How Digital Platforms Smoothen GST Payments
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“One Nation One Tax” was an idea in the making since a decade, before the government finally made it a reality with the GST regime in July 2017. This proved to be the largest sweeping change in India’s economic history, since its independence. Naturally, as is the case with any kind of change, the GST regime created its share of apprehension, scepticism and even downright panic in some ways.
It was an overhaul like none other after all. However, after trudging across the 1-year finish in July 2018, it is a safe bet to assume that much of the uncertainty surrounding this major tax reform has been alleviated. Over 77 per cent CFOs surveyed by Deloitte India have confirmed that GST has had a positive impact on their overall business. But is the GST, really that ‘good and simple’ indeed?
A new pathway for progress
From a governance perspective, the move was made to reduce the underreporting of taxes as well as create online trails for each transaction to help generate a more accurate picture of liabilities. With the introduction of GST, we witnessed a far-reaching impact on taxation, finance, legal, IT systems and supply chain.
Although the GST roll-out could have been handled better, let’s remember that dismantling a decade old and complicated system and replacing it with a completely new system was bound to run into challenges. It took time for businesses to learn and adapt to the new GST regime – which is more complicated than other GST schemes around the world, resulting in spiked compliance costs for many businesses in the early days.
However, in recent months there has been a slow shift towards acceptance and even optimism, with the exception of small businesses who continue to struggle with compliance and dealing with the impact that the GST regime brought on for their operations.
It is safe to say then, that while there have been some definite wins in favour of the GST regime, some challenges continue to plague this new tax regime. One of the key ones being, that of compliance, especially among the MSME community in India.
Payment Platforms – disrupting the adoption cycle
Considering that a large portion of India’s businesses is MSMEs, sparing both human and financial resources, for the purpose of accounting and taxation comes at a great expense. This, of course, can be offset by making the shift to a more comprehensive digital payments platform.
While in the past, digital payments services were primarily concerned with ensuring invoicing and management of bills payable and receivable, they have now evolved with the requirements of the current age. Several systems are now GST-complaint to ensure that from the first stage in the business process, their GST profile is constantly being updated.
At different points within a payments cycle, there are tax implications involved and it’s important to accurately calculate these for both payments received and made. The entire process of making GST payments and raising GST complaint invoices becomes infinitely smoother when carried out through the means of a digital payments platform.
And with platforms now integrating credit services as well, business controllers will also be able to view their entire financial standing from one integrated dashboard thereby considerably cutting down obsolete processes.
As of 2017, there are 19.9 million companies that fell under the Micro, Small and Medium Enterprises and after including unregistered companies the number jumps to 36.2 million. Most MSME businesses conduct a large number of their transactions in cash and under report for tax purposes or not report at all.
With the introduction of the GST, there is a requirement for an online trail for each transaction along with mandatory reporting. Although GST aims to simplify the process of filing taxes, there is a certain amount of computer literacy that is required to complete it hence leaving several business owners in the dark.
Digital Payments Platforms as support systems for GST
As India moves towards a digital-centric future, businesses, regardless of their size need to be integrating digital into their financial strategy to stay ahead of the curve.
Over the past year alone we have witnessed several changes to the GST policy and the most glorious part about digital platforms is that these changes can be immediately updated on the system thereby ensuring that the business remains compliant to the latest policy.
The future of digital payment platforms lies in their proactive role in helping businesses navigate through changing times and helping them run more efficiently and cut costs. As technology progresses, payment platform providers will also bear the responsibility of educating and assimilating businesses and aligning them with the changing times by providing them with the right tools and understanding.
Ultimately, the role of a digital payments platform is critical in helping businesses implement change and stay compliant, even as GST policy and other compliance policies related to payments evolve. They are a friend for business.