The introduction of the Goods and Services Tax (GST) has been an important step in the field of indirect tax reforms in India — and one that has affected all sectors of the Indian economy. For companies dealing in goods, the stakes are high when it comes to managing the GST compliance process. Supply chains, warehouses, logistics, retail, even transportation companies and distributors can have a considerable impact on whether GST returns are filed accurately and in a timely manner. A disruption in one link can potentially buckle the entire value chain of supply.
Pre-GST, supply chains, coupled with the warehousing and logistics industries, were often highly unorganised and fragmented, primarily due to infrastructural mismanagement. GST has changed the rules of the game for industries and businesses, however, allowing them more opportunities to gain efficiencies through automation. At the same time, businesses that lag in technology and automation face the possibility of falling behind their competitors.
Earlier, the waiting period at check posts could be as high as 30 to 40 hours if the server was down. GST has been instrumental in reducing the number of lengthy clearance processes as well as the amount of complex paperwork at numerous interstate check posts. The e-Way bill was introduced as a mechanism of self-compliance to help further reduce the amount of time wasted at these check posts. A World Bank report estimates in logistics alone, companies realise cost savings by nearly 30-40 percent when the e-Way bill and GST processes are appropriately implemented.
Consumer expectations are changing rapidly with the advent of same-day delivery by e-commerce giants, and goods come and go out of fashion in just days instead of months. In these changing times, the supply chains of companies need to be agile in order to handle abrupt spikes or declines in demand. This requires keeping careful track of inventory during the delivery chain. To keep the carrying costs down and reap economies of scale, the best approach is to keep inventory in stock at a central warehouse so that when there is a spike in demand, the goods can be gathered and quickly shipped out. However, supply chains cannot be swift if there are blocks caused by manual GST compliance. Tax automation keeps supply chains agile.
In the past, state boundaries were the crucial factor in deciding where to locate warehouses. However, GST has made the entire nation a single market. Businesses can now optimise their transit routes and warehouse locations to a greater extent than ever before. We can see evidence of this clearly with the new trend of "mega" or "mother" warehouses, and smaller depos. As depos shrink, it has become more economical to locate them closer to where consumers are located. GST has helped warehouses relocate from far off places to zones closer to customers. To fully reap the benefit of this new system, however, GST automation is a must.
GST is widely recognised as a procedure-driven system where timely and accurate compliances are the cornerstone for success. Ensuring compliance with GST has been a costly affair, however the cost of lax compliance is higher in the long run.
Noncompliance with GST can incur many adverse effects on businesses. Apart from late fees and penalties, businesses need to be concerned with compliance ratings. Real-time technological solutions and automation of tax compliance systems ensure timely compliance and position companies for higher compliance ratings.
Adopting technology and advanced tools for bringing in more precision in these sectors also helps to neatly organise and streamline them as well, while providing a galore of opportunities for existing players to scale up. This simultaneously opens the door for new entrants. Further, as more companies aspire to implement the just-in-time delivery model, they will find the need to automate e-way bill and GST compliances inevitable.
The e-Way bill system was primarily instituted to control tax evasion and thereby increase the government's revenue collection. Over time, the process of generating e-Way bills has become easier. Previously, e-Way bills were generated online on government site; today, e-Way bills are commonly generated or cancelled through SMS, Android App, and by site-to-site integration through API.
Failure to generate e-Way bills can dent the reputation of businesses, attract monetary penalties, and impact other GST assessments. Technology-based automated solutions are the answer to avoiding procedural noncompliance penalties, ensuring quick delivery of goods, and benefiting businesses in a myriad of ways.
Though some businesses balk at the cost of implementing GST automation solutions, these solutions are in fact more critical now than ever. This is a competitive era - software providers are deploying the best security measures industry standards allow. It is now on companies to select suitable automated solutions and stay ahead of the curve.
(The writer is Managing Director, EMEA and India, Avalara Inc, provider of cloud-based tax compliance automation for businesses and a GST Application Service Provider)