The Future of GST Compliance: Predictions and Trends

The Goods and Services Tax was imposed on July 1, 2017, in India to bring significant changes in the country’s indirect tax system. The main idea behind implementing the GST was to replace the multiple cascading taxes with a single unified structure. It is implemented to simplify the tax regime, increase compliance, and reduce evasion.

For businesses, this new regime allows them to streamline their operations by eliminating the complexity of multiple taxes and facilitating easier interstate trade, following the “one Nation, one Tax” principle. Moreover, GST significantly contributes to widening the tax base, enhancing the efficiency of tax administration, and boosting GDP growth by forming a healthy tax environment.

The implementation of the Goods and Services Tax has brought several compliance and regulatory changes for businesses, including frequent changes in tax rates, complex return filing procedures, and a lack of clarity over certain regulations. With time, businesses have adopted technological solutions with the GSTN for the online filing and reconciliation of taxes.

Smart businesses are also investing in GST-compliant software to streamline their company’s accounting system. It allows enterprises to meet compliance requirements with higher efficiency and also helps them take advantage of input tax credits. Hence, it reduces the overall taxation burden on a business.

In this blog, we’ve very well discussed the future of GST compliance in India and how you can efficiently handle the challenges and utilize the benefits of technological solutions for the Goods and Services Tax. Without any further delay, let’s begin the guide !!

Technological Advancements in Compliance

Integration of AI and Machine Learning

Artificial Intelligence (AI) and Machine Learning (ML) are revolutionary technologies for GST compliance, as they can help automate various tax-related processes, including data entry, tax calculations, data accuracy, return filing, etc.

Listed below are certain use cases of integration of AI and ML in the advancement of compliances.

• Automated Data Entry and Extraction: Artificial intelligence-based tools and platforms can easily extract data from scanned documents or digital invoices and bills. This may help enterprises reduce manual efforts and data errors, promoting automated processes.

• Smart Tax Calculations: Using AI-powered tools and platforms, enterprises can effortlessly analyze the company’s transactions and automatically apply accurate GST rates, considering the product categories, exemptions, and place of supply. This way, you will eliminate the manual calculations and ensure accurate tax liability.

• Automated Return Filings: Integration with GST account softwares, run of AI and ML, may help the businesses to automatically fill the GST return forms, verify the data, and streamline the entire filing process. Hence, it doesn’t let the businesses face the penalties associated with the late filings.

Overall, Artificial Intelligence and Machine Learning save businesses time and resources and enhance the accuracy and efficiency of GST compliance. Moreover, the implementation of technology can also help businesses forecast tax liabilities, perform predictive analyses, and manage effective cash flow. These activities allow businesses to focus on core operations and adhere to regulations.

Also Read: Future Of GST Billing Software: Al, Machine Learning, And Beyond

Blockchain for Transparency and Security

Blockchain technology significantly enhances the transparency and security of the GST transactions by availing enterprises with decentralized, immutable ledger to keep the records of all tax related activities.

Here are some of the top-notch benefits of the blockchain technology used in the GST-compliant software.

• Enhanced Transparency: In the blockchain-based ledger, each GST transaction is recorded chronologically and securely. Hence, it inculcates full transparency within your taxation process. All authorized parties, including buyer, seller, and government, have a complete right to view the original history of transactions, facilitating trust and reducing disputes.

• Improved Security: Blockchain technology leverages cryptography to keep transactions

secure. Technically speaking, every block in the chain is associated with the previous one. Hence, you won’t be able to alter the data without altering the entire chain. This minimizes the risk of fraud and manipulation with the GST records.

• Streamlined ITC: Blockchain technology can help your enterprise make ITC (Input Tax Credit) claims. It allows the GST-compliant software to automatically verify the legitimacy of ITC claims and significantly reduces manual verification and potential errors.

• Reduced Paperwork: Integrating blockchain technology analogy within your business will eliminate the need for paper-based invoices and documentation. Plus, blockchain can securely store all GST-related information. It can also streamline the taxation process and reduce the overall administrative burden for enterprises and the government.

By integrating blockchain technology into GST frameworks, you may increase the reliability, accuracy, and efficiency of your taxation system. Moreover, it can also help streamline the verification process and prevent overall fraud in tax submissions using decentralized and immutable GST accounting software. 

