GST Impact Study, GST & IFC Mapping & Using Data Analytics in GST. A generic approach of doing a GST impact study which can be adapted as per specific requirements of the assignment is given below. This is not comprehensive but only illustrative. check complete information for Impact of GST in India from below….
GST Impact Study, Using Data Analytics in GST
1. Understand the current IT environment and application software
The first step is to obtain understanding of the IT environment of the enterprise, specifically the application software and information Systems used for processing of transactions. This will provide understanding of the current Information Architecture and how information is originated, initiated, processed and accessed across at different stages. The Application Software which processes all the business transactions could belong to following categories:
- Standard ERP Software of different size and scope (simple to complex),
- Industry-specific software (specific verticals)
- Utility Software (specifically built for GST compliance)
- Customised software developed in-house or procured from vendors.
Depending on the category and type of application software, the approach to GST compliance could vary. In case of standard and industry-specific software, vendor may include GST features, and then focus would be on testing whether features are adequate and are properly mapped to enterprise requirements. In case of custom-built software, GST features have to be added or done by using utility software. In such a case, GST features required for enterprise have to be prepared and tested to ensure compliance
2. Mapping Business Processes and GST Compliance requirements
The constitution of the entity, type of business processes and transactions which are facilitated through existing information systems (both manual and automated) have to be studied to map what is required as per GST, current features, identify gaps between the two and provide appropriate recommendations. Some examples of key business processes to be reviewed are briefly explained
a. Procure to Pay (P2P): P2P is the process of obtaining and managing the raw materials needed for manufacturing a product or providing a service. It involves the transactional flow of data that is sent to a supplier as well as the data that surrounds the fulfillment of the actual order and payment for the product or service. The changes required in each of the sub processes of this process covering entire life-cycle from point of order to payment have to be studied to identify gaps and provide recommendations
b. Order to cash (OTC or O2C): O2C is a set of business processes that involve receiving and fulfilling customer requests for goods or services. It is a set of business processes that involve receiving and fulfilling customer requests for goods or services. There are multiple sub-processes such as receipt of customer order, fulfilment of order or service by scheduling it, shipping of order/providing service, generation of invoice/delivery note, collection from customer and recording of transactions at different stages. The specific sub processes as applicable to the enterprise have to be studied and specific GST compliance applicable at each of the stages have to be identified and mapped, followed by specific recommendations for changes required.
c. Inventory Cycle: The Inventory Cycle is a process of accurately tracking the on‐hand inventory levels for an enterprise. An inventory system should maintain accurate record of all stock movements to calculate the correct balance of inventory. To businesses that buy, store and sell inventory it focuses on the process of understanding, planning and managing inventory levels, from purchasing through more-efficient auditing. The impact of GST on existing inventory cycle have to be studied and recommendations provided covering both transition and changes in information systems.
d. General Ledger (GL): GL process refers to the process of recording the transactions in the system to finally generating the reports from financial transactions entered in the system. The input for GL Process Flow is the financial transactions and the outputs are various types of financial reports such as balance sheet, profit and loss a/c, funds flow statement, ratio analysis, etc. CAs should study the existing GL processes covering the complete transaction processing cycle such as company creation, setting of configuration, creation and Updation of master, processing of transaction, generation of reports, filing of returns and payments. Based on study and walk-through, gaps and additional requirements for ensuring GST compliance have to be provided as recommendations.
Re-modelling of business structure
As stock transfer is also treated as supply under GST, enterprises may have to relook at their business model and decide whether to continue existing branches or set up new location across local state borders. Further, the option of creating separate divisions in case of different business verticals within state may have to be explored. If an enterprise has different type of business verticals within state, then this would require separate registration in GST regime, the enterprise may have to divide its divisions in ERP software. However, the risk of duplication of ledgers, Vendor master, Customer master & Tax master have also to be considered.
GST & IFC Mapping
The Companies Act, 2013 has brought a new requirement for all corporates to have internal financial controls in place and auditors must comment on the efficiency and effectiveness of such controls. In the GST regime, the business processes such as Order to Cash, Procure to Pay, Inventory, Reporting, etc. require a detailed review to re-assess how the processes work, compliances applicable, new risks due to GST and whether enterprise has implemented required controls to mitigate these risks
Using Data Analytics in GST
The proposed GST system requires matching of tax credit not just bill by bill but also based on each of the line-items of each of the invoice (where tax rates are different). GST requires uploading of all outward supplies, all the inward supplies every month and matching the credits to identify mis-matches and communicate with relevant vendors. Data Analytics and CAATs could be useful for data analysis, MIS and identifying and reconciling the mis-matching so that remedial measures can be taken. CAs must consider using Data Analytics software which have inbuilt features for invoice matching, analysis of purchases and sales with standard templates for GST compliance so that these services can be provided using automation.
GST is a game-changer for ensuring compliance of commercial transactions. Technology is a key enabler and the epicentre for the transformation to the new GST regime. Hence, it is critical for enterprises to understand the impact on compliance and changes required in their existing information systems. CAs can be catalyst and change-agent for ensuring smooth transition to GST by providing advisory and assurance services not only pertaining to interpretation of GST (traditional area) but also facilitate implementation and changes to information systems (new avenues) as required. GST is definitely a challenge but this can be converted as a big opportunity to provide IT-enabled GST compliance services. CAs will have to update their technological skills so that can deliver these new services to their clients.
- Returns Under GST, Returns Under Goods and Service Tax
- GST Definition, Objective, Framework, Action Plan & GST Scope
- When will GST be applicable – GST Bill Passed in Rajya Sabha
- What is IGST – Integrated GST (Integrated Goods and Services Tax)
- GST Rate – GST Rates in India, Worldwide GST Rates – Full Analysis
- GST Forms: Registration, Return Filing, Payment, Challan, Refund, Invoice
- GST Registration – Procedure, Rules, Forms, Documents Required
- Input Tax Credit under GST Law, How to Claim ITC Under GST Law
- GST India: Intro, Taxable Event, Time & Place of Supply, ITC, Valuation
- Role of Chartered Accountants in GST, Role of CA in GST
- Audit under GST Regime, Audit in GST Law (Goods & Service Tax)