Role of GSP and ASP in GST India
Implementation of Goods and Services Tax (GST), scheduled to take place beginning July 1, 2017, is going to require a collective effort of the all the stakeholders: central and state governments, Central Board of Excise and Custom (CBEC) and state tax departments, taxpayers along with their tax and software consultants, Reserve Bank of India (RBI) along with banks, and the IT platform provider, i.e., GSTN.
The Goods and Services Tax Network (GSTN) is a non-profit, public private partnership company. Its primary purpose is to provide IT infrastructure and services to central and state governments, taxpayers and other stakeholders, thereby facilitating the implementation of the Goods and Services Tax (GST).
The GST system project is a unique and complex IT initiative. It seeks, for the first time, to establish a uniform interface for the taxpayer and a common and shared IT infrastructure between the center and states. It will thereby integrate multiple tax department websites, bringing all the tax administrations (center, state, and union territories) to the same level of IT maturity, with uniform formats and interfaces for taxpayers and other external stakeholders. Unlike the present-day taxes, GST is going to be on a digital platform from its inception.
With a view to address this IT challenge in an effective manner, the center has set up a special purpose vehicle called GSTN. It will be at the center of the IT ecosystem under GST.
The common GST portal developed by GSTN will function as the front-end of the overall GST IT ecosystem. The IT systems of the CBEC and state tax departments will function as back-ends and will handle tax administration functions such as registration approval, assessment, audit, adjudication, etc. For taxpayers, GSTN will provide common and shared IT infrastructure and cater to functions facing taxpayers, such as filing registration applications, filing returns, creating challan for tax payment, settling IGST payment (like a clearing house), and generating business intelligence and analytics. Checking the claim of Input Tax Credit (ITC) is one of the fundamental pillars of GST, for which data of Business to Business (B2B) invoices will be uploaded by taxpayers and matched by GSTN.
Tax automation will thus become critical to meeting regulatory requirements under GST. A high level of synchronization is required between the taxpayer's system and the GSTN system, which will be very difficult to achieve without automation.
Item-level details in invoices with reconciliation of sales register with auto populated purchase register and auto reversals will be key data processing requirement under GST compliance. Having the ability to reconcile invoices with sales registers, auto populated purchase registers, and ITC reversals will be essential under GST compliance.
Sale and purchase transactions data that will be uploaded by the taxpayer to the GSTN portal will, for the first time, contain a Combination Key comprised of the supplier's GSTIN, invoice number, financial year, and HSN/SAC Code. This will make each line in GST database unique. Correct data entry of this key field will therefore be very important for taxpayer compliance. Wrong data feeding in this important field may result in mismatches between seller information and the buyer's claim for GST credit, and, unless rectified, eventual denial of credit to buyer. For this aspect of GST compliance, support from enriched APIs (Application Programming Interfaces) is of great value to taxpayers.
GSPs and ASPs: important constituents of IT ecosystem
From a taxpayer's point of view, this front-end may be accessed directly through the G2B portal provided by GSTN. Alternatively, taxpayers may opt to use third-party applications for interacting with the GST returns system, such as desktop and mobile applications, and other mediums.
The GSTN Portal will be at the front-end of the GST IT ecosystem for all taxpayers in all parts of the country.
When making the above choice, the taxpayer needs to note that the interface and features exposed by the GST portal will be uniform for all taxpayers and might be basic in form and design. On the other hand, third-party applications are expected to have richer interfaces and features required by specific groups of taxpayers (e.g., large taxpayers with completely automated financial system, SME with semi-automated system, and small size with no system). Also, due to its sheer size, the GST filing portal will not be as nimble as those provided by third-party applications
Taxpayer convenience will be key to the success of GST India regime. Taxpayers therefore have the option to use third-party applications, which can provide varied interfaces on desktops, laptops and mobiles and can connect with the GST filing system. Third-party applications will connect with the GST filing system via secure GST system APIs. The majority of GST system functionalities related to taxpayer GST compliance requirements shall be available to these applications through GST APIs, which the applications will enrich and enhance as a convenient front-end for taxpayers.
Accessing the GST filing system directly through the G2B portal may not be a good option for many taxpayer organizations, who may instead access it via third-party applications. These applications have the benefit of being much more user friendly and customer focused. They will connect with the GST filing system via secure GST System APIs. Developers of such applications have been given generic names: GST Suvidha Provider, or GSP, and Application Service Providers, or ASP.
GSPs and ASPs thus will provide much needed support to taxpayers in the IT ecosystem for GST. But, while the extent of support provided by a GSP may be limited to providing enriched access to the G2B portal, support provided by ASPs will extend much further and will address most taxpayer compliance difficulties.
ASPs will focus on taking taxpayers’ raw data on sales and purchases and converting it into the GST returns. These GST returns, or GSTRs, will then be filed on behalf of the filer with GSTN via the GSP.
