For IT industry, GST roll-out a $1 bn business

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Bengaluru | May 08, 2017 6:41 AM

The Indian IT industry is chasing a $1-billion opportunity with the advent of the GST regime, at a time when the sector is going through a bad patch with a slowing demand environment.

GST Network is the nodal agency for implementing its IT backbone and Infosys has already won a 5-year contract in this regard.

The Indian IT industry is chasing a $1-billion opportunity with the advent of the GST regime, at a time when the sector is going through a bad patch with a slowing demand environment. Industry observers feel that the GST roll-out will provide the sector an opportunity akin to the Y2K phenomenon, at the turn of the millennium.

“It is a Rs 6,000 crore opportunity,” said Mohandas Pai, former board member of IT major Infosys, sizing up the potential market. “This is a billion-dollar opportunity that will present itself repeatedly for the next two years and then go on to become an annuity business,” he told FE.

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GST is probably the biggest indirect tax reform India has seen, that is looking to ease the process of doing business in the country. GST returns have to filed on a monthly basis, and this calls for a robust accounting software that can enable error free filings.

GST Network is the nodal agency for implementing its IT backbone and Infosys has already won a 5-year contract in this regard. In 2015, the Centre had awarded a contract worth `1,380 crore to Infosys to build and maintain the technology network for implementing the goods and services tax (GST) system across the country. But this is only a part of the opportunity.

Developing enterprise resource planning (ERP) packages that help SMEs record GST transactions is a big opportunity to start with. SMBs need to record the GST transactions, upload invoices and do the return filing. Software companies have also realised the opportunities in the challenges that SMBs will face while transitioning to GST, as the government expects close to nine million returns to be filed in the first month of its roll-out.

The other opportunities are in creating POS billing software and developing payment solutions and e-signing products. “Software product companies will have a field day with the GST roll-out.

IT firms which don’t have have a software product will be left behind,” says Archit Gupta, founder, Cleartax.
Storage and security services are two other key components of the market opportunity. The governments both at the Centre and the states will require giant storage capabilities to accommodate data and cloud based storage service providers are expected to gain.

Says Manoj Chugh, President (Enterprise Business) at Tech Mahindra, “Security will be important too, since the data could often be sensitive in nature.” Data analytics will become another fountainhead of opportunities. The central and state governments will need a plethora of data analytics and automation tools to derive insights. “I expect providers of big data analytics tools and services to be in great demand. Överall, it is much like the Y2K opportunity that presented itself years ago,” adds Chugh.

Jaideep Mehta, managing director (South Asia) of research firm IDC, says it is clearly a Rs 5,000-6,000 crore opportunity. “I am sure all IT firms in India are looking to tap into it. Not just the biggies, but even the smaller IT firms have a great chance here. The multinational firms too are gearing up to the task.”

Agrees Neel Ratan, regional managing partner, PWC, “The opportunities will be well distributed across the IT spectrum. There could be 50-100 IT companies working on the project. I don’t think big companies alone will get the lion’s share of the business,”

For instance, SAP, is promoting its big data platform SAP HANA, which is now GST ready. Says Debdeep Sengupta, president and managing director, SAP (Indian Subcontinent), “We believe that business of all sizes, today have a lifetime of an opportunity to digitally accelerate their growth. Ending an era of complexity, leakages and revenue inefficiencies, will enable business leaders to focus on profitability.”

Intuit on the other hand is helping SMBs to deal with concerns on how GST could impact their business thorough their accounting software called Quickbooks. Says Nikhil Rungta, Managing Director, Intuit QuickBooks India, “GST is going to be one of the biggest inflection points for businesses in India. It will be a catalyst to getting businesses to automate their workflows and adopt digitization.”

There are 51 million small businesses in India but only about 20% are digitally enabled, however with GST, more small businesses will go digital. While nine million businesses are filing VAT and service tax today, this number will go up by at least 50% post GST, adds Rungta.

With the simplification of the tax regime, the economy will get a major boost and could well help in GDP growth. If economy grows, it’s good for IT, as the technology budgets of the organisations will also go up, says Tech Mahindra’s Chugh.

From a technology point of view, organizations in the country, small or large, will have to comply to the GST regime. So, there are few one-time opportunities like upgrading the ERP systems and IT applications so that they are compliant with the GST, according to Chugh. Secondly, there is a data migration piece. The data has to be migrated to the new template to fit the new framework. Then there is the `process re-engineering’ piece, because the supply-chain has to become highly optimized with the multiplicity of the tax players.

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