The rolling out of GST since July has created more confusion than ever for taxpayers and tax practitioners as software providers are blaming GSTN is not ready and GSP are unclear of their service charged rates to taxpayer/practitioners direct or indirect via ASP software providers.
As the first filing was due on 20th August, when understandably no GSP or ASP was able to assist the taxpayers to prepare and submit GST returns online. It was speculated that the first few month filings can only be done manually via GSTN direct or worse paper forms which really derail the digital concept and disallowing for data matching and reconciliation of the reports. For how long or until GSTN is ready with digital service, the process of filing GST Return is a myth to tax payers and their advisers, which can then translate to non-compliance if not carefully considered.
From the experience of other countries that had already implemented GST, the readiness of government system had always been a hit and miss at the beginning but will be in place over time. More so on the concern of economic impact which is definitively more significant for smaller businesses with the majority coming from start-up compliance cost including business and GST registration, learning about GST, learning new procedures, getting advice about GST from the professional advisers, discarding out-of-date stationery or receipts to conform to the requirement of GST and purchasing new or updated software to capture GST data.
Accounting firms in order to provide GST services for their clients must take on the ownership of IT system to manage their internal process as well as managing the clientâ€™s compliance reporting obligations and their IT system to ensure the management of 37 returns per year and not the once a year as they previously dealt with.
While most accounting software providers now claimed to be GST compliant, meaning they have customised to collect and maintain GST data, however whether or not taxpayers or advisers can file the returns through the software is still an uncertain possibility.
In his consultation with Chartered Accountants colleagues, CA Raj Chawla from Raj Chawla & Associates, New Delhi said some of the firms wanting to provide GST Return services for their clients in particular are finding itâ€™s very fearful not knowing how their clients will comply without any clarity from software providers whether or not they will include within the platform filing capability. Most had indicated that their software cost is certain however GSP fee is unfixed and will be added on.
â€œThatâ€™s causing huge frustration and certainly difficulties in managing client expectations and deadlinesâ€ CA Raj Chawla.
Application Service Provider (ASP) are referred to accounting software that taxpayers use to capture and manage GST data which also generates GST reports ready for filing. Taxpayers are accustomed to paying for these service providers but to pay additional and scaling service fee for GSP is harder to explain which realistically to meet GST compliance, the fee should be included by ASP as the complete package for filing reports generated from the software.
Currently there is no uniformity in GSPâ€™s pricing, however considering the role of the GSP from taxpayersâ€™ point of view when meeting GST compliance; it is purely a tollgate without any direct service to GSTN or for the taxpayer. A GSP does not need to invest in service application infrastructure nor contribute to GSTN for the collection of GST. However, GSP have been busy building their toll booths to collect GST reporting passage fee which is dependent on API calls when tax payer is validating with GSTN for data matching and reconciliation and or filing.
Without marketing fee nor customer acquisition cost nor the need for support staff, GSP fees comprises of a set-up fee and each interaction with GSTN via their portal which is referred to as API call, is charged between Rs 1-7 per API call with each API call restricted on data or number of invoices to ensure that taxpayers with large number of invoices are paying more for meeting their GST reporting obligation.
Generally the average number of API calls required for a GST report to be filed by a business with up to 100 invoices per month is estimated about Rs 65-250 depending on rate of Rs 1-7 per API call, the number of data mismatched requests sent to validate data.
The reality is most business has much more than 100 invoices per month and this is where the issue lies as tax practitioners and tax payers will face the music from GST as well as GSP when they file their GST Reports.
Some of the initial batch of GSPs is now also providing ASP services for tax payers who want to file their GST reports direct without going through an ASP and the rate of filing is cheaper than that offered to taxpayers who file their GST Report via an ASP. Some retail GSP were quoted at 30 paise per invoice if taxpayer directly registered with them as compare to the Rs 1-7 per API call via ASP without the mark up.
The question here is will there be a need for the existence of ASP in the future? With thousands of accounting and related software providers are now converting to ASP status to connect to GSP and extend the filing capability. Or will accountants convert their clients to GSP software to file direct to be cost effective when filing GST reports.
Majority of the initial 34 GSPs do not have previous tax compliance or finance software development background now providing services direct to taxpayers to meet GST reporting obligations. You wonder if the technology infrastructure is really quick and cheap to set up and without any prior accounting software development knowledge, why is the charge so high to taxpayers. Couldnâ€™t the government provide such service directly without charge so taxpayers can comply with GST obligations without further costs?
Introduction of GST is likely to have some direct impact on the standard of living for Indian households which will eventually leads to higher prices, lowering the purchasing power of wages, and might lead to a reduction in the incentive to work. While greater transparency of GST collections would lead to loss in living standards, worse if the collection process also incurs significant cost, one wonders what and why they do business at all!