At the stroke of the midnight hour on Friday, India will see an unprecedented tax reform, but there is no guarantee of a smooth transition. Even as the government has planned a star-studded rollout in Parliament for the much awaited Goods and Services Tax, there are concerns regarding the technological preparedness of the software for the new system ahead of its launch. This means business could face a bumpy ride , at least for the first few months.
Even as the government insists that the GST, which combines various indirect taxes under one umbrella levy, will change the face of the country, those at the helm of its implementation apprehend challenges ahead. GST Network, , the company providing the infrastructural backbone for the new tax system, had said in an interview that it has not conducted a test of the final version of the software owing to shortage of time.
In an interview to the Business Standard, GSTN Chairman Navin Kumar had said the software had been updated after last-minute changes were made to GST rules, but there was no time to carry out beta tests on this version. This means glitches are possible, even though Kumar said he was “fairly confident” of the system. Technology experts, however, said that this was a big risk to take with a reform at the scale of the GST.
Under the new system, business will have to form tax returns online, at regular intervals. Of the various GST Returns forms (GSTR 1, 2 and 3), only the first has been coded and the process for the rest is still underway. This means that even though the tax regime will be formally launched on Friday midnight, its various elements will be made available in a staggered manner.
Tax experts said this means business owners will have to manage their accounts by themselves, according to the GST rules, till the time the GST portal can be used to file returns – this is expected to happen only be end August or September. The government has given businesses time till September-end to file invoices with the GSTN for July and August, but even if they wanted to do so before that, the system is unlikely to be ready.
Under the new tax regime, while businesses that make Rs 20 lakh will be exempt from GST registration, a majority of businesses will be required to file three returns a month. The first one is for outward supplies, GSTR 2 is for inward supplies and GST 3 is a combination of the first and second.
“If you look at it from the compliance standpoint, people need to do invoicing themselves and on August 20 [before filing the returns] only the invoicing summary needs to be submitted,” said Archit Gupta, founder of ClearTax, an online tax filing company which is providing GST services and has applied for a license to become a GST Suvidhaa Provider, a third-party through which a taxpayer can file returns on the GST server, instead of only using the government to business website.
There could be up to three billion invoices generated every month by all businesses under the GST ambit and there’s no saying whether the GST Network is strong enough to handle the accumulated load of two months once the filing begins in September, Gupta said.
Technology experts, on the other hand, warned of bugs in the system in the first few weeks after the rollout. “I don’t think GST rollout can go smoothly if they haven’t tested the software,” said Kiran Jonnalagadda, co founder of HasGeek, a technology company in Bengaluru. “A large number of submissions will come with incorrect data because people just won’t know where to file what but it remains to be seen if the systems are agile enough to weed it out efficiently.”
He said financial software cannot be rolled out without rigorous testing and checks but if the government is working on a hard deadline, developers could be in for a tough time.
Another problem with the GST rollout is the unavailability of Application Programming Interfaces or APIs, which link the input of one software to the output of another. For instance, Facebook provides APIs for apps like Tinder, which allows people to login through Facebook to verify themselves. These APIs are necessary to link the GSTN to the GST Suvidha Providers.
However, the second and third sets of APIs are still being developed. Jonnalagadda said the problem with APIs was that if any changes were made to them after they’re released, the GST Suvidha Provider, which has to build its software over the API, would have to update at its end too. “One needs to ensure that APIs are foolproof because even a minor change can have a major impact,” he said. “Since they are not released, everyone has to be on the tenterhooks waiting for something to break and then quickly rush to fix it.”
Meanwhile, suvidhaa providers like Hazel Infotech Limited are confident the system will be robust by September even though the first set of trials, held in December, had thrown up problems.
“There are a lot of changes happening on the GSTN’s end so we are trying to keep up with that,” said Mayank Parekh, director of Hazel Infotech. “Return filing can happen only in September and you can’t know if the car runs well without actually driving it, so we will only know how stable the systems are once people actually start filing their tax returns.”