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How to Find the Best Indirect Tax/GST Software For Your Business

  • May 21, 2021 | Manjula Muthukrishnan

Introduction

Keeping up with the constantly evolving tax landscape and tax complexities have been the prime movers for adopting tax automation. Tax automation helps organisations track and calculate their tax obligations continually. Enterprises face a challenge to figure the accumulation of indirect tax errors across operations, and the complexities of taxes further contribute to these errors.

However, building comprehensive tax solutions and keeping them fully updated requires a team of tax research and technology experts. Due to the overwhelming efforts needed to institute tax solutions and the actual costs of tax compliance, companies are turning to third-party vendors specialising in tax compliance solutions. Indirect Tax solutions establish an agile framework to deal with tax requirements and help organisations stay compliant as well as adapt to evolving reporting standards.

While organisations have the luxury to choose from a plethora of tax solutions, they must understand the critical aspects of tax solutions. Organisations have to be uncompromising about the indispensable functionalities of tax solutions given the sensitivity of tax function, and the ramifications there can be due to shortcomings in the solution’s framework. We have put together some of the essential elements of tax solutions that companies must look for before incorporating them.

The Must-Haves For Indirect Tax Software

     1. End-to-End Indirect Tax Process Automation

End-to-end process automation helps determine the actual value from Indirect tax technology. This includes automating processes from the calculation of sales & GST taxes (as well as address rate determination and tax calculations) to compliance with signature-ready returns.

Automation of compliance procedures will be an integral part of tax management to reduce errors and increase efficiency. Digitized Tax solutions can granularly deal with the reporting requirements, mitigate risks and enable businesses to handle cross-functional processes seamlessly.

     2. Integration with ERP Systems and Automated Tax Determination

Tax solutions need to be essentially integrated with enterprise business systems to ensure accurate tax calculation and reporting. Integrating indirect tax technology with ERP systems enables it to extract transaction data and attributes used to make accurate, repeatable, and scalable tax calculations. It allows tax solutions to post-tax collections and accruals automatically to the general ledger.

     3. Maintain and Apply Exemptions

Indirect tax solutions must facilitate maintaining exemption certificates and apply exemptions (blanket exemption, product exemption, retail, manufacturing etc.) whenever possible. Exemptions are not industry based such as manufacturing, retail etc. Rather, they are based on the two parties or the nature of the product of the particular transaction.

     4. Reprocess Tax for Erroneous Transactions

Tax solutions must possess the functionality to revise tax calculations by applying appropriate tax policy and treatments on error-prone transactions. This helps to file and remit tax liabilities accurately.

     5. Access to Audit Defense Data and Capabilities

Indirect tax technology should facilitate the creation of audit reports each month via web portals. This enables organisations to quickly analyse tax results and institute robust processes that enable GST compliance.

     6. Robust reporting, Reconciliation, and Tax Return Preparation

It is of utmost importance for tax solutions to generate various non-statutory reports for audits, customer inquiries, and reconciliations. Upon completion of reconciliation, the software should be able to create signature-ready tax returns that can be e-filed and remitted.

     7. Tax Research and Updates Compliant with GST Standards

In order to carry out effective tax research, indirect tax technology vendors must have efficient in-house teams of professionals. These teams will include chartered accountants, tax lawyers, and former auditors. Vendors should have established tax research processes annually certified and compliant with appropriate standards. Vendors should provide rate updates frequently in addition to product taxability and rules updates.

Tax solutions should be able to monitor GST compliance of the business ecosystem, including supply-end vendors and delivery-end distribution partners.

     8. Robust Cloud-based Solution

Enterprises should necessarily pick indirect tax software which is cloud-based. Cloud-based solutions eliminate the dependence on internal IT teams for maintenance and facilitate collaboration between teams with ease of access to tax information. Enterprises should look for vendors with cloud data centres rated at tier 4, the highest rating for low downtime.

      9. Information Security

Tax solutions must have the appropriate security measures to protect sensitive tax-related data. Organisation policies and tax solutions should be audited and certified by a third party for  SSAE 18 and ISAE-3402 compliance.

    10. Training, Documentation, and Support Materials

Enterprises will most certainly face challenges post-implementation despite thoroughly scrutinizing potential vendors. Enterprise should opt for an indirect tax software vendor that offers concerted and ongoing support.

    11. Auto Scaling, Self healing and Zero downtime

Tax solutions must facilitate auto-scaling, which automatically adds resources as taxation demand increases. Having a zero downtime feature provides automated integration application/ system upgrades.

    12. Analytics and Dashboards

Augmenting Compliance Technology with intelligent tax analytics helps cope with the evolving GST. A robust tax solution that can perform intelligent validations (ranging from a duplication check, GST Identification Number and Point of Sale) must be established. These validations ensure accuracy at the granular level. Comprehensive real-time reports and analytics to mitigate tax risks and material costs. Intelligent analytics provides insights on the areas of leakage and consequently instils efficiency in taxation.

Enterprises should choose indirect tax technology to provide comprehensive real-time reports and analytics to mitigate tax risks and material costs. Insightful dashboards that can help in efficient tax management, and provide data that helps drive negotiations with stakeholders are necessary.

Conclusion

Digital tax reporting solutions will improve the accuracy of indirect tax processes and provide insights that can be used to inform decision making. In turn, tax solutions vendors must work  hand in hand with tax advisors right from the implementation stage  to final configuration. Digitized tax functions that can help in accurately evaluating current tax processes and identifying areas for improvement should be instituted. Modern tax technology can help businesses manage costs associated with investments in licensing and implementation of technology.

Indirect tax technology must enable organizations to meet the requirements of the tax authorities and enable businesses to make informed decisions. Instituting robust indirect tax solutions will have a far-reaching positive impact and make businesses more strategic and agile across their operations.


Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Manjula Muthukrishnan
Avalara Author Manjula Muthukrishnan
Manjula is the Managing Director of India operations at Avalara. Her role involves overseeing strategic operations in India with a special focus on strengthening the company's end to-end tax automation offerings in the market by enabling Indian customers navigate the complexities of the local indirect tax system - Goods and Services Tax. Prior to joining Avalara, she served leadership roles at renowned organizations like Infosys, HSBC and Socion Advisors. Manjula has been recognized by various internal and external forums for her contributions in the area of Corporate Social Responsibility.

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