In our previous blog, we discussed about the advantages of computerized accounting vs. manual accounting. 3 months into GST, you would have surely seen many businesses around you choosing to go digital – either on their own or at the advice of the highly knowledgeable community of tax practitioners who are advising businesses across the country to adopt computerised accounts. 

But why is GST such a game-changer here? There are ample benefits a business stands to get out of computerised accounts, but GST seems to have added a whole new set of reasons, all by itself. Let’s explore why computerised accounts has become all the more important, since it can help your business for being compliant under GST:

  • Compliance no longer based on summary, but based on transactions – In the previous indirect tax regime, the return filling used to be based on summary level information i.e. on the total of all transactions in a given financial period. In the GST regime, each transaction will need to be uploaded on the GST portal, and via a set of 3 returns, every tax payer will get to know about his tax liability and the available input tax credit he can utilise to meet it. Given the multiple suppliers and customers, managing compliance at this level is next to impossible using manual accounting. Maintaining computerised accounts will not only allow for accurate book keeping, but also allow quick detection of errors, and a comprehensive compliance experience which can ensure the right ITC for businesses.
  • Dependency on supplier for the right ITC – In the previous indirect tax regime, there was no inter-dependency amongst businesses as far as compliance was concerned. In the current regime, the allotment of ITC on provisional basis and consequently on a final basis is dependent on the suppliers of a business. Only if the supplier files his returns properly and pays the requisite tax against those returns, will a business avail the right ITC. There are bound to be situations, where there may be disputes, missing invoices etc. and that can only be resolved via a robust system of online matching of bills. Both pre and post matching, businesses will need to check their books for any errors or non-compliant transactions, and correct potential errors. In order to communicate with one’s suppliers and customers with the right data, maintaining computerised accounts is a must. Manual accounting will surely make the process longer and tedious, which may result in loss of ITC and negatively impact working capital.
  • Revised ITC provisions – Unlike the previous regime, there are a lot of scenarios, in which a business can avail ITC. One most important example is the ability to avail ITC on indirect expenses, which has been introduced in the GST regime, as part of the “furtherance of business”. Similarly, subject to provisions, businesses are allowed to carry over transitional ITC from the previous regime, ITC on capital goods and so on. Only if a business maintains accurate records, will it be able to file the returns correctly, which will lead to the right ITC being allocated. It is therefore no surprise, that computerised accounts will be much more useful compared to manual accounts is concerned, as it will allow for the right records to be fetched, quickly and efficiently.
  • Increased compliance activity – For any regular trader, 1 monthly return and 1 annual return in the previous regime, has now made way for 3 monthly returns and 1 annual return in the GST regime. The jump from 13 to 37 returns in the year, is a huge increase of compliance activity, which will keep businesses on their toes on the 10th, 15th and 20th of each month. Although some of the data is auto populated, time and effort is required to ensure proper compliance. Needless to say, such a jump in the frequency in compliance activity cannot be handled by manual accounting systems.
  • More touch-points with the tax consultant – Similar to the previous indirect tax regime, businesses may choose to either do compliance in-house or hire the services of a tax consultant – who could be a CA or a GSTP i.e. GST practitioner. Given the close scrutiny which is required to be done at the transaction level for the purpose of compliance, it is a given that businesses will be sharing their business data more often with the tax consultant, so that the audits are done properly and returns are filed in time. Computerised accounts will allow secure sharing if the requisite business data, which can be viewed by the tax consultant in his system, reviewed with ease and shared back before the final returns are filed. Doing this check manually will indeed be extremely difficult.

In short, these reasons are bound to drive the need for computerised accounts to small businesses across the country. Taking this all important decision, will allow businesses to handle their compliance in a hassle-free manner and ensure that their credibility and working capital both are taken care of effectively in the GST era. However, each business will need to evaluate whether it is the right time to go for business automation, but more about it, in our next blog.

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Pramit Pratim Ghosh

Author: Pramit Pratim Ghosh

Pramit, who has been with Tally since May 2012, is an integral part of the digital content team. As a member of Tally’s GST centre of excellence, he has written blogs on GST law, impact and opinions - for customer, tax practitioner and student audiences, as well as on generic themes such as - automation, accounting, inventory, business efficiency - for business owners.