Moglix recommends robust technology for digitising manufacturing operations

Amid the ongoing digitization drive, B2B e-commerce platform Moglix opined that although India's manufacturing sector has immense potential, its contribution remains a mere 16 percent to GDP, largely due convoluted tax filing procedures and lack of adequate technical know-how.

India's manufacturing sector has been a priority of the government in the recent past. For the same, the Centre introduced a number of schemes including Make in India, Digital India and the Goods and Services Tax (GST).

While the new taxation schemes have streamlines operations, reports suggest that 80 percent of the supply chain of manufacturing companies are still running offline. The companies lack the resources and technology to understand the nuances of the GST and adapt to the scheme at a rapid pace. Consequently, this has increased the tax compliance costs for manufacturing companies in hindsight.

Therefore, Moglix believes that technology companies must create cost-effective digital solutions for manufacturing companies who are looking for a seamless transition from multi-tiered tax structure to a unified and consistent one.

"We at Moglix have experienced the impact of GST as a supply chain company (commerce) while dealing with our 5000 vendors and 200 plus enterprise customers. We have provided solutions to issues pertaining to GST compliance for our clients that rise mostly from dealing with multiple vendors. Moglix solutions assist clients indirectly by consolidating of the tail end of vendors or directly, through our ASP solution for GST filing called Green GST," said Moglix Founder Rahul Garg.

The e-commerce startup also recommended certain steps for manufacturing companies to follow:

Upgrade ERP/Accounting software

The ERP/accounting software is required to be updated to accommodate the GST format of the invoice and the various fields in invoices and PO that have been declared imperative. This standardization has been rolled out to ensure that the supplier and buyer invoices match with each other before the GST returns are filed. If the invoices do not match then the buyer stands to lose the input tax credit.

Selection of ASP/GSP

An application service provider (ASP) is the front end to the GSP (GST Suvidha Provider) that acts as a high bandwidth conduit to GSTN that conveys information from ASP in a secure encrypted manner. The ASP is a simplified UI (user interface) for organizations to define users and roles to drive the monthly reconciliation of the supplier invoices with the procurement invoice. ASP is a very critical software as it not only ensures compliance and timely GSTR filing but also ensures that you get input tax credit for your purchase.

Ensuring compliance by vendor ecosystem

A key challenge faced by the manufacturing organizations, as per Moglix, is to manage their multiple vendor bases across MRO category of procurement. While it is simpler for larger organizations to deploy GST software, the fact remains that they will not be able to get input tax credit till their vendors file GSTR and the invoices match. Moreover, switching to a digital record keeping system is a massive challenge, especially for small-scale businesses. In this scenario, SAAS-based ASPs in the market are low cost and intuitive to use products. That can be used for a wider base of vendors to help them in getting compliant.

Digitisation of supply chain, vendor collaboration

While startups do not have the resources to handle complex tax compliance, GST's objective is to simplify the tax regime by reducing the multiplicity of taxes. This will not only bring compliance costs down but also make taxation transparent with digital tax processing. The DIY model will enable startup founders to complete registration, GSTR filling, tax payments, and claim refunds online, thereby saving money for all sorts of enterprises irrespective of sector.

These steps, Moglix believes, can spur the growth of the manufacturing industry, and also help businesses avail the benefits of the GST.

-ANI