Binary Semantics’ GSTrobo team participated in the India Taxation Summit 2024 at Bengaluru. It was a remarkable event for us that brought together industry leaders, policymakers, and innovators to discuss the future of tax and finance.
Our founder, Suramya Choudary, played a pivotal role as a panelist, sharing her expertise on aligning tax planning with financial goals.
Here is the recap of the summit and how GSTrobo is playing its part in transforming finances with tax-tech solutions.
Aligning Tax Planning with Financial Goals
The discussions were on “Aligning Tax Planning with Financial Goals” where we discussed practical strategies for tax Planning from the indirect taxation purview and its importance for financial stability of organizations.
Key Points from The Panel Discussion
- A significant part of the conversations revolved around the comparison between the concessional rate of tax and the normal tax regime, particularly in the context of Special Economic Zones (SEZs), manufacturing, and start-ups.
- Experts discussed the strategic claiming of ETR deductions to effectively reduce tax rates, where emphasis was put on better financial planning. The panel also explored the relevance of mergers, demergers, and amalgamations and the strategies for utilizing losses against profits.
- Cross-border business restructuring, including acquisitions and hive-offs, was also a key topic.
- The discourse extended to Goods and Services Tax (GST), focusing on the challenges and opportunities in organizational tax planning categorically for the indirect tax space.
- A major hurdle for any organization today is claiming the maximum Input Tax Credits to unlock their working capital, reduce overhead expenses, and minimize tax costs that impact their bottom line.
- Shedding light on bringing automation in account payable processes, the tax and finance head’s need of the hour is finding the existing gaps in their tax planning initiatives.
- Being pioneering tax-tech solution providers, we cannot over-emphasize the importance of compliance as companies try to achieve their organizational goals.
Leveraging Local Software Integrations in Centralized ERP Systems
Most large-cap companies leverage the solutions of centralized ERP framework. But every country or geography follows their own set of regulations which the central system is unable to equip mainly because it follows a common global standard. This is where the customized software solutions like GSTrobo come in. By forming an ecosystem of these local integrations, the scope extends to smoother business operations.
Setting Up Processes for ITC Maximization
While ensuring Input Tax Credit (ITC) maximization within an ERP-driven system, two critical factors were highlighted –
I. Vendor Compliance – Putting Checks at Various Stages of AP Process
As a decision-maker, you want to work with compliant vendors, but compliance parameters often change. While compliance is important, other factors also influence vendor selection. Implementing checks in the ERP at various stages—from vendor setup to payment—ensures early detection of non-compliance at an earlier stage.
II. Vendor Data Validation
Coming to the second factor, it is to make sure that the data our vendor is reporting, viz-a-viz our ERP system data, is accurate.
The Challenge in Doing This
Now, most mid- to large organizations try to follow the exercise of absolute 100% accurate and timely reporting of invoices in the AP process. But this is just not possible/feasible due to enormous volumes and manual data entry. Mistakes are bound to happen. This creates a need for AP process automation, which reduces data entry mistakes at the source.
What’s The Big Holdup
Many organizations do not even have eligibility criteria for a particular good/service in ERPs, which is also important for timely utilization.
Ultimately reducing our burdens of reconciliations right before GSTR 3b filings, which again tend to sometimes leave certain ITC amounts for the next period to claim to lack of time to gather requisite inputs from various branches/vendors.
Ensuring Timely Credit of All Invoices – Key ERP Changes
To achieve ITC utilization with minimal human intervention, we recommend several strategies and changes within the existing ERP systems –
- Vendor Registration Review
To procure a healthy vendor from the get-go, ERP systems should include key health metrics. This involves a comprehensive review of the vendor’s past compliance, with the ERP setting permissible limits for registration. Parameters such as GSTIN status checks, vendor return statuses, and e-invoice applicability should be validated. These checks should apply at all stages, from PO creation to final vendor payments.
- Eliminating The Risks of Wrong Data Entry
Today, the biggest task of any organization is to discover the wrong data even before it enters the ERP system. But how do we achieve this goal?
Well, for this, we have Intelligent Documents Processing (IDP) – the new hero in town. By implementing a sought-after IDP system, it’s very much possible to automate the entire Accounts Payable (AP) process of an organization to make sure we reduce data entry mistakes.
- Implementing Periodic Auto-Reconciliations
Finally, the system needs to perform periodic auto-reconciliations for at least e-invoice applicable vendors, share red flags, or communicate beforehand with such vendors to resolve issues in a timely manner.
Food For Thought – The Balancing Act
The concluding question is, what is the optimal method? One must make the strategic choice between maintaining high compliance versus taking advantage of tax planning opportunities that may carry risks such as show cause notices, appeals, and associated recurring tax costs.
The decision hinges on whether it is preferable for an organization to prioritize stringent compliance measures or to pursue potential tax benefits, which could incur recurring tax costs attached thereto that, in turn, would affect the financial goal of the organization and come with associated legal risks.
But this is where we need the role of technology to show us ways to create this balancing act. It’s with the help of technology that we can reduce the overall costs incurred in whether litigation management or ERP automation to do our compliances accurately and with more ease.
