How to be Diwali ready with a fool-proof compliance strategy

The festive season in India will commence in a month.

We are now entering the golden period of sales. A buying frenzy is approaching, and if businesses want to make profits, they must get their ducks in a row.

One of the most important ducks, in this context, is streamlining a business's tax operations. Here's how your business can be Diwali-ready with a fool-proof tax compliance strategy.

Let's start on home ground. Most Indian businesses expect to cash in on a large number of profits during the Indian festive season.

In 2020, despite the pandemic, businesses witnessed a whopping 88% customer growth from 2019. This growth was driven by 40 million shoppers, most of whom belonged to tier-2 cities. The massive demand for shopping from tier 2 cities was because of millions of people who had moved back home while adjusting to the Coronavirus pandemic. So, this year can be a fresh start for businesses that weren't prepared to handle the massive shift in the supply chain and faced disruptions back then.

India has been making considerable strides in the evolution of its Goods and Services taxation system. In the last few years, the government has been encouraging the digitization of tax operations. They have introduced tax services like e-way billing, e-filing, and e-invoicing. Your business will need to incorporate all of these functions in its tax operations in real-time.

Picture this. Your business has just announced a new sale - you are now offering products at lucrative discounts, and customers are making a beeline to purchase said products. On the backend, your team will need to ensure that the applicable discount is applied, the tax is calculated accordingly, and the details are reflected on shipping manifests as well as tax invoices. While this might sound easy enough to do, imagine carrying out these tasks for a million or more orders. Wouldn't you agree that the scope of error is considerably higher? 

Apart from tax functions, your business also needs to ensure all the compliance requirements. This means tasks including filing returns, keeping a record of all documentation for audit purposes, and claiming input tax credit are streamlined. Again, you need to ensure that tax operations do not disrupt your business's operations.

That is precisely why your business needs to integrate technology solutions that will offer end-to-end tax automation.

By choosing the right e-invoicing and e-way billing solutions, your business will also be able to speed up and streamline the return filing process. This will be possible as details of tax invoices and shipping manifests will be pre-populated in GST return forms when filing tax returns. 

What if your business operations are not limited to India? Thanks to globalization, several retail businesses are now operating internationally.

In 2018, the global cross-border B2C e-commerce market earned revenue worth US$562.1 billion.

This number is predicted to reach approximately US$ 4,195.4 billion by 2027. The cross-border B2C e-commerce market is anticipated to record a CAGR of nearly 28.4% during 2020-2027.

We can no longer operate, assuming that a business will only be revolving around the Indian Goods and Services Tax. So, your business needs to consider the taxation systems of other countries where they are or will be operating in the future.

This could mean Sales Tax, Value Added Tax, etc.

Let's give you an instance. We will assume your eCommerce business is now shipping to customers in the USA and Europe. Both regions have different taxation systems. While the United States practices Sales Tax at a state level (policies will change between 50 states), the European Union employs Value Added Tax. Since this is an e-commerce business, you must ensure that your customer knows the shipping and associated duty charges properly. Remember, customers, do not like to be surprised with hidden custom duty and shipping costs. So, how can your business be ready to maneuver the different kinds of taxation systems? How will your business keep up with continually evolving tax policies, tax rates, and tax jurisdictions?

With tax technology, your business can keep up with changing tax policies and tax rates of different countries down to jurisdictional levels. So when sales tax policies might change between New York and New Jersey, or if VAT policies might change between Spain and France, you will be in the know. Tax automation software will take changing policies and rates into practice and reduce the scope of errors in your tax invoices. Intelligent AI systems will know about tax holidays, special tax rates, etc., and ensure that information is used in your operations. 

Tax technology solutions can help customers know about shipping and tax costs at the time of the purchase - so that they know exactly how much they must pay for a product. This means no delays at international borders and no nasty surprises of additional costs. For instance, a customer purchasing a product in France from a business in the USA shouldn't have to deal with changing tax jurisdictions. All they must have to do is change their currency to Euros, and they will be able to see all tax and shipping charges before they check out.

One of the most critical compliance requirements is to be ready for audits. Tax compliance software can generate reports and document all transactions in real-time so that the authorities have everything they need if they want to conduct a check.

Using tax technology solutions is not limited to applying the correct information at the right time. Automating your business's tax function will help iron out any compliance concerns well in time for the festive season. It will also provide insights to improve your current compliance strategy so that tax operations are never a reason for business interruptions. 

Incorporating tax automation solutions in your tax function will make you Diwali ready and help you prepare for the upcoming international festive season around the world. 

So, make the best use of tax automation and streamline your tax functions in time. This Diwali, spend less time working and more time enjoying yourself with your family.