By Harshad Shinde
The Goods and Services Tax (GST) was introduced over a year ago in India, and since then there has been a magnitude of changes that have revamped our entire taxation system. In a recently released statement, the World Bank said, ‘the Indian GST system is among the most complex in the world’.
What makes our GST system so complex?
Firstly, the tax rates of Indian GST are among the highest in the world. The highest GST slab of 28% is the second highest rate in the world. What makes it even more complex is the different set of rates for different goods and services. Most countries in the world have only a single rate of GST, however, this possibility has been ruled out by the government. Furthermore, certain goods are outside the purview of the system, adding to its complexity.
Multiple rates play a pivotal role in increasing the cost of compliance since there is a need to classify inputs and outputs based on the applicable tax rates. To add to the woes, return filing in GST has not been smooth sailing.
Digital era of taxation
Digital era tax policies are changing the way businesses are carried out and the need of the hour is a dynamic, user-friendly software. While there are many software’s that will help businesses automate, each business needs to assess whether a cloud-based or on-premises solution suits them best. Although the recording of transactions is similar in both, the cutting edge capability of the cloud is the need of the hour.
Although no system can offer a completely secure network, the security concerns are well taken care of in case of offline software’s as data in that case resides on the desktop or laptop itself. However, instances of breach of security have declined in cloud-based systems, since technology has evolved over the years and issues concerning security and privacy have been resolved to a great extent.
In case of an offline solution, businesses are solely responsible for back up and redundant back up whereas in the case of a cloud-based system, this is taken care of by the service provider. Updating software is also easier in a cloud-based system as there is no need to manually update the system.
Additionally, on-premises solutions are costly whenever there is a need to increase capacity as they warrant additional server power and hardware and software installation. Even then, often such a huge scale-up is not possible as several offline software’s do not support large scale deployment. In cloud solutions, scalability is cost effective due to the pay as you go, model. Given the complex and demanding nature of the GST system, moving to the cloud is the best solution one can think of.
Harshad Shinde is the Product Manager, GST India, Avalara
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