Making festive season sales easier with GST compliance technology

Although the pandemic has managed to render a cloud of gloom over the year 2020, the holiday season is quickly approaching and there is hope that the festive spirit will help turn things around. Not just for everyone living through lockdowns but also for businesses who have seen better times. With Diwali and Christmas around the corner, businesses are going to put the pedal to the metal and give it their best shot to revive their dipping revenues. This means clearing stocks with heavy discounts, promotion contests, exclusive events and everything businesses usually do in a bid to boost their sales in festive times. 

According to a recent report by Forrester, India’s 2020 festive season will generate $6.5 Billion in online sales which is a year-over-year growth of 34% in online retail spending. In a time when footfalls have drastically reduced due to lockdown measures, a lot of businesses are taking their sales to digital platforms. And while online operations are a convenient and easy way for a customer to shop, a lot goes into setting up an online sales framework. During such a busy season, businesses are in a pickle whether to deal with demand and supply chain disruptions, deliver an omnichannel customer service, sell products overseas, or tackle the ever-changing GST and e-invoicing challenges.

If retail, consumer goods, FMCG, e-commerce companies and brands want to focus on their core operations, one of the building blocks they have to get right is their GST compliance technology so that their finance and tax teams do not get buried in manual work to manage their GST returns, e-way bills and e-invoicing operations. So, where does GST come into account? The answer is literally in every transaction made by a business. Be it a business to customer (B2C) transaction or business to business (B2B) transaction, each time a deal is struck, a business must take the GST implications into account. Let’s have a look at some of those instances:

• Issuing correct GST invoices or tax invoices
• Applying correct tax rate while issuing a tax invoice to the transacting party
• Passing on of the benefit of any reduction in taxes; failure of which can draw the attention of anti-profiteering authorities
• Generating the correct e-way bill to ensure smooth movement of goods from one place to another
• Ensuring the validity of e-way bills; Moving goods without a valid e-way bill constitute an offence and can attract a minimum penalty of ₹10,000 or the tax that is sought to be evaded, whichever is higher in value.
• Adapting to e-invoicing and generating invoice reference numbers for the movement of goods; at present e-invoicing is available on all B2B transactions made by companies having an annual turnover exceeding ₹500 crores. This threshold will be lowered to include all B2B transactions by companies with an annual turnover exceeding ₹100 crores from January 1, 2021, and all B2B transactions by companies irrespective of turnover from April 1, 2021. It is highly likely that soon e-invoicing will bring all business to customer (B2C) transactions under its radar.
• Fulfilling all compliance requirements while carrying out cross border transactions while selling products overseas
• Accurately filing of GST returns using valid return forms 
• Ensuring GST returns are filed within the stipulated deadline 
• Making the payment of tax liabilities, penalties and interest, if applicable, without delay
• Increasing logistics capacities with an updated tax functionality for efficient and error-free taxation and delivery of goods; big players like Amazon have increased their logistics capacity by 20% for India’s Diwali season alone. 
• Making sure all stakeholders including manufacturing, wholesale, retail, distribution, warehousing, stocking, logistics and all parties involved in a transaction are up to date on their tax operations 

What’s new in Goods and Services Tax? 

One might think comprehensive GST automation technology for GST operations are not a priority but changing tax laws and policies beg to differ. In this year alone, the Central Board for Indirect Taxes and Customs has announced several changes in tax law and policies in terms of taxation rates, tax return forms, filing systems, documentation systems etc. It is not only cumbersome to keep up with all of these evolutions under indirect taxation, the penalty for not maintaining compliance can actually cost your business quite a substantial amount of its hard-earned revenue. Let’s understand what kind of changes have been implemented to taxation systems, what businesses can expect in the future and how GST technology can be your business’s knight in shining armour. 

Need to generate real-time e-invoices 

The most recently implemented reform under India’s indirect taxation system, the Goods and Services Tax, is the system of e-invoicing. This system is currently applicable to all business to business transactions by companies with an annual turnover exceeding ₹500 crore but the threshold is expected to be lowered in the next few months and more and more companies will be brought under its net in a phased manner so that by April 2021 all businesses come under its purview. E-invoicing is the electronic authentication of a tax invoice, which, upon validation, will be assigned an invoice reference number. In the month of October 2020 alone, over 65 lakh invoice reference numbers were assigned to tax invoices. Having the right e-invoicing solution can help reduce the time required to generate e-way bills manually while moving goods and integrated GST return filing will keep tax evasion in check. Filing GST returns on time is more important now since the authorities will block the generation of e-way bills if GST returns are not filed by the stipulated deadline. Choosing the right e-invoicing solution will also speed up the return filing process as details of invoices will be pre-populated in GST returns forms at the time of filing returns. While the authorities have been lenient for the initial days of implementation of e-invoicing, they are highly unlikely to be considerate in the middle of the festive season after November 1, 2020. Failure to adapt to e-invoicing is likely to lead to expensive penalties. 

Tax rates, deep discounting and anti-profiteering measures 

Online sales are expected to generate a revenue close to $7 billion during Diwali alone and with products being offered at heavily discounted prices, tax authorities are going to be keeping a keen eye on players, big and small to ensure they do not indulge in any deep discounting or acts of profiteering. This will mean businesses will not only have to keep track of any changes in the GST rate for products (the GST on smartphones was brought to 12% from 18% this year ad smartphones are one of the highest sellers during the festive season), they will have to ensure that the benefit of those reduced tax rates reaches the end consumer. Failure to do so will result in large penalties which will cause quite a significant dent in the revenues earned during sales.

Invoice mismatches and reconciliations

Since the lack of footfalls is making brick and mortar stores move their operations online, an important step to remember while conducting festive season operations is that invoice reconciliation can be quite a challenge when there are multiple channels and points of sale. Usually, businesses will depend on accountancy professionals to manually go through GSTR-2A data and reconcile with suppliers invoices but that can be quite a time-consuming process and not to mention, riddled with human errors. Meaning, additional difficulties while claiming ITC is likely to surface. Any tax expert worth their salt will recommend adoption of tax technology to automate the reconciliation process. Besides, there are various other reconciliations apart from GSTR-1 vs GSTR-2A data. These are GSTR-3B vs GSTR-1, GSTR-3B vs GSTR-2A, GSTR-1 vs EWB, IRN vs GSTR-1, IRN vs EWB, IRN vs GSTR-2A, IRN vs Invoices. 

The tax technology environment is rather dynamic and one that continues to evolve at a rapid pace. Keeping up with changing tax policies, evolving taxation systems and innovation in tax technology can be a challenging task for businesses dependent on manual tax operations. Avalara's India GST e-Invoicing Solution can help you connect multiple data sources like ERP, e-commerce platforms, accounting systems through API integration as well as direct upload by supporting multiple data formats. Avalara will help you with your preparation for the upcoming mandatory e-invoicing regulations by helping you get on the right track. To start with, we will understand your business needs, help you with your ERP integration, get your GST returns and e-way bills automated, make invoice reconciliation a cakewalk, set up GST calculation engine, support GST registration, if required.

Reach out to us and let our team of solution experts help you with your e-invoice management needs.

For more information, check out our India GST e-Invoicing solution announcement.