactions easily and are suitable for them. While they may prove to be economical, they are not adaptable and cannot change with the present environment.
The tiny legacy systems create difficulty to include GST in them. They are also not supportive in a ‘Plug and Play’ environment, Which means we might not be able to plug in different software for GST into existing legacy system.
Most of the cases, custom development is also not possible in older software due to reasons like language incompatibility, coding, or the company that had developed it, shuts down.
However, GST will be a game changing reform for Indian economy by having a common market and reducing the cascading effect of tax on the cost of goods and services.
GST will have a tremendous impact on almost all the aspects of the business segments in the country, for instance, pricing of products and services, SCM optimization, IT, accounting and tax compliance systems.