KPMG Presents The Blueprint: Business in the New Normal

1. Increasing compliance
With the onset of new unique financial instruments and business models, the government has tried to keep up by creating a more comprehensive compliance system. However, this has only led to a significant increase in the number of compliance for large organisations. From a practical aspect, the Indian government is pushing for e-invoicing, similar to the process adopted by 60 other countries. The e-invoicing process mandates that every tax invoice should be registered or validated through a government-controlled IT system. The chief objective is to keep track of every transaction that a company enters, reducing the chances of potential fraud and enhancing complete transparency. Tax technology is a subset of e-invoicing since computing taxes will be automated when generating the invoice. It’ll also be necessary to match the taxes with these government-registered e-invoices.

2. Volume of Data
With each transaction incurring some form of tax liability, organisations might face challenges in using manual systems to keep up with the volume of tax processes. Following a meticulous tax filing system establishes the integrity of the organisation by ensuring efficiency in processes and appropriate data storage. Thus, an automated tax system is significantly helpful when dealing with large data volumes.

From a practical aspect, purchasing raw materials could generate massive transactions. Getting input credit for such transactions helps the organisations avoid unnecessary losses. Nevertheless, there will be errors working in manual systems, which might result in the company losing out on tax credit. Furthermore, as the government moves to more technology-driven methods of filing taxes, the manual processes might miss certain transactions and give rise to unnecessary enquiries. The technology needs to adapt to the regulations as presented in the recent budget, and all recurring transactions impacted by it need to be rapidly updated.

3. Integrated Cycles
The primary focus for any organisation’s smooth functioning is to achieve efficiency and accuracy with its internal processes. Most cycles of an organisation are related to each other in some form. Even in terms of tax, the TDS portion of the payroll process, the professional taxes, and the TDS for consultants are often interlinked. At the same time, the GST for purchasing assets and GST collected while making sales are interlinked. Automated tax procedures help seamlessly integrate these cycles to create an efficient internal system.

4. Match the tech-driven government resources
Most of the government’s processes, especially those related to tax compliance, are now embracing advanced technology. The TDS deducted is automatically reflected in the income tax of the payee. Every year, these portals are updated in compliance with the regulations of the annual budget. Even GST transactions are being linked to the income tax portals to ensure a complete and accurate match of each transaction between what was filed in the GST returns and what is filed in the Income Tax Returns. Organisations will have to adopt tax technology to effectively manage their taxation procedures to keep up with these advancements.

Things to watch out for before adopting Tax Technology

1. Why should your organisation shift to tax technology?
The leadership team of any organisation should always first understand why the organisation needs to shift to a more technologically-driven tax system. This will help the organisation focus on the practical long-term benefits and risk management rather than looking at only the costing aspect.

2. Which areas should adopt tax technology?
Next, the management must understand which areas of the organisation need to be integrated with technology and to what extent. Most recurring transactions are the ones that should be automated first as well as those that are more prone to human error.

3. How can your organisation seamlessly adopt tax technology?
Lastly, it's vital to understand how tax technology can be adopted. Technology might not be readily available for customised processes. The accuracy of the technology is another integral aspect to consider while also understanding how the tax technology can be frequently updated to match the latest regulations announced in the budget. This plays a prime role in ensuring a smooth transition to tax technology while continuing business operations.

While adopting tax technology is gradually becoming more of a necessity than a luxury, it is crucial to note that the source data most often decides the outcome's accuracy for any form of technology. Therefore, understanding the tax technology adopted is essential for using it efficiently. As the number of technology-driven businesses in India rise, it's necessary to jump on the bandwagon in time to make the most of the latest innovative opportunities presented.