GST has emerged as a critical force in altering India’s economic environment during the last six years. GST, which went into effect on July 1, 2017, replaced a complicated network of indirect taxes with a unified tax policy of ‘One Nation, One Tax,’ with the goal of streamlining operations, improving tax compliance, and fostering economic growth. As we reflect on the six-year journey of GST implementation, it becomes increasingly vital to assess its influence on economic development and the transition to a “Digital India.”
Significant challenges in GST implementation and compliance
In fact, it took 17 long, arduous years for GST to become a reality in India. It was initially suggested to the Indian parliament in 2006 after being launched in 2000 by then-Prime Minister Atal Bihari Vajpayee.
The country is now on the verge of implementing GST, but this does not necessarily imply that things are going to get simpler. After so, the implementation of state VAT regulations in 2005 was far from smooth.
The Indian administration should ready itself for a similar reaction. After all, GST implies a substantially higher burden for many Indian enterprises than the current tax framework. This is why:
- On taxable products and services, India’s dual GST model levies both a destination-based Central products and Services Tax (CGST) and a destination-based State Goods and Services Tax (SGST), with rates varying depending on client location. Currently, most taxpayers register with either the state governments (for VAT) or the federal government (for service tax), and they levy a consistent tax rate based on their company type.
- GST will be implemented in 29 states, seven union territories, and across the country, totaling 37 distinct zones, each with its own tax rate. Any PAN India firm would be required to get 37 GST registrations, and even the tiniest business will be required to file as many as 37 returns yearly. In comparison, currently there are two half-yearly service tax returns. And it is assuming that the GST returns are error-free; adjustments will result in further returns.
- The whole GST compliance procedure would take place largely online. However, today’s business systems must be changed or replaced in order to communicate with the GST Network (GSTN). This might be a particularly burdensome burden for organisations, whether they are already technically skilled or are just getting started in the digital realm.
Also Read: Challenges And Best Practices For Bill-To/Ship-To Transactions In GST
Role of technology and IT systems in facilitating seamless compliance with IGST obligations for inter-state transactions
The Goods and Services Tax Network (GSTN) is a private limited company formed as a ‘Not for Profit Organisation’ under Section 25 of the Companies Act, 1956 (now Section 8 of the Companies Act 2013). GSTN has been established.
It was established primarily to offer Information Technology (IT) infrastructure and services to stakeholders26 in preparation for the adoption of GST. GSTN’s primary goals include the following:
- To support and collaborate with diverse stakeholders in developing IT and communications infrastructure for the successful implementation of any IT-driven initiatives and other government e-governance projects.
- To provide IT and communications-related services to various stakeholders for the implementation and management of various initiatives, including e-governance initiatives such as GST implementation, taken by the Government or any department or agency of the Government.
- To provide IT and communications services to various stakeholders in order to prepare them for aligning their IT and communications infrastructure and processes with those e-governance systems. Initiatives done by the Government or any department or agency of the Government.
GSTN’s organizational structure
The GSTN Board of Directors (the Board) shall have at least two and a maximum of 14 directors, according to the Articles of Association. The GSTN Chairman would be appointed through a joint approval procedure of the Central Government.
Government and state governments, as well as the Board, must choose a Chief Executive Officer (CEO) to run the Company’s operations under the control and supervision of the Board. Under the current organisational structure, the CEO is aided by Executive Vice Presidents (EVP) and Senior Vice Presidents (SVP) who oversee various corporate responsibilities.
GST IT Portal
The GST IT Portal has been at the heart of the GST ecosystem, serving as a single interface for over a crore taxpayers’ GST compliance tasks.
It has allowed tax administration unification between the Union and the States. The GSTN-developed common GST Portal serves as the front-end interface for the complete GST IT eco-system, allowing for the filing of registration applications, filing of returns, and the production of challans for tax payment.
GST payment, IGST payment settlement, and production of Business Intelligence (BI) and analytics. M/s Infosys has been hired as both the system developer and the Managed Service Provider (MSP).
CBIC and state tax departments employ back-end IT systems to conduct tax administration operations, including registration approval, assessment, audit, appeal enforcement, and adjudication. While six27 states and the CBIC have been establishing their own IT systems for tax administration, GSTN has been tasked with developing the same for 25 additional states and union territories.
Also Read: Mastering the GST Portal: Your Ultimate Step-by-Step Guide
IT audit of GSTN
GSTN’s IT audit was undertaken in two stages. The audit’s first phase was carried out between May and August of 2018. The primary goals of the audit were to determine if the IT modules for registration, GST payment, and settlement were adequate.