Government Initiatives and Regulatory Changes

Upcoming Regulatory Changes

In 2023, the council suggested several changes to the Goods and Services Tax system and even made some changes. Below, we’ve mentioned some of the latest official tax updates, considering the GST council meetings.

(i) 52nd GST Council Meeting

In the 52nd council meeting that occurred in New Delhi on 7th October 2023, Union FM Nirmala Sitaraman highlighted some of the points that can impact the potential businesses in several ways that we’ve mentioned below.

• Easy due clearance for sugar mills: The tax council has recommended the GST authorities reduce the GST rate on molasses from 28% to 5%. It will directly enhance the cash flow of the sugar mills and allow sugarcane farmers to clear their dues. Moreover, this action would also reduce the cost of cattle feed, as molasses is one of the key ingredients. Hence, all the sugarcane mills must be ready to better handle their taxes and increase the overall profitability.

• Exemption for certain services: The Council has recommended providing an exemption for GST imposed over certain services like water supply, sanitation, and waste management. It will reduce the overall compliance burden from such companies, and they must be ready to implement better tax management methods to even increase the company’s.

• Enable ITC claims for bus operator companies: In this council meeting, officials have also suggested excluding all the bus operators organized as companies from the governmental section that requires ECOs (Electronic Commerce Operators) to pay GST over bus tickets. Bus operator companies can easily claim the ITC (Input Tax Credit) over their purchases and reduce the overall cost. However, small bus operators who are not registered as companies might be required to comply with the existing systems through ECOs. It clearly indicates that the small bus operators should be ready to handle certain extra tax burdens in comparison to other registered companies, which would hinder their growth.

Also Read: 52nd GST Council Meeting Recommendations – Detailed Insight

(ii) 51st GST Council Meeting

In the 51st GST Council Meeting, held on 2nd August 2023 over a video conference, the council discussed and approved certain rules that have directly impacted the business running around online gaming, casinos, and horse racing.

The council has decided to maintain the existing 28% GST rate over the face value of the bets placed at these places. However, the value of the supply of online games in casinos would depend on the amount paid by the player rather than calculating it through the overall value of the bet placed. It may even help businesses simplify their tax calculations.

Amendments to the CGST and IGST Acts will help these businesses address their registration, tax payment, and compliance requirements. Moreover, businesses that do not adhere to GST-based rules and regulations may no longer be accessible.

All the businesses of online gaming, casinos, and horse racing should properly follow all the GST rules and regulations. Otherwise, businesses might face some severe issues. Invest in GST compliance software today to ensure adherence to all the rules and regulations.

(iii) 50th GST Council Meeting

The 50th GST Council Meeting, conducted on 11th July 2023, has made multiple serious decisions that can significantly impact the number of businesses. Listed below are the business sectors and their impact.

• Reduced GST rates for certain goods: In the meeting, the council decided to reduce the GST rates for certain goods, including uncooked/unfired snack pellets, imitation zari threads/yarn, fish-soluble paste, and LD slag. Reduced taxation on these goods will directly benefit the manufacturers and sellers and allow them to reinvest more money in their businesses.

• GST exemptions for specific services: Organizations critically occupied with space exploration activities, like ISRO, Antrix Corporation Limited, and New Space India, are also exempt from GST for satellite launch services. This will allow these organizations to not worry about taxes and instead save their budget for project development.

• Compliance measures: In the council meeting, members addressed certain strict criteria for registering and claiming Input Tax Credit (ITC). These changes will increase compliance costs and complexity for businesses, so businesses must be ready to deal with them.

• Impact on the utility vehicle industry: For now, however, the main impact on industry pricing or production cost will be evaluated only after the final notification is released. 

Expansion of the GSTN’s Capabilities

GST Network is a non-profit and non-government organization that helps businesses execute all tax-related tasks, including returns filing, ITC claims, etc. The GST Network in India has gone through various enhancements to improve user experience, handle higher transaction volumes, and offer comprehensive analytics.

