By Heena Jhingan
The Department of Value Added Taxes, Daman & Diu, was set up to look after the entire tax administration of the union territory. The department is reported to hold a record for highest tax collection per employee in comparison with VAT departments across the country. This is despite the fact that until a couple of years back the tax collection system was not standardized and all the work was done manually, using the traditional pen-paper approach right from registration of the dealer to tax calculation.
With the Government of India initiating NeGP (National e-Governance Plan), Department of Value Added Taxes, Daman & Diu came to be covered under the MMP(mission mode project) for commercial taxes. As per the program, all the departmental transactions and operational process are to be computerized. This kind of a transition requires external expertise and change management at an organizational level. This is where Wipro stepped in a consulting role.
Wipro was involved in the project right from its conceptualization back in 2011, however, real action began only in 2012 when functional modules were being rolled out into e-services. The department has now integrated an e-filing system on its portal, where dealers can register , compute and pay the tax.
Taxing procedures
“Individual invoices were not captured and all the transactions of dealers were considered into two categories – sale or purchase. The tax calculations were performed on overall sale or purchase data and no separate tax charges were considered for commodities of different categories. Such representation of tax liabilities were reported on paper forms at the VAT office with no proper demarcation of inter and intra state sales or purchases. Moreover, commodities classification according to the tax rates applicable for respective categories was not practiced with diligence, resulting in inappropriate tax payments. Also, with returns being submitted on paper, cross checking and verification of returns filed can be an arduous task considering the amount of paper data generated in the subsequent cycle of returns filing and payments,” he explains.
The solution
Wipro’s task was to make this hassle free for both users and the administration. The agency needed to take care of all the aspects, including infrastructure and capacity building and security.
Ramachandran observes, “For the ease of both user groups, provision of a single interface to the users of the system to interact with the Value Added Tax office was a must. This was done by using the web portal of the UT administration of Daman & Diu and customization of the National Informatics Center (NIC) Karnataka software VATsoft for filing returns. NIC has been for providing e-Governance and integrated services in Government Sector. VATsoft is being used by several other North Eastern states and union territories in the country.
Since the system was to be used for filing tax returns, the system needed to be a secure environment. Ramachandran informs the system being used by about 3,500 dealers in Daman & Diu includes NIC deployed measures for module security in addition to the physical security of the network components, human resource security and incident management, troubleshooting for these incidents, identity protection and access controls that is built in the forms of functionalities allowed for any user to access and is centrally controlled by the department administrator.
“To make the system more robust, several security mechanisms have been included. The system allows role-based access and also tracks event logging. The security solution that is being used offers anti-virus protection as well as source code protection together with firewall and intrusion detection systems. Both network and host based protection mechanisms have been included in the security system,” he says.
He adds that the implementation has been a smooth one, resulting in about 37% increase in the revenues of the department.
B.S. Thakur, Deputy Commissioner-VAT, Daman, says, “With the help of Wipro Consulting Team, the VAT office is now in a position to render the services to the taxpayers online. With this the VAT department has taken a giant leap forward into the age of digitization, increasing efficiency, transparency and productivity of the VAT department.”
The challenges
The implementation was a learning process for both the department and the consultancy firm. Ramachandran explains that they needed to build capacity for the 15 member team of the department. He believes that whenever a change is introduced in the system, it is very important for the users to understand the significance of that change.
“In India, a majority of the dealers operate through their chartered accountants. In that case, not only should the dealers understand the need of automation, but the CAs must also understand the need and functioning of the system. Doing this is a time consuming job,” he says.
The next step
For Wipro, this is not a regular time bound contract, instead a project where they will get extension on need basis. At present, the the agency has delivered solutions for registering, filing and tax calculations. In the next level, Wipro will help in integrating modules for tax refund and audit. Meanwhile, Wipro has also started work to digitize the data, the users can now access data of the past years (3-4 years).
This implementation, says Ramachandran, will ease the migration to GST regime. “The Daman & Diu department stands ready for future enhancements and functional changes with the development of VATsoft.” The transition to GST will now be a matter of customization, he says.