The distribution of Integrated GST (IGST) among the Union and States complied with the terms of the Acts and Rules regulating the GST regime. Business Continuity Plan (BCP) and Change Management Process (CMP) aspects were also discussed.
- Registration module :In many situations, system validations were not matched with the provisions of the GST Acts and Rules, resulting in critical gaps in the GST Registration module, such as the system failing to validate. Lack of confirmation of important information in Registration (Legal Name, Type of Business, and Corporate Identity Number) with Central Board of Direct Taxes (CBDT) and Ministry of Corporate Affairs (MCA) databases, etc.
- Payment module: Despite being in service since July 1, 2017, the Payment module has operational flaws, such as delays in updating the Electronic Cash Ledger.
(ECL) even after the taxpayer has successfully paid the tax, problems with GST receipt reconciliation, and so on.
- IGST Settlement reports: Due to the non-implementation of appropriate GST modules, such as imports and appeals, all IGST Settlement Ledgers were not produced. This, together with the Inaccuracies in the settlement algorithm, as well as limitations in the GSTR-3B return in capturing all of the information necessary for settlement, impacted the settlement of monies to the Centre and various States.
- Scope of IT audit of GSTN: To determine if the GSTN Refund and Returns modules were in accordance with the provisions of the Acts and Rules regulating the GST regime, as well as the System Requirements.
To assess the E-Way Bills (EWB) module in the GST ecosystem, which was built by the National Informatics Centre (NIC) under the supervision of GSTN. Follow-up audit on the actions done in response to audit findings identified in Phase I of the IT audit.
Audit Criteria
Audit criteria for this IT audit were developed from relevant parts of the CGST Act, IGST Act, UTGST Act, and SGST Acts, as well as their related rules and regulations.
Notifications from tax authorities such as the CBIC Business process of Refund, Returns, and e-way Bills modules SRS.
About Refund module
Under GST, a refund is any sum owed to the taxpayer by the tax administration. The refund provisions in the GST law aim to streamline and standardize the refund procedures under GST.
Report No. 1 (Indirect Taxes – Goods and Services Tax, Central Excise and Service Tax) 36 regime. Sections 54 and 77 of the CGST Act, 2017 and Rules 89(1) and 89(2) of the CGST Rules, 2017 provide an overview of the numerous conditions that may necessitate a refund claim.
The table below displays the key refund categories and the specifics of refund applications filed through RFD-01A29 up to September 29, 2019.
| Refund category | Number | Amount (in crore) |
| Export of goods / services- Without payment of Tax,
i.e., ITC accumulated |
2,13,309 | 78,751 |
| ITC accumulated due to inverted tax structure (clause (ii) of proviso to section 54(3) | 1,06,245 | 23,683 |
| Excess balance in ECL | 2,05,866 | 5,349 |
| Export of services- With payment of Tax | 19,252 | 3,901 |
| On account of supplies made to Special Economic Zone (SEZ) unit/ SEZ developer (without payment of tax) | 8,253 | 3,136 |
| On account of supplies made to SEZ unit/ SEZ developer (with payment of tax) | 21,727 | 1,850 |
| Excess payment of tax, if any | 5,916 | 561 |
| Supplier of deemed exports | 1,521 | 542 |
| Recipient of deemed export | 2,024 | 492 |
| Tax paid on an intra-State supply which is subsequently held to be inter-State supply and vice versa (change of Place of Supply) | 130 | 156 |
| On account of assessment/provisional assessment/ appeal/ any other order | 919 | 60 |
| Others | 22,507 | 3,772 |
| Total | 6,07,669 | 1,22,253 |
Audit Objectives
GST information technology audit The Refund Module was carried out to
- Determine if the GSTN-based Refund Module was appropriately designed and implemented on time.
- Determine if the GSTN-implemented Refund module complies with applicable sections of the GST Act, Rules, and Notifications as amended.
- Determine if the integration of the two IT systems (GST and Customs) for the refund of IGST on goods exported has been efficiently operationalized.
- Determine if the implementation of the Refund Module has improved the taxpayers’ convenience of doing business.
Rollout of Refund module
The GST Portal’s refund module anticipated online filing of refund applications by taxpayers and subsequent electronic processing of claims by the tax administration. Because refund is a fundamental taxes function, this
From the beginning of the GST deployment, functionality was meant to be rolled out. However, when the GST was implemented in July 2017, there was no Refund module. The refund module was launched on the following dates:
- In the case of IGST refunds on exports, the automated method of refund sanction was implemented on the GST Portal in October 2017. This entailed integrating with ICES, which employs automated verification of Refund requests.
