One of the key aspects which the Hon’ble FM focussed on in her budget speech was technological advancements that need to be done to pave India’s way on the global stage. Not only to enhance the manufacturing capabilities but to further augment ease of doing business in India and instill growth of Central Public Sector Enterprises/ financial institutions. The fact that for the first time the Union Finance Minister delivered her budget paperless while moving to a tablet coupled with a new app being used to access all budget-related documents certainly gives away the intent of the Government to set the pace of economic growth with technology at its helm.
The Government has also decided to support the development of a world-class Fin-tech hub at the GIFT-IFSC by providing additional tax incentives that may take the fin-tech space to a new height.
From a taxation perspective, the Finance Minister announced a faceless dispute resolution committee for direct taxes, faceless Income Tax Appellate Tribunal, pre-filled income tax returns, etc. which marked the digitisation in the direct tax arena.
From the perspective of GST and Indirect taxes, the FM reiterated the measures taken to simplify GST compliances by digitising the compliances such as E-way bills, E-invoices, QRMP scheme, nil return through SMS, validated input tax statement, pre-filled editable GST return, etc.
The FM also informed the house about the enhancement of GSTN’s capacity, deployment of deep analytics and artificial intelligence to identify tax evaders and fake billers.
GST Amendments In The Budget Which Has Impacted The Tax Technology Space
It is true that GST is now regulated by the GST council and hence very few amendments were delivered on the GST front. However, from the amendments delivered there were a few which were key with respect to tax technology and may have far-reaching impact namely:
Amendment To Section 16
Section 16(2) of the CGST Act, 2017 has been amended to include one more condition for the buyer to avail Input Tax Credit (ITC) namely:
‘(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;’
Thus, in addition to the four conditions prescribed, now the buyer would have to wait to avail ITC till the time the seller uploads his invoices in his GSTR 1 and communicate the details of such submission to the buyer.
This additional condition is in a way already being followed by the trade-in light of Rule 36(4) of CGST Rules, 2017. It appears that the amendment is brought in to give legislative support to the rule. However, from the technology perspective, it is possible that a few tweaks in an organisation’s system may prove helpful to comply with this legal amendment. This could include a push notification to the buyer as and when a supplier uploads his invoice, an option to the recipient to request the seller to upload a specific invoice (a facility has already been enabled on the GSTN portal which will provide a communication platform for taxpayers, wherein a recipient can ask his supplier to upload any invoice that has not been uploaded but is required by the recipient to avail ITC), etc. However, while this amendment shall plug the fake invoice racket to a large extent, it would also result in an increase in compliance burden on the buyer as numerous reconciliations would have to be carried out to ensure that only eligible credit is being availed. In such scenario, the reliance on technology is only obvious. Invoice reconciliation though can be done manually, and can prove to be an extremely expensive activity in terms of time and effort involved; thus tech-enabled reconciliations are a lifesaver.
Amendment To Section 35 & 44
Section 35 r/w Section 44 of the CGST Act, 2017 requires a taxpayer having an annual turnover exceeding the stipulated time limit to get his accounts audited and submit the reconciliation statement along with a copy of audited annual accounts. This section is amended in order to do away with the mandatory requirement of conducting audits under the GST Law. Further, now the annual return can be self-certified by the organisations themselves before submission.
This amendment may provide some breather to the organisation with regard to the annual audit being omitted. However, on the other hand, the responsibility and onus of the management shall increase multi-fold. No mandatory audit means no external checks or certifications from experts leading to a complete self-governance regime. The organisations would have to warrant that the tax positions adopted, the taxes paid, ITC availed, and data furnished as a part of the GST compliances are accurate and fair themselves. The maker-checker concept thus goes away. Only during assessments and departmental audits, the management may discover errors and omissions; but by then the penal consequences may have triggered leading to long-drawn litigations. To help the organisations in an uphill task like this, technology can come to aid. Though the manual maker checker concept may have disappeared, the same can be done with the help of technology. Using technology in day to day compliances shall reduce errors and mistakes to a large extent which otherwise cannot be ruled out due to manual intervention.
The role of technology in the taxation arena is increasing day on day. The re-iteration of the same by the Union Finance Minister in her budget and in the policies also establish the same. Slowly but gradually, we are moving towards the global standards of e-compliances and e-governance which go hand in hand. E-governance has already disrupted the traditional methods and has forced businesses to look beyond manual compliances. It may not be wrong to say, the time to switch to technology was yesterday; however, today is also not too late.