Technology for MSMEs: Among the key challenges noted for technology adoption in tax operations of smaller businesses was changing the mindset of individuals towards using technology and the lack of knowledge on the benefits of the transformation.
Technology for MSMEs: A survey by consulting firm Deloitte India on Tuesday to assess the integration of digital technologies in tax functions of India Inc. — such as GST returns, annual return filing, and FEMA reporting — said smaller companies’ adoption of technology to digitise their tax compliance was comparatively lower than larger companies reporting very high use of technology.
According to the survey, the lifecycle of technology adoption in tax typically has four phases. The first phase is reactive and the adoption is for compliance with regulatory requirements. Typical examples of this are the use of TDS and GST compliance tools. In the second phase, organisations adopt plug-and-play software/ off-the-shelf automation for streamlining internal processes. For example, a litigation management tool that tracks the status of assessments and litigation year-wise.
In the third phase, organisations figure out that they have their unique set of issues and challenges, and they go with specific and customised solutions addressing their pain points. For example, solutions around data (extraction, reconciliation, wrangling) or BOTs/RPA (robotic process automation) solutions for repetitive processes.
Once the tax function is technology-enabled, the fourth phase includes the transformation of the tax function, wherein tax teams focus less on compliance and more on strategy and implementation and partnering with businesses.
“While smaller companies are in phase 1 or phase 2 of their tax technology journey and are using TDS compliance tools and, possibly, a litigation management system, larger organisations have moved beyond and are in phase 3 (very few are in phase 4) where they are exploring customised solutions to address their needs in the tax function,” the survey said.
The survey recorded responses from 129 tax professionals of businesses to track the effects of technology across sectors, including consumer; energy resources and industries; financial services; government and public services; life science and health care; and technology, media, and telecommunications.
Among the key challenges noted for technology adoption in tax operations of smaller businesses was changing the mindset of individuals towards using technology and the lack of knowledge on the benefits of the transformation. Once the benefits of technology are realised, another challenge of the absence of funding for technology transformation identified by relatively smaller companies may also be taken care of, the survey added.
Nonetheless, smaller enterprises are turning their focus on technology to ease their tax journey. For instance, they are ensuring their teams spend some portion of their time on tax technology and also increasing their spending on tax transformation and automation.
Moreover, the survey added that with larger companies relying significantly on third-party software for managing and tracking compliance and litigation, it is a matter of time before relatively smaller companies follow suit.