Among key updates in GST, they have simplified the return filing process by using the latest GST RET-1 form, which replaces the GSTR-3B and GSTR-1 forms. This new form can be filled more quickly and has a more user-friendly interface. In addition, the GST Network has been improved with various rich features, including an improved dashboard, real-time returns tracking, and an efficient reconciliation process that eventually enhances the GSTN’s capabilities.

Recently, the GST Network has introduced varied new functions to support the increasing volume of transactions. It includes functions like integration of e-invoicing with e-waybill generation to streamline the process and ensure compliance. In the upgrade, the officials have also included a new table, I’m GSTR-1, to maintain the details of supplies made through e-commerce operators and other payment options such as UPI, credit card, debit card, etc.

The GSTN has even updated its portal with a new dedicated news and update section. Moreover, they have also made certain minor UI improvements for better usability and brought some new website policies, such as data archival. All these changes will allow the GSTN to handle the higher transaction volume and provide more efficient analytics. In this way, businesses can also manage their compliances effectively and foster smoother operations.

Compliance Challenges and Solutions

Addressing Compliance Challenges with Technology

Here are some of the major compliance challenges that can be solved with technology: 

1. Complex Return Filing: Under GST, businesses have to file various forms, including GSTR-1, GSTR-3B, and GSTR-9, which are very complex and time-consuming to manage. Moreover, changes frequently come in the GST laws and procedures, which makes it difficult for businesses to be updated and compliant. Here, the advanced GST software comes into play to help businesses automatically populate the data from integrated accounting systems and reduce manual efforts and errors. Using cloud-based platforms can additionally help businesses provide real-time updates on regulatory changes and stay compliant with the current GST rules and procedures. 

2. Complexity and Compliance Burden: The GST structure consists of multiple layers and tax slabs that lead to complex regulations. Mostly, small businesses struggle to understand and adhere to these complex intricacies. Using the GST software can guide businesses in using the GST processes, simplifying tax calculations, automating return preparation, and offering built-in help for navigating complex regulations. The cloud-based software can even allow your systems to access GST compliance tools and information whenever you want. Hence, it leads businesses to reduce complexity and compliance burdens. 

3. Input Tax Credit (ITC) Management: With the immense data of businesses, it becomes challenging for them to maintain the accuracy of records and prove their eligibility for ITC claims. The manual submission of ITC can lead businesses to face mismatches or non-compliances that directly impact their working capital. Hence, using technological solutions can help businesses calculate eligible ITC based on predefined criteria. It helps enterprises to ensure compliance and increase credit claims without manual intervention. Plus, the advanced analytics tools can monitor ITC claims in real-time and allow businesses to have better control over cash flow and tax liabilities. 

4. Data Security and Privacy: With the digitalization of gas-related processes and systems, there is a big threat to sensitive financial and transaction data from unauthorized access. Therefore, businesses should use cloud-based GST software with advanced encryption. It can safeguard the business’s financial information from any data breaches or unauthorized access while ensuring compliance with data protection laws. The best thing about this software is that it regularly conducts security audits to detect any vulnerabilities and ensure data security. 

5. Invoice Matching and Reconciliation: To claim the ITC, it is crucial for the businesses that their purchase and sales invoices match correctly. Failure to match the invoices can lead businesses to face disputes and denial of ITC, which impacts the overall cash flow. Therefore, businesses should use technological software to manage their invoices. They can automatically reconcile purchase and sales invoices and help businesses identify discrepancies and mismatches promptly. Moreover, the blockchain technology used in accounting software can help you create a transparent ledger for recording all the transactions, making it easier to match invoices and detect any inconsistencies.

Also Read: 5 GST Compliance Problems Every Business Owner Should Avoid

Automated Compliance Monitoring and Reporting Tools

The GST software is very well-trained to handle the compliance and reporting part of the businesses by maintaining accuracy, efficiency, and real-time adherence to the regulatory requirements. Modern GST software can easily be integrated with a business’s existing accounting and ERP systems for the automatic extraction and synchronization of financial data. Using these automated compliance monitoring and reporting tools helps businesses automatically make data entries and generate e-invoices and e-waybills.

