Indian information technology (IT) firms could see business opportunity of over $1 billion in building and implementing solutions to help their clients become compliant with the good and services tax (GST) regime to be rolled out in July 1.
Companies such as Infosys, Wipro, HCL Technologies, Tech Mahindra and others, implementing SAP and Oracle enterprise software, will now have to align the technology backbone (enterprise resource planning or ERP) based on GST norms.
Opportunities include customised packages and software services implemented on the customer's business, said analysts.
According to Harpreet Singh, Partner (Indirect Tax) at KPMG, dealers and businesses were earlier required to upload details of their transactions and multiple returns at the government's GSTN portal but now, they will have to adopt technology for taxation or an ERP system in order to be GST-compliant.
This would create opportunities for the IT services firms and other companies that are building application-based solutions to make tax compliance easy for businesses once GST is implemented.
"GSTN has tied up with third party entities called GST Suvidha Providers (GSPs) that will be allowed to use the application programme interface (API) for themselves and make them available for other parties. There are other players called application service providers (ASPs) who can use these APIs to build innovative applications for taxpayers. In view of the above, the recent trend is that all IT services companies are now gearing up to either become a GSP or an ASP as they see a great potential in this," added Singh.
He elaborated that anyone aspiring to build and provide application services for GST can become an ASP.
Tax compliance and related technology service firm ClearTax estimated the opportunity for implementation of GST related software system to be worth nearly Rs 1,000 crore. "For system integrators or service providers, the opportunity with GST is worth more than Rs 1,000 crore. On the software-led services segment for GST, we foresee an opportunity worth more than Rs 3,000 crore ($500 million). This market is still emerging and will take a longer time to be established," said Archit Gupta, founder and chief executive officer, ClearTax.
Nearly 80 lakh businesses are estimated to be registered under GST and a majority of them are likely to use application-based services. "Therefore, there is a huge market, which the IT companies are eying to tap. Even if 60 per cent of the dealers decide to go through the ASP route, we are talking about roughly 50 lakh customers in the market to be tapped," said Singh.
According to another IT industry analyst, some IT services providers are planning to create packages for GST consulting services and offer dedicated services through BPO.
"Apart from the incremental revenue through software implementation, some IT services firms are talking about creating package for GST on consulting business front," said Pareekh Jain, senior vice-president, HfS Research.
Delay in the finalisation of the complete GST tax structure is, however, impacting the development of applications or solutions for easy compliance. Some companies are "struggling to launch their ASP solutions" owing to frequent changes in the GST law and the release of multiple versions of the new tax regime, said Singh.