The 3 Key Challenges In GST Implementation

by Teja Gudluru, CEO & Director, UDO    Jun 08, 2017


There is a significant amount of buzz encircled around GST as retailer’s expectations gather steam by the moment. Much predictions swarm around the ingrained hope that the reform will noticeably reduce the compliance cost for taxpayers, harmonise the tax structure, while transforming administrational operations into uniform entity across states. However, integrating all taxes levied on goods and services in a federal country is easier said than done. More than anything, an extensive revision in the Constitution of India and consensus between Central and States Governments, is required to facilitate the smooth transition. Here are some of the challenges, highlighted:

- Swift boost in Assesses and supply channel rehabilitation: The GST model extends the tax band by taxing each economic supply within the distribution network, which results to fast augment in, assesses. Here, businesses need to reshuffle their distribution network, in order to reduce additional tax burden on the consumer, while thinking in price competitive terms. Regardless of the bigger picture to generate revenue in a neutral and transparent way, the Government will require ensuring that this doesn’t take place on the cost of consumers paying more than the worth. Also, one needs to keep an eye out for the reinvention of  supply channel. For the current tax regime, place of supply formed a minor issue as service is taxed by the Centre and revenue receipts remained at ease from place of levy. Post GST; inter-state transactions would be in an unprecedented situation as places of taxation need to be clearly demarcated.

- Challenges to legislation: Implementation of GST comes at the behest of significant Constitutional re-shaping, making the reform tread on a stickier path.  Constitution of India, in past, has allayed powers to the Union and the States to levy and collect taxes as per Union, State and Concurrent List. This has turned out to be a self- inflicted bugbear, restricting the Government from bringing about any change in this structure. In order to enable the Centre and the State Governments to levy GST, the Constitution of India requires modification to provide for powers to levy and collect GST both by the Union and the States. 

- IT Infrastructure: Rapid need for implementation necessitates IT infrastructure for the Goods and Services to upgrade itself. This requires development of comprehensive solutions to facilitate the adoption in the required timeframe.  The IT systems on ERP and API side would be largely affected from the inculcation, as existing ERP vendors require to build patches that meet complete needs of GST execution on a techno-enable scale. This would then facilitate integration of API’s, with GSTN released API’s needing to be tweaked.

New formats of Invoice, Vendor master, Revenue master, Stock transfer, PO & SO master, Customer master, Expense GL, Goods & Service master need to be  integrated into the system , taking the whole number of API’s to 80, where every API need 2 weeks of all-inclusive testing, prior to  being released as a stable version. The need of the hour is for GSP’s to start working together to develop API jointly, sharing the workload.

GST is set to become a welcome change for the economy, simplifying the indirect tax structure in India. Yet, the above challenges need to be assessed fully, with immediate changes to facilitate growth. Aided by a more comprehensive framework of constitution and other factors, GST can embolden the frame of a reformed economic system, empowering India to reach greater heights.

[Disclaimer: The views expressed in this article are solely those of the authors and do not necessarily represent or reflect the views of Trivone Media Network’s or that of CXOToday’s.]