Companies not fully geared up for new Tax Collected at Source (TCS) regime, EY-SAP India Survey

With the expansion of the scope for the Tax Collected at Source (TCS ) provisions, under the Income Tax Act,  effective 1 October 2020,  a recent survey conducted by EY and SAP India asserts that corporate India is not entirely  prepared to deal with various tax implications of the TCS provisions. 85% of respondents acknowledged that their current tax function framework is not completely geared up to comply with the new TCS regime.

The survey conducted in early September 2020 captures responses of over 110 corporate businesses across India to assess their readiness to implement TCS with respect to compliances, validations, and reconciliations with various reporting requirements.

Key insights from the survey include:

Updating systems and processes to comply with TCS: 80% of the organizations anticipate issues around applicability and updating systems and processes as a significant challenge to comply with the new TCS regime.

Expected increase in manual intervention: 81% recognized that reconciling data and ensuring accuracy due to TCS compliances will increase manual intervention for their tax teams.

IT systems not geared up: 65% admitted that their current IT systems are not completely updated for the new TCS regime and will hence have to consider other alternatives

The inclination to adopt a digital solution:  65% of the respondents admitted their organization requires a digital solution to automate the entire TCS compliance and reporting life cycle. Further, 70% revealed that the automated TCS platform should go beyond basic compliance by assisting in proactive reconciliations, data preparation for tax assessments, and tax credits matching.

Rahul Patni, Digital Tax Leader, EY India said, “Given the intent of TCS provisions, leading organisations are looking for digital solutions which help to not just comply, but also proactively perform reconciliations from a tax audit readiness and internal audit perspective.”

With an increasing thrust from the Government to focus on leveraging technology to ensure tax compliances and undertake tax risk assessments, the tax and finance function of business organizations need to adopt technology faster than ever.  Given EY and SAP India have been at the helm of this digital evolution in Tax, a strategic partnership has been formed to offer clients a seamless tax transformation journey.

As per the EY and SAP India survey findings, organizations are expecting to face significant challenges with respect to reconciliations, data, systems, processes, enables tax audit readiness