Less formalised sectors are the weak link for GST: SAP India President & MD

He says companies are focused to be GST-compliant and get GST-ready

It is estimated that SAP-enabled enterprise resource planning systems and solutions will account for 40 per cent of all transactions under the new goods and services tax (GST) regime. Deb Deep Sengupta, president & managing director at SAP India, shares with Sudipto Dey, his perspective on corporate readiness for the new indirect tax. Edited excerpts:

How are companies going about adapting to the change in the indirect tax system?

Their first focus is to be GST-compliant and get GST-ready. Then, most companies – of all sizes – will take this opportunity to re-design their supply chain to improve their efficiencies, be it in logistics, manufacturing, distribution, supplies or stock points, etc. This will happen once the compliance and readiness drive is over. Large companies are already on that journey; smaller ones will follow. Businesses will use the power of one market to ship their goods in a more efficient manner. This will pan out in phases at least over the next two years getting information technology (IT) systems upgraded, meeting compliances and then work on the logistics and supply chain part.

So, how ready are your customers and clients for GST from July 1?

We started our GST readiness journey in November 2014, with awareness workshops with customers.  There are two aspects to this. One is market readiness and awareness; the other is product readiness. We have a global team based out of India that works on statutory localisation for 165 countries. We realised early in the cycle that big corporates are pretty much ready.  However, the challenges were with small and medium businesses (SMBs). We created a 22-city road show on GST awareness and readiness, a health check drive. We created 30 GST solutions centres for companies and entrepreneurs to walk in, do a health check and figure what they need to do to be GST-ready. We have a 24x7 help desk for our customers, to clear any doubts. 

From a solutions perspective, we have done two things. For customers starting from zero, we have a packaged solution called GST-in-a-box; within 100 days, they could become fully GST-ready. Our target is to have 100,000 SMBs (use this solution) over the next two years. We have created a cloud-based app service which helps companies to be GST-enabled and compliant. This is an Application Service Provider that hooks on to any GST Suvidha Provider, to offer automated reconciliation of accounts and transactions. Our entire stack of SAP solutions are GST-ready and enabled. 

Will your final solutions for customers be ready by the last week of June?

The final APIs (application programing interface) will be released (by GST Network that manages the IT backbone and infrastructure) on June 29. We only have to rework the formats. We should be ready to release the final version within 48 hours of the government releasing the final APIs. 

However, there is a huge chunk of businesses whose systems are not ready. We are working with a network of partners, across 24 different industry types, to offer them GST-ready ERPs. Listed companies might be more ready because of compliance and statutory requirements, while the informal sector might take some time from a readiness perspective. Large companies have been working with their vendors to get them ready for this change. However, some Tier-2 and Tier-3 suppliers could take a while. 

Actually, we look at SMBs from the perspective of an industry. Sectors that are more organised and have few big players might be better prepared. Sectors that are more fragmented might not be that ready. 

Which sectors are the weak links?

The high-level parameter is where you have strong players at the top of a sector. They will ensure their ecosystem is ready. Sectors which are fragmented, with a lot of players, could take a while. Less formalised sectors are the ones to watch out for.