The advanced GST software is enriched with features like automated return filing for varied forms. For instance, GSTR-1, GSTR-3B, and annual returns are pre-populated with the data from integrated systems and minimize the time and effort required during manual entry. It not only speeds up the filing process but also ensures greater accuracy in submissions. In addition, GST software also helps businesses provide real-time reconciliation of purchase and sales invoices, automatically identifying discrepancies and ensuring the accuracy of ITC claims. It helps businesses to maintain compliance and optimize tax liabilities.

Moreover, the GST software is equipped with robust analytics and reporting capabilities. They can provide you with comprehensive reports on GST transactions, filings, and ITC claims, defining the valuable insights of businesses. The predictive analytics feature, powered by AI and ML, will allow you to detect potential compliance issues and trends, mitigating the overall business risk. You may also receive notifications of upcoming deadlines, filing statuses, and regulatory changes to maintain compliance consistently and reduce the risk of bearing penalties. Plus, the inclusion of immutable audit trails enhances overall business transparency and accountability.

By leveraging the advanced features of GST softwares, businesses can significantly enhance their GST compliance processes, ensuring accurate, timely, and efficient adherence to tax regulations. In this way, you will not only improve your business’s operational efficiency but also optimize the financial management and reduce the risk of non-compliance.

Industry Impacts and Case Studies

Sector-Specific Impacts of Future GST Changes

The GST trends and technologies have widely impacted the overall market, including different sectors. Below, we have separately discussed the impact of GST changes within specified sectors.

(i) Manufacturing Sector

The manufacturing sector is one of the significant contributors to the nation’s GDP. Manufacturers generally have to deal with complex logistics, supply chains, and inventory management. The upcoming trends in GST and technological solutions will have a unique impact on the manufacturing sector. Listed below are some of the potential impacts on GST trends and manufacturing,

• E-waybill system integration: Using GST software will help manufacturing businesses streamline the movement of goods within and across state borders. It will reduce paperwork, improve logistics efficiency, and minimize delays. However, small business owners will require substantial capital and support to adopt this technology.

• Focus on RCM (Reverse Charge Mechanism): In the RCM, the recipient of certain goods or services may be responsible for paying GST, not the supplier. It will directly impact the cash flow of the manufacturers, as they won’t be receiving the upfront ITC on supplies. To deal with this challenge, businesses are required to implement different strategies like negotiating advance tax payments from customers.

• GST Rate Rationalization: The government may be planning to rationalize the complex GST structure with fewer tax slabs. It can potentially simplify business compliance. However, they might be required to face higher tax burdens based on the revised rates.

We have also defined it with a case study below.

Case Study 1: Textile Manufacturing and GST Trends

Company: ABC Textiles is a medium-sized textile manufacturing company in Surat, Gujarat.

Challenges:

• Manually generating e-waybills is causing delays in dispatching goods. 
• Issues in cash flow management due to RCM for some specified raw materials. 
• GST rate rationalization might lead to a higher tax burden.
• Scrutiny risk from GST authorities related to ITC claims.

Solutions:

• Integrated the e-waybill generation with existing manufacturing software. 
• Negotiate with customers regarding the advance payment for RCM supplies. 
• Practice a cost-benefit analysis to determine alternative sourcing options for RCM supplies. 
• Implement a robust data management system within your business to capture and store invoice data electronically.

Expected Outcomes:

• Improves logistics efficiency and minimizes delays in transportation. 
• Manage the cash flow in the business by using advance tax payments. 
• Saved cost through potential alternative sourcing or product price adjustments. 
• Avoid the risk of discrepancies and penalties regarding the ITC claims.

The Role of Technology:

• Cloud-based GST software allows real-time data visibility, simplified e-waybill generation, and fosters seamless integration. 

• Data analytics helps manufacturers optimize their supply chains, identify cost-saving opportunities, and build robust data trails for ITC claims. 

• Using the blockchain technological solutions can promote supply chain transparency, facilitate tamper proof record keeping, and streamline the business operations compliant with GST regulations.

Conclusion:

The manufacturing sector is required to actively adopt the newly coming technological solutions and evolving GST trends. Embracing these changes will allow the manufacturers to optimize operations, improve compliance efficiency, and gain a competitive edge in the market.