- Until November 2017, there was no functionality on the GST Portal for other types of refunds. From November 2017, the GST Portal made it possible to file refund applications online taxpayer. Following that, the taxpayer would print the application form and send it to the tax officer along with supporting papers. Following that, the tax officer would process the refund claim in files rather than the portal and sanction refunds. This was effectively manual processing of the refund approval procedure, needing unnecessary interaction with a tax official rather than a faceless IT interface. This system was in place until December of 2018.
- Following that, in December 2018, a feature in the GST Portal was enabled that allowed refund application form GST RFD – 01A, together with all accompanying papers, to be submitted electronically. Following that, the documents were to be electronically delivered to the tax officer’s dashboard.
- This manual refund processing lasted until September 26, 2019, when GSTN established a comprehensive electronic refund processing environment beginning with tax refund processing. Department to centralized distribution using Public Financial Management System (PFMS).
GSTN should have prioritized and accelerated the refund module because it is critical and important to taxpayers. Proper planning and collaboration among stakeholders may have accelerated the launch of the refund module.
Conclusion
The common individual is inexperienced with taxation and technological ideas. The administration of the goods and services tax is so thorough and logical that it looks to be a difficult task to comply with it using technology. However, like in every other industry, technology has improved and found its way into GST. Binary Semantics, a pioneer in seamlessly linking the Goods and Services Tax (GST) system with cutting-edge technology to make GST compliance simple and quick, reveals the profound relationship between GST and Revolutionizing Technology.
Businesses must make significant changes in their IT infrastructure to enable a smooth transition. To properly create and maintain compliance, every taxpayer and tax professional, even those in the most distant corners of India, will need to be IT trained.
Otherwise, noncompliance will not only result in legal fines but will also have a negative impact on corporate operations and relationships. In fact, each taxpayer will be assessed based on their GST compliance, with the results made public online. Naturally, a lower GST rating might have severe effects, such as company loss, and this could happen quickly.
Also Read: GST Certificate Download: How to Download Without Login?
FAQ
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How does implementing advanced technology contribute to better IGST compliance for inter-state transactions?
Utilizing advanced technology enables automated tracking, reporting, and compliance with IGST requirements, reducing manual errors and streamlining processes.
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What role can IT systems play in ensuring accurate calculation and payment of IGST in inter-state transactions?
IT systems can perform real-time calculations, ensuring accurate IGST amounts are determined based on transaction details and current tax regulations.
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How can businesses leverage technology to stay updated with ever-changing IGST regulations for inter-state trade?
Automated systems can be programmed to monitor and update as per changes in IGST regulations, ensuring businesses stay compliant with the latest requirements.
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In what ways do integrated IT solutions enhance transparency in IGST compliance for businesses involved in inter-state transactions?
Integrated IT solutions provide a centralized platform for data management, enhancing transparency in reporting and making it easier for authorities to verify compliance.
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What are the potential risks and challenges in relying solely on technology for IGST compliance in inter-state trade?
Risks may include technical glitches, cybersecurity threats, or system failures. Regular audits and updates are necessary to mitigate these challenges.
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How can businesses ensure data security and confidentiality when using IT systems for IGST compliance in inter-state transactions?
Implementing robust cybersecurity measures, encryption protocols, and access controls are crucial for safeguarding sensitive tax-related information.
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Are there specific software solutions tailored to streamline IGST compliance processes for businesses engaged in inter-state trade?
Yes, various ERP (Enterprise Resource Planning) and tax compliance software cater specifically to managing IGST obligations, offering features like automated reporting and audit trails.
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What impact does the digitization of invoices and documentation have on IGST compliance for inter-state transactions?
Digitized invoices and documentation ease the process of record-keeping and facilitate quicker audits, contributing to efficient IGST compliance.
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How can technology aid in the reconciliation of transactions to ensure accurate reporting and compliance with IGST requirements?
Automated reconciliation tools can match transactions across different systems, reducing discrepancies and ensuring accurate reporting for IGST compliance.
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What measures should businesses take to train their workforce in utilizing IT systems for seamless IGST compliance in inter-state transactions?
Providing comprehensive training programs on the use of IT systems, updating employees on new features, and establishing a support system for addressing queries are essential for successful implementation.
