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GST to help government run a legitimate economy

In a chat with VARINDIA, Tejas Goenka, Executive Director at Tally Solutions has vividly described GST, reasons behind its introduction, the technology that is embedded in the new tax format, mechanism of GST and compliance of Tally with all the industry segments  

Alike VAT, Goods and Services Tax (GST) is a new kind of indirect tax merging some of the existing taxes to a single tax. Trade across state and tax on tax are the two major reasons that have triggered the government to introduce this new type of law, GST. With its introduction in India it is expected that the burden of tax will become less.     

“More noise has been made about GST theoretically than necessary. It is a new kind of Tax but when we actually read the law, we understand the situation. The government is very clear about it and there are two major reasons behind introducing GST; first, trade across state is very difficult and second tax on tax happens as at centre there is tax on certain things and state tax on certain things - Centre tax on Excise and Service tax and state tax on VAT. If you are manufacturing then one has to pay excise tax and then again VAT on excise tax. This means the charge of the tax is little bit more. With GST the expectation is that a manufacturer will charge GST and others will also charge GST but there one needs to pay tax only on the value addition. So the tax on tax is removed.  Secondly, the trade between states should become easier,” says Tejas Goenka, Executive Director at Tally Solutions. 
Technology & GST
In today’s world everything is being done with the help of technology. Similarly, GST is also driven by technology. The concept behind GST is invoice matching. It is expected that this system of invoice matching will reduce the fraud in taxes.  

“The world has moved into technology at a faster pace in last 10 years. The large big change was the intent behind VAT which is also a technology driven law but at that time one could not imagine what kind of technology was needed. During budget, Finance Minister said that if you look at demonetization then people will start recognizing where the money is. Only 5-6% tax is being paid by the people which is less than what they are supposed to pay and there are simple ways to get over it. So GST has introduced a concept of invoice matching. The concept is very simple, if I sell a handset to you then will give you an invoice and suppose the cost of the handset is Rs 10,000 and assume that GST will be 20% so Rs 2000 of tax you have to pay me. The government does not want to know the total sales and purchase of the month, it only wants to see the invoice that you have paid Rs 10000 plus Rs 2000 of GST to me. When the invoice is accepted or rejected by you then the government is sure that both parties are agreeing who has to pay what tax. Here the fraud that happens in tax will reduce. The system of invoice matching that is expected to help the government make sure that the economy becomes a legitimate economy,” explains Tejas. 

How GST works
The government is asking to book the sales and purchases of every month which makes easy to calculate the tax liability. 
“In GST, government is trying to say that please upload all your sales either everyday or on 10th of every month. The moment I upload all my sales, the only thing need to do is accept the entire amount that I have sold to you. All my sales become your purchase, you can accept the purchases or decline or modify it. Now every transaction will either have acceptance, rejection or a modification. If I have to do this on 10th of every month then it cannot be done without technology. For me I am just building a system with GST which will basically match invoices and therefore yours and mine tax liability will automatically be calculated. All you have to do is pay and sign,” states Tejas.  

As GST is based on invoice matching it is impossible without technology. So, for that government is encouraging the portal based system build on API system. The APIs will be connected to accounting software and work becomes easy.  

“The reason why GST is important is actually the whole law is based on the concept of invoice matching and it is impossible to do it without technology. According to government, if you are selling a phone please upload that invoice and if you are uploading that invoice you cannot be entering it in your Tally or excel sheet and cannot be then entering it into government portal and upload it. So please enter it into one place and from there itself you should be able to upload. Typically the government is pushing the portal based system. And with GST, they are very clear and building this API based system. Now the APIs will connect the accounting application in which you are doing entries and it will then allow the business to operate much easier. Whatever the transaction entries that took place, it will automatically showup at the backend of GST. Our role is we provide accounting software and you use Tally for invoices and Tally is already connected to GSTN. Therefore your work becomes much easier,” he adds.

Tally compliant with market
Tally as an accounting software is compliant with every business. A major portion of the market use Tally as their accounting software. With time people are looking for specific solutions so the company has to focus on that.     

“If you look at the number of business that needs to be compliant, businesses that are automated, 80-90% of the market is ours from an accounting point of view. The focus has to be, if I look at the next few years, people are asking for more specific solutions for them and they want them out of the box. There are some specific industries that are unique like retail. We have POS billing but we are not the preferred brand for many people. But the market is also very small if you want to go vertical specific,” says Tejas.

 Tally will remain a horizontal player and will also focus on some the specific segments. It observes that retail is a segment with immense potential in coming years. The company will also put in its efforts into it.   

“We will definitely believe that we will remain a horizontal player for long time and we will take select segments and focus on them. We think retail has a potential to become very large. Even though the amount of sales today are very low but the moment you go with the next 3-4 years and the effort that the government is making like to get digitized, cashless people will want something which will work in less time. And to get there is what we need to put our effort into,” adds Tejas. 

Channel Partners
Tally has a huge partner base across India and they contribute a major portion to the company’s total revenue.  
“Partners play a very important role for us. If we consider the entire revenue of the company as 100% then 95% of the revenue is contributed by the Partners on the books. Actually 99% is contributed by Partners. Very few people go to our website and buy the software. We have over 25,000 partners,” asserts Tejas.  

Tally- Aspiring to be a global brand
Tejas aims to serve people by helping the entrepreneurs across the world. He is also hopeful that Tally in coming years will no longer be an Indian brand but a global brand. The company is constantly investing in few countries like Middle-East, Bangladesh, Nepal, Indonesia etc.  

“The reason I joined the business is that there are 7 billion people in the world today, there are probably about 150 million entrepreneurs in the world today, after 10-15 years the number of entrepreneurs will increase and you can serve 7 billion people through them. It is basically like how much of a positive impact you can have on the world sitting out of India. I think in next 15-20 years, Tally will no longer be an Indian brand and become a global brand.  For last few years we have put our investment into Middle-East specifically UAE, Saudi, Oman, Bahrain, Qatar, Kuwait. We have our office in Nairobi also which we started two years ago. We operate out of Bangladesh and Nepal but it is more for India. We have also deputed people in Indonesia,” concludes Tejas.