(ii) Retail Sector

Retail sector is widely spreaded in a diverse landscape, from small shops to giant e-commerce stores. Upcoming GST trends and technologies will undoubtedly impact how retailers operate and manage their tax obligations. Listed below are a few impacts on the retail industry.

• Real-Time Inventory Management with E-invoicing: Utilizing e-invoicing allows businesses to exchange real-time data that can be used for better inventory management. Technically, it will allow the retailers to check on the stock levels and optimize the ordering processes. However, smaller retailers require assistance in integrating e-invoicing with POS (Point-of-Sale) systems.

• Rise of E-commerce and GST compliance: The E-commerce sector is on the boom and requires seamless GST compliance across varied states. You may use technologies like auto-calculation of IGST (Integrated Goods and Services Tax) and simplification of interstate movement of goods. Moreover, you will also require a robust system for maintaining data accuracy and managing reverse logistics.

• Data analytics for targeted promotions and GST reporting: Businesses can leverage the GST data for targeted promotions based on customers’ purchase history. In addition, data analytics can also provide businesses with automatic GST report generation and simplified compliance tasks. However, retailers must have robust data security measures to protect customer information.

Below, we have explained it with the help of a case study.

Case Study 2: Multi-brand Footwear Retailer and GST Trends

Company XYZ Footwear is a multi-brand footwear retailer with store chains across several states in India.

Challenges:

• They face a higher compliance burden when managing GST across various stores and states.
• Tracking the inventory levels becomes difficult due to a lack of real-time data. 
• Maintaining GST compliance is challenging for online sales through an ecommerce store. 
• Better data insights are required to create optimized promotions and provide a personalized customer experience.

Solutions:

• Small stores that have lower turnovers may utilize composition schemes. 
• Integrating the e-invoicing with the POS systems to monitor the real-time inventories. 
• Implement the automatic IGST calculations and e-waybill generation in the e-commerce platform. 
• Utilize data analytics to automatically generate GST reports, understand customer buying patterns, and effectively target promotions. 
• Investing in robust data security measures can help you safeguard customer data.

Expected Outcomes:

• The compliance burden has been reduced for smaller stores under the composition schemes. 
• Real-time data insights will improve your inventory management. 
• Streamline GST compliance for online sales. 
• Make informed decisions for targeted promotions and personalized customer experience.

The Role of Technology:

• Cloud-based RMS can help the retailers with integrating the e-invoicing, inventory management, and POS systems. It increases the data visibility and simplifies the GST compliance tasks. 

• Ecommerce platforms can have built-in features for automatic tax calculations and e-waybill generation. It allows businesses to streamline online sales and compliance.  

• Data analytics allows the retailers to read customer behavior, optimize pricing strategies, and automate GST report generation. Automatic functioning leaves no space for manual errors.

Conclusion:

Accepting and adopting new technologies and GST trends can help retailers gain a competitive edge. It can help businesses to have efficient operations, improved customer experience, and seamless compliance with developing GST regulations.

Preparing for the Future

3 Effective Strategies for Staying Ahead in Compliances

Here are some of the main strategies that allow the business to stay ahead in compliance.

1. Leveraging Technology

In today’s modern world, you have to implement robust GST compliance software that can help you with data entry, tax calculations, e-invoicing, e-waybill generation, and return filing within your business. Automating the tasks will reduce manual errors, save time, and ensure accuracy. You should prefer cloud-based software for better accessibility and scalability. They will also help you access real-time data, automatic updates, and simplified collaborations.

Also make sure that your GST software will integrate seamlessly with your existing accounting and ERP systems for the seamless data flow and avoid any duplicate data entry. Moreover, the use of data analytics and reporting features present in the GST software will help you analyze the tax liabilities and ITC utilization and figure out the areas of improvement in compliance.

2. Consistent Staff Training

Businesses should provide consistent training programs to the staff involved in the GST processes. Staff should be well aware of the GST regulations, follow the best practices for data management, and be familiar with the necessary functions of GST software. You can also tailor the training programs to the specific roles and responsibilities of staff members. For instance, you should provide detailed training to the accounting team on tasks like return filing.

For the effective implementation of training across the staff members, you should provide them with workshops, simulations, and e-learning modules. Also, encourage your staff to stay updated with all the new coming GST changes through official government websites and industrial publications.

