66% CIOs Are Not GST Ready and Need Time to Ensure Compliance: DynamicCIO survey

Recently, Finance Minister, Arun Jaitley ruled out giving any further extension to the deadline of Goods and Services Tax (GST) implementation. Addressing a news conference, he also said that Indian small business has been given enough time to prepare for the July rollout and that there was no excuse for companies not to be GST ready.

Are Indian Businesses Ready for the GST Transition?

The overwhelming answer is ‘no’. And, that they would need time to make the transition. This is the outcome of a wide-ranging survey conducted by dynamicCIO among CIOs. We administered a questionnaire to CIOs across industries and verticals, wherein we tried to get a sense of the basic concerns and requirements that CIOs have vis-à-vis GST implementation and compliance, and received responses from 75 CIOs.

“There are eight parallel tracks going on in the group. It has caused huge amount of pressure on the IT teams. In my journey, it is probably one of the toughest projects as far as IT is concerned. For example, I am personally looking after the entire project on GST for the whole group. There are 54 legal entities, 70+ GSTIN IDs and almost similar number of locations. There are issues like supplier integration, customer presentations, internal preparation, dedicated supplier training, etc. We have to indulge in huge data collection process for the suppliers, dealers and customers. This is, to me, a countless job with never-ending closure. It requires huge efforts with very little results,” says Parna Ghosh, Vice President and Group CIO, UNO Minda Group as he expresses the sentiment commonly shared by most of his peers across the industry.

Why CIOs?

They are in a unique position in the organization hierarchy and occupy a central position in the scheme of technical things. They are not only purchasers of software and hardware but are also administrators of IT maintenance, implementation and security. They are people who make things work. They are the keepers of technology. For large organizations looking to be GST ready, they are the points-people tasked with ensuring compliance, technologically. They are in a decision-making role and would play a crucial part as organizations scurry around to understand, assess, plan, purchase and implement the tax reform.

Survey Results Decoded

-Most of the CIOs said that the GST rollout will impact their lives to a large extent. As many as 90% believe that the new tax law has or will impact their lives to a large extent (68.18%: greatly {needing overhaul of the software}; 31.82 %: substantially; 0%: not much impact {just like any other change}). Around 68.18 % of CIOs said that the GST rollout will involve a lot of changes to the existing systems and business processes and may even entail acquisition of new hardware and software, along with a new approach to taxation.

“There is the GSP/ASP/GSTN data upload/reconciliation and a host of other activities for which even basic testing is pending in most enterprises. A lot of companies are yet to decide whether to go for a GSP who is also an ASP or decide an ASP and then see preferred GSP or vice versa,” says Vijay Sethi, CIO, Hero Moto Corp.

-Responding to the question of how long the GST transition would take, an overwhelming majority of the CIOs pegged it at 1–6 months (72.73 %), whereas another 15.91% of the respondents felt it would take between 6 months and 1 year. A small group (11.36%) thinks it will take less than 1 month.

“I expect lot of work for IT teams for the next 3-4 months, as there will be lot of learning that would need to be incorporated after the rollout. As users come out with more business scenarios that were not thought through during earlier rounds of testing, there will be work to be done. IT has to work to incorporate clarifications regarding various rules. On whether the data downloads and uploads will be as smooth as being projected by most ASPs/GSPs, I think one should just go back and look at most software implementations. Despite best of global vendors and multiple rounds of testing there are plenty of bugs,” adds Sethi.

Are Industries Justified in Demanding Extension of GST Rollout Dates?

No wonder, industries have been lobbying with the government to get the dates extended. The enterprises have a point. Fact is GST rollout will bring about radical and sweeping reforms in the way indirect taxation is practiced in India. The results could also be an indication of the varied nature of industries or premature assessment.

Malaysia which implemented the GST on 1 April 2015 is still in a state of chaos although it’s been 2 years. A number of financial experts told me that the country will need another 5 years to really settle down and implement the new tax regime in letter and spirit. One can very well imagine what can happen with a country like India, where the scale and complexity is many times more. It is anybody’s guess how long the complete implementation will take.

“The complexity of the tiered structure and nuances of various Indian States makes a smooth implementation a difficult task. Hence, the lack of preparedness may cause short-term disruption to businesses. The GST implementation may also create some inflationary pressure, as the experience in Malaysia has shown,” said Ammar Master, LMC Automotive’s Senior Manager, and Meg Sunako, LMC Automotive’s Senior Economic Analyst, in an article in The Hindu.

-The biggest shocker came in the form of answers to the question: How prepared are you and your IT organization for the GST transition, both in terms of software and hardware? The overwhelming response was that the CIOs and their companies were in the process of preparing for the transition and that they will need time to streamline their processes with the GST compliances (65.91%). While 31.82% said that they were ready for the July rollout, 2.27% said that they will take appropriate action after GST rollout.

Enterprises are still struggling to come to terms with the new rules and regulations of the GST and their demand for more time is justified. Most of the survey respondents feel that they are still preparing for the incoming tax law, in effect, indicating that they are not ready as far as compliances are concerned.

One of the major hitches in the GST has been its uncertainty of implementation. After the tax law got the nod of India’s Parliament with full ratification, there should have been a period of at least 2–4 years so that enterprises get to know the intricacies of the new law. A number of industry insiders feel that enterprises were not given enough time to prepare for the radical tax reform.

-Will the GST rollout necessitate training of IT and non-IT staff? If so, what will be its extent? Around 27.27% of the CIOs think that substantial training will have to be undertaken of staff. On the other hand, the majority view was that improvement modules will be adequate (68.18%). A mere 2.27% believed that no training would be required.

 -Responding to the question of how much the GST will impact enterprise IT or ERP, the majority of the respondents said that the impact would be great, adding that changes would include a complete overhaul of the systems (43.18%). Another 50.00% are of the view that the new tax reform will have substantial impact on existing IT infrastructure and that new versions of the old systems would be adequate to deal with the wide-ranging reforms. A small number of CIOs (6.82%) think that there will be hardly any impact and not much change would be required except for minor alterations.

Conclusion: Organizations need time to implement the GST

“In my view, it’s like the Great Indian Weddings where, till the last minute before the wedding procession arrives, there is utter confusion and everything seems pending and the bride’s family remains tense on how things will be done. But in the end somehow things fall in place and everything goes well. The GST case is quite similar. All IT teams and CIOs are quite tense but will somehow manage in the end,” opines Sethi.

The GST rollout will happen by 1 July 2017. The reform will particularly affect enterprises. The tiniest of changes in a tax chain leads to a veritable domino’s effect, which means that it will affect the whole structure of revenue generation and collection, from the top to the bottom. Businesses, therefore, need to be prepared for the transformation. They have to know a number of things for running a profitable business: which taxes they are supposed to pay, how the various tariffs and rate slabs work, quantum of taxes and the various procedures needed to be followed for calculation as well as compliance.

(Image Courtesy: Economictimes.com)

Categories: Management

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Muqbil Ahmar

Muqbil Ahmar is Executive Editor at Grey Head Media, spearheading the digital presence of the websites DynamicCIO.com and ...

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