GST – Taxation meets Technology

  • Contributed by CA. Vikram Seth

    While much is being said and heard about GST in India these days, we have many accountants who still think GST will just be another  tax and all they need to do is to do is create another tax ledger and  do another tax calculation.

    During the past years, we have had some new taxes being implemented – eg VAT and TDS. It is interesting to note how GST will be a different experience as compared to these other taxes.

    With VAT & TDS, there was not much of a technology impact. An accountant continued to work as he did, making  his entries. To file the VAT or TDS returns, the data was usually  given to the CA who could manually input the required totals into the VAT Return and file it. Even with TDS, it was usual to re-enter data into and Excel sheet – which would then be used to generate the eReturn

    GST is a different ball game. Let’s see why :

    1. The transactions are the Return : There is virtually no manual Return to be filed. The transactions are all that is required. The key requirement is to upload sales & purchase invoices. The Return would be an automated output based on your transactions.

    2. Your Customer is the Sales Tax Officer : Your customer will get input credit only after you make payment of GST. Hence any delay or non-filing of return would result in your customer not being able to avail of Input Credit. He would surely come breathing down you neck if you defaulted

    3. Your software is your best friend : With GST – there is high dependence on technology.Your Invoice matching, Return filing , Ledger / Party Reconciliation, Input Credit calculation, State Level Tax calculations etc are going to be done by software . As an accountant – your main role is to setup Masters and then record transactions properly.

    4. Time is of the essence : Pre-GST, Returns are filed either Monthly , Quarterly or Bi-annually. With GST, there are 3 Returns to be filed each month – and that too fully matched with your customers & suppliers. Businesses with high transactions will have to be on their toes to ensure that these timelines are adhered to.

    5. You are being watched : The GST Network is going rate assessees based on their compliance parameters. In case you regularly default on compliance, you would get a low rating – which would be visible to prospective customers – impacting your business. (Pre-GST, the VAT department would publish a list of blacklisted / hawala dealers which would need to be manually verified each time you dealt with a new party). In addition, since each transaction is being uploaded , the Tax Department will have much higher visibility of your business , the margins vis-à-vis industry standards etc .

    6. GST readiness does not end within the organisation : Come 1st July, if your Vendors are not GST compliant, then you would not be able to claim input credit on purchases. Similarly, your sales side supply chain could get disrupted if your Dealers / Distributors are not complaint and they are unable to pass the input credits to customers. Imagine the chaos after the first GST returns are filed on 20th August and there are dozens of mismatches.It is estimated that in certain sectors the upto 70% of the distributors / dealers will not be ready for GST unless concrete steps are taken. A key point to note is that many customers would make payments to vendors only after they see the Purchase Invoice uploaded on the GSTN. This will require invoices to be updated on a daily basis.


    There are two important points to note as regards the workflow for matching transactions that are proposed under GST:

    1. Visibility of transactions prior to filing of GST Returns : Since there is limited time for matching transactions before GST Returns are filed, there is a concern as to whether a Customer can see details of invoices raised even before the GST Return has been filed by the Supplier. It has been confirmed by the GSTN that, a Customer will be able to see Invoices raised by a Supplier even before the GST Return is filed. This would be a big relief to users since the process of transaction matching can begin as soon as transactions are recorded rather than waiting for the Returns to be filed

    2. Visibility of your transactions to your Chartered Accountant /Tax Professional (TP) : Many users are still assuming that this is just another tax like VAT and that their CA/TP will handle the compliance. The challenge for the CA will be the availability of time to manage multiple customers in the given timelines for Return filing. A lot of work will only need to be done by the Assessee – namely correctly setting up Masters and input of Transactions. The good news is that the GSTN proposes to enable a CA/TP to login and view clients data – thus enabling remote & more efficient services to multiple clients without the need to manually send backups.

    Electronic data interchange is a key concept that will be propagated as GST is implemented. Organisations will work to seamlessly exchange data on their own (without having to depend on the GST Network). This will bring about a new level of automation and have huge implications in the future.

    The GST Network is appointing GST Suvidha Providers (GSP’s) – who will automate a lot of the functions and make the GST experience a smooth one as is visible below

    GST Network Flow

    Tally has been appointed  a GSP and  will enable a seamless interchange of data between the users accounting data and the GST Server

    Tally as a GSP



    Views presented in this article are personal view of the author. Information presented in this article is intended for information purpose only and does not constitute any legal opinion or advice. Readers and Users are requested to seek formal legal advice prior to acting upon any of the information provided herein.