A recent survey by EY and SAP India revealed Indian enterprises’ readiness for the new provisions on tax and technology adoption needed to comply with it.
India has been one of the frontrunners in digital technology advancement in the Asia Pacific region, even surpassing more mature and emerging economies. As the digital consumers in the country grow exponentially, Indian businesses’ digital adoption, particularly the finance and administrative function, needs catching up according to recent studies.
In July, an SAP Concur study revealed that only 11{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of Indian organisations have implemented end-to-end digital finance and administrative processes despite the impending need to eliminate the tedious manual processes. This study reflects the most recent survey conducted by EY and SAP India, which showed the Indian enterprises’ digital readiness to comply with the new provisions of Tax Collected at Source (TCS).
New TCS Provisions in Effect
On October 1, the expansion of the scope for the Tax Collected at Source (TCS) provisions, under the Income Tax Act, has taken full effect. The Finance Act, 2020 has amended the provisions relating to TCS to provide that a seller of goods shall collect tax at the rate of 0.1 per cent (0.075 per cent up to March 31, 2021) if the receipt of sale consideration from a buyer exceeds Rs 50 lakh in the financial year.
The EY and SAP India survey uncovered that Indian companies are not completely equipped to handle the various tax implications of the TCS provisions. Conducted early September 2020, the survey involved over 110 corporate businesses across India to assess their readiness to implement the new provisions on the tax and technology capability of their organisations in addressing the concerns on compliances, validations, and reconciliations with various reporting requirements.
Key Findings
Aside from complying with the new TCS regime, the EY and SAP India study revealed that organisations are anticipating significant challenges on reconciliations, data, systems, processes, and tax audit readiness.
- 85{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the respondents shared that their current tax function framework is not completely ready to accommodate the requirements to be able to comply with the new TCS provisions
- 80{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the respondents foresee issues around applicability and updating systems and processes as a significant challenge in complying with the new provisions
- 81{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} expects an increase in manual intervention for their tax teams in reconciling data and ensuring accuracy due to TCS compliances
- 65{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the respondents shared that their IT systems need updating for the new TCS regime, which also means that organisations will have to seek alternatives
- 65{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} admitted that their organisations require a digital solution to automate the entire TCS compliance and reporting life cycle
- 70{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the respondents revealed that the automated TCS platform should go beyond basic compliance by assisting in proactive reconciliations, data preparation for tax assessments, and tax credits matching
Supporting Tax Transformation
Today, more than ever, the tax and finance function of Indian organisations need to embrace digital adoption to align with the Government’s thrust on technology in ensuring tax compliances and undertaking tax risk assessments.
“Given the intent of TCS provisions, leading organisations are looking for digital solutions which help to not just comply, but also proactively perform reconciliations from a tax audit readiness and internal audit perspective,” said Rahul Patni, Digital Tax Leader at EY India.
Specific to the need for an intelligent, intuitive, and integrated digital fabric to support TCS compliance, EY has developed an automated solution called ‘DigiTCS’ powered by SAP’s Business Technology Platform. Hosted on SAP Cloud Platform, DigiTCS is scalable, secure, modular, and integrated with customer’s SAP ERP.
Anand Raisinghani, Vice President, Platforms and Technologies, SAP India said:
“Our customers need to stay compliant with the evolving regulatory tax framework. As SAP is the financial system of record for majority of Indian enterprises, we responded swiftly to ensure required provisions form part of our solution offering.
Together with EY, we deliver DigiTCS — a comprehensive solution powered by SAP Business Technology Platform. With this, we will empower companies to adapt to the new Tax regime providing them ease of deployment, security, and no disruption to their existing process and business.”
DigiTCS is another result of EY and SAP India’s innovative collaboration that would help Indian organisations in their tax transformation journey.
