Tech in Asia
Photo credit: Trocaire.
The developer portal for India’s revolutionary, constitution-amending tax reform on goods and services, the GST, is a good indicator of how the government wants the new system to run.
It’s smooth and organized. Follow the dropdown menu to reach the APIs, where bundles of code reveal what the government hopes techies will use to aid various kinds of taxpayers – things like authentication, return filing, and record keeping.
Enter large software companies, like Tally and SAP. Both are popular in India and are openly using these APIs to create tech solutions, organizing forums to discuss the GST, and publishing content on how everything will work.
Then, there are startups that help file taxes with solutions on the cloud. Their pitch is simplicity. The GST needs to be filed monthly, compliance can be confusing, and the data clunky to store – so why not go with something lightweight?
One is ClearTax, co-founded by CEO Archit Gupta. Archit is excited about the potential the tax brings, but nearly breathless when he starts talking about its close relationship with technology.
“They’re going paperless,” the PhD dropout tells me excitedly. “It’s very progressive for the tax department to be doing this.”
What is the GST?
Direct taxes are charged on income and corporates while indirect taxes are taken from intermediaries, like goods and services.
Currently, both central and state governments apply indirect taxes in India. There are many of these, including excise taxes, which are applied on manufacturing costs, VAT (value added taxes) during the process of sales, and entry taxes between state lines. Rates vary from state to state, making taxes difficult to track, returns hard to manage, and corruption easy to miss.
Take the VAT, which is applied at each stage of a good’s production including its sale. It’s slightly different across states, so a different amount is paid each time it moves across the country. A lack of transparency means people are also paying taxes on taxes – the tax they pay is often calculated from the value of a product plus the tax that’s already been paid on it.
The GST will collapse all of these smaller taxes and present a single rate for all goods and taxes. Its three components are the central government’s GST, the state’s GST, and inter-state GST. Together, they make up the overall GST, which will apply tax on the “supply” of goods, meaning their destination.
Essentially, it will treat India like a single market – except for a few industries like liquor and petroleum.
The execution is where technology comes in.
Cloud-based solution
“The GST in itself is easy, but implementation is tough,” explains Archit. “Because of a huge population and large number of businesses, tech becomes the only way to bring efficiency and scale.”
He is of the belief that a cloud-based system is best equipped to first move taxpayers to the GST and then handle their monthly filings after that.
One reason is scale, he explains. “Start with just invoices. They go from a freelancer all the way up to medium and large enterprises – there may be hundreds of thousands of them. How do you create simplicity at that level?
Another reason is a focus on design and communication. “We present a visual experience that you can understand. How much money did I use this month? How much did I spend? You won’t see that 28 page tax form that the government has shown you.”
Big picture
Well aware of the need for high-functioning technology, the government awarded Infosys with a US$207 million contract to create and manage the tech backbone of the GST network for five years.
The council is still working on figuring out some of the finer details of the bill. At first, it will be rolled out with companies that are making more than INR2,000,000 (US$30,000).
The rate is also being decided. Currently, goods are taxed between 27 and 32 percent and services at 15 percent. It’s predicted that the GST will work out between 18 and 22 percent, so the price of some things will rise while others will drop.
What’s most important is the vision that the GST presents – both for startups and the country as a whole.
“The economy will become more white, businesses will start surfacing real income from real expenses,” says Archit. “It’s a silver bullet.”
If done right, it’s an opportunity for India to see how effective its startups can be at solving big problems. “There’s a souring of attitude around startups,” explains Archit, whose company is five years old and didn’t raise any funding for the first few years. “People are looking at Uber for the job stability. That’s not how it should be. We should take risks. We should put ourselves out there.”
“How many times do you see groups of computer scientists getting together to help fix the tax issue?” he asks me. “This is the place to be.”
See: How ClearTax won investors like PayPal founder, Gmail creator, and WhatsApp biz head
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