ASPs will act as a link between the taxpayers and the GSPs. The GSTN client ID and GSTN client secret for ASP will be generated by GSP from the portal, which will be provided by GSTN. It's a kind of sub-license generation.
A GSP may also offer the services of an ASP to meet a client's particular data processing requirements, and provide customized solutions to a large number of organizations. This provides combined GSP and ASP support.
An important point to note here is that whether a taxpayer goes for direct access to G2B portal or chooses the more comfortable option of using GSP services, a provision is made in the IT ecosystem under GST for the taxpayer to have complete control, security, and privacy while interacting with the GST system.
Services provided by GSPs and ASPs
GSPs acting as ASPs are expected to enable taxpayers to comply with the provisions of GST law through their web platform. These application service providers should provide taxpayers and other stakeholders with innovative and convenient methods of interacting with the GST Systems, from registration, to uploading invoice details, to filing returns.
ASPs can come up with an application to provide GST filing facility in existing software, or, with the help of ASP partners, they can develop an end-to-end solution with which corporates, consultants, and taxpayers can manage their sale/purchase and GST filing: e.g., an offline utility-like spreadsheet; taxpayers could fill out their invoice details and then upload it on the GST portal for processing.
Similarly, for tax consultants (TC), ASPs can provide a dashboard that displays a list of all his/her clients. Clicking on a client would give the TC a snapshot of the client's actions/ pending actions.
GSPs and ASPs in action
With respect to the GST IT ecosystem, taxpayers can be divided into three broad categories, namely:
- Users with standalone or networked systems that are not connected to the Internet
- Users with applications with API interfaces such as Tally, SAP, Oracle, Ramco ERP, Microsoft ERP and many more.
- Users with applications that are in the cloud and can work in both offline and online mode, have well-defined API based architecture, and use latest technologies.
Users in the first category will necessarily need a third party (GSP/ASP) to help them upload invoice data, file returns, etc., generated from their accounting software. However, many in the other two categories will prefer to have GST Access in a user-friendly enriched form through the GSP/ASP network, even though they may be in a position to directly consume APIs in the form provided by GSTN.
As for specific services, after receipt of raw data from the taxpayer, GSPs either themselves or with the help of ASP partners shall provide the taxpayers with the following services:
- Compile invoice wise data from the business units.
- Upload invoice wise sales register (supply data) in GSTR-1 within 10 days from the end of the month.
- Download purchase data, i.e., inward supplies (receipts or purchase) in the form of draft GSTR-2 from the GST Portal. The draft GSTR-2 will be automatically created based on the GSTR-1 filed by corresponding suppliers.
- Cross-match purchases made with those downloaded from the GST portal. After reconciliation with the books and draft GSTR-2, upload the final GSTR-2. Reconciliation of the purchase register and data downloaded in the form of GSTR-2 from the GST portal will be carried out by the ASP for the benefit of taxpayer.
The GST Portal will then generate the GSTR-3, based on the GSTR-1 and GSTR-2.
Other dealers, including casual dealers and those opting for the composition scheme, will also be required to file returns.
Vital Check points to consider before appointing ASPs
Since a major part of the support provided to a taxpayer in the GSP and ASP network relates to the enriched interfaces offered by ASP, taxpayers need to pay particular attention when choosing an ASP.
As ASPs will be processing raw data pertaining to a taxpayer's sales and purchases, they will need access to the business's sensitive information. Raw data provided by the taxpayer should contain all the sensitive information relating to the sales & purchases of the Organization, such as:
- To whom does the taxpayer sell and where do the sales occur?
- What does he sell?
- How much does he sell and at what price?
- From where and from whom does a taxpayer purchase?
- What does he buy?
- How much does he buy and at what price?
In short, an ASP will have all the data required to establish the profit percentages for the business of a taxpayer, across the business's entire range of products and services. Hence, before appointing an ASP, the taxpayer needs to consider following:
- Data privacy and protection. An Asp's ability to strictly maintain data privacy under properly drafted non-disclosure agreements, data security strengths, and the ASP's arrangements for the protection of shared data.
- Value-added services. The extent to which an ASP provides other value-added services, such as trend analysis, tax alerts, and legal support.
- Data retrieval and audit trail., An ASP facility for data retrieval are very important, especially given the statutory requirements for record preservation. For a taxpayer to justify claims before tax authorities, an audit trail must be available.
An important part of GST compliance will be filing data with the GSTN. An IT ecosystem under GST, through a network of GSPs and ASPs, will help corporate and tax consultants achieve better data-based compliance under the GST regime.
Avalara Technologies is an ASP partnering with multiple GSPs in India to provide cloud-based, GST compliance solutions to business corporations and accounting firms.
To learn more about how Avalara can help you with GST compliance automation, contact us through http://www.avalara.com/in/products/gst-returns-filing
This whitepaper is contributed by CA Mukund Abhyankar.