Is your ERP ready for Goods and Services Tax?

Impact of Goods and Services Tax on Enterprise Resource Planning (ERP) Systems

While it’s still gloomy whether Goods and Services Tax is going to get implemented from 1st April 2017, Large enterprises have already geared up for the changes to be made in their existing Enterprise Resource Planning (ERP) systems. Major ERP player such as SAP, Oracle etc have also confirmed to incorporate the GST compliance requirements within their system for existing and new customers.

Data migration is one big task which affect both master data and transaction data and requires extensive deployment of expert resources. Hence it is of utmost importance to examine and identify the impact areas of GST implementation in ERP System.

Here we will discuss some of the functionalities and modules that are going to get impacted under GST regime.

Is your ERP ready for GST?
Is your ERP ready for GST?

Chart of Accounts – Earlier organizations involved in business of selling goods and providing services simultaneously were required to maintain separate account codes for Value Added Tax (VAT) and Services Tax related transactions. These account codes will get merged once GST goes live. Attention must be given while carrying forward the closing balance of tax credit from current account codes to the new account codes.

Master Data Information – Model GST law has defined new rules with respect to charge of tax, place of supply of goods and services and time of supply. The tax rates applicable on various transactions will also differ on the basis of these rules. To address such scenarios, there arise a requirement to revisit the master data such as Customer’s Bill To and Ship To Addresses, Warehouse Information, Inventory and Item Masters etc. This will streamline the tax determination and reporting thereafter in the ERP system.

Tax Rule Engine – Most of the ERPs have a separate Tax Rule Engine which is a master repository of all the logic inside the system. This includes the tax charge rates, tax jurisdiction and tax compliance and reporting. Major re-engineering work would be required to build this tax engine for GST from scratch.

Reporting and Workflows – Another major area of change would be the reporting framework and workflows. All the existing reports pertaining to the current indirect tax regime will become obsolete and new reports needs to be designed as per the GST Law. Consolidation of tax compliance in ERP system will also result in vulnerability on timely submission, as it becomes single point of failure for overall reporting, and hence more robust workflows needs to be planned and implemented.

Bringing out these changes in an ERP environment is not an easy task and organizations should start addressing these changes without any delay for an easy transition into the new tax regime.