3. Leverage Expert Consultancy

In the ever-evolving world of GST compliance, you would be required to seek the help of tax advisors and compliance experts. These professionals are very well-updated with the latest GST amendments and judicial pronouncements. Tax advisors can effectively analyze the specific operations of the business and recommend planned strategies for the optimization of tax liability. It involves exploring exemptions, utilizing ITCs, and suggesting the optimal GST registration structure.

Moreover, a productive conversation with an advisor can help you determine the potential compliances early. In fact, they will also guide you over how you can mitigate these risks and develop strategies to reduce future penalties and disputes with authorities. The compliance experts can even help businesses use the software effectively and maintain compliance.

Call to Action

Consultation and Software Demos: CaptainBiz Software

In the world of widely evolving GST horizons, you may find the advent of varied new trends and technological advancements. It becomes a little difficult for businesses to stay compliant with the regulations. Hence, consulting with our GST expert would be a strategic move to provide you with tailored insights and guidance regarding the required compliances. In this way, investing some money in your business will lead you to optimize your tax strategies max, maximize the benefits, and minimize liabilities.

You can also check out CaptanBiz GST software, which is enriched by the power of modern GST billing capabilities. Using GST software may lead you to improved operational efficiency, accelerate company expansion, and simplify your GST compliance procedure while adhering to all rules and regulations. Check out the CaptainBiz 14-day free trial offer to understand how advanced functions are capable of meeting future requirements and transforming your financial management.

Information Updates

Check out the CaptainBiz blogs for regular and consistent updates on GST compliance changes and technological advancements. This way, you will stay compliant with all the coming changes with minimal effort. We consistently post detailed blogs on every piece of information regarding GST trends and technological advancements.

Frequently Asked Questions

• What is the future of GST?

The government is consistently making efforts to simplify the tax structure for the coming future. They are reducing the number of tax slabs and rationalizing the tax rates. It will help the businesses by reducing their compliance burden and increasing the tax system’s efficiency.

• What is new compliance under GST?

A new compliance under GST is the filing of ITC-04. As per this GST compliance, the businesses whose aggregate turnover exceeds Rs. 5 crores must file the ITC-04 semi-annually. While the businesses whose aggregate turnover is up to Rs. 5 crore must file the ITC-04 annually.

• What are the GST objectives?

The core aim of the GST implementation is to bring the country under a single tax regime. It has helped the Indian taxation system to eliminate the multiple layers of taxation over certain years.

• Why is GST compliance important?

GST compliance consists of various rules and regulations that businesses must adhere to. It allows the business to maintain the taxation system legally.

• What is the compliance cost of GST?

The GST compliance costs incurred by small businesses are 1.45% of the annual turnover, while for large businesses, they are around 0.02%. This clearly reflects the regressive nature of the compliance costs.

• What is the limit of GST compliance?

Businesses dealing in goods with an annual turnover of Rs. 40 lakhs and businesses dealing in services with an annual turnover of Rs. 20 lakhs must be registered for GST and pay taxes on sales of goods and services.

• What is the GST compliance rate?

The GST compliance rate refers to a score given by the government to businesses to represent their compliance with the tax department. This score is calculated considering various parameters, including timely filing of monthly and yearly returns, furnishing details of input credits used, taxes paid, etc.

• What is the role of technology in GST compliance?

Technological GST softwares helps the businesses in streamlining the GST procedures and improve the overall tax reporting structure. Moreover, it also increases the efficiency to pay the GST and file returns.

• What is the GST replacing in India?

The implementation of GST (Goods and Services Tax) has replaced various taxes, including excise duty, VAT, service tax, etc.

• What is beyond the scope of GST?

Certain goods and services are not considered supplies in schedule III activities or transactions. These include employee services, court services, funeral services, transactions in non-taxable territories, land sales, custom port transactions, and actionable claims. All these are generally expected from GST.

Prarabdh Gupta Freelance Content Writer & Strategist

Prarabdh Gupta is a finance content writer with 4+ Years of Industry experience in simplifying complex finance terms. He crafts captivating and engaging content around mutual funds, insurance, banking, real estate, taxation, and financial planning. He has completed his graduation from Jiwaji University, Gwalior.

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