Is your ERP GST Compatible??

The most important question before welcoming GST ( Goods and Service Tax) which is yet to be answered by most of the companies in every industry is "Is your ERP software GST compliant?". The another question need to be answered to tackle the answer for the former one is Why changes in ERP is required and to what extent?

New sets of compliance under GST

Goods and service Tax Regime will be altogether a new era, where a new set of law and compliances has to be followed by the assessee. The concept of invoice to invoice matching has been introduced under the Indian GST which is new for the whole world and would attract the appreciation from other international bodies if it is successful. Invoice to Invoice matching concept is beneficial for government's treasury as it will make difficult for traders playing in cash economy to continue in the business. As per this invoice matching concept, recipient of goods will be uploading an invoice received from the supplier on GSTN (Goods and Service Tax Network) system in which he will claim his input tax credit (ITC). The ITC claimed by the recipient shall be matched with the outward tax liability depicted in the invoice which has been uploaded by the supplier. Any mismatch will result in loss of the differential credit if relevant rectifications are not made.

Why are changes in ERP required?

As discussed above GST compliance requires an invoice to invoice matching, which can be a difficult and cumbersome task when the number of invoices to be dealt with is huge. So, here the ERP (Enterprise Resource Planning) system comes into the scenario, which has to serve as a helping hand to avoid interests, penalties and other non-compliance consequences. In GST era, ERP has to be smart enough to handle the invoicing task in the manner as is required for generating GST returns and thus need to be updated in accordance with provisions of new Act. ASP (Application Software Provider) and GSP (GST Suvidha Provider) will also be playing important role in helping assessee in discharging compliance liabilities by rendering various tools and services at a nominal charge. 

Is your ERP software GST compliant?

Although the concept of ASP/GSP has been introduced to make the taxpayer's life easier but still it is mandatory that certain changes in ERP systems are inculcated. This will help in avoiding errors at data uploading stage at the time of filing returns. If at any point of time an organization wants to evaluate that whether its system is ready to deal with GST complications or not, then it need to seek an answer for few questions such as:

• Is all the relevant data required to compile GST return being recorded at the invoice stage or not?
   
• GST Act emphasis on differentiating between nature of various supplies which is determined on the basis of place of supply, time of supply and other provisions because transactions differentiating in nature might be liable to a different rate of tax or penalty. So is your ERP capable fo doing so?
   
• Purchases from the unregistered dealer will be attracting self-invoicing by the registered buyer. ERP need to be configured to issue an invoice in such manner and to record the ITC available in respect of such invoice. Is your software ready?
   
• HSN / SAC code is required to be recorded in respect of goods/services after a specified turnover limit is crossed. Is the functionality added?
   
• As the concept of Invoice to Invoice matching is being introduced, it becomes necessary that a proper track of invoice is being kept and also a history of changes made in any invoice is maintained, so that the invoices changed due to mismatch can be identified. Is your ERP modified for this?

And there are more such questions which will differ from organization to organization depending upon the software system being used and the quantum of sales and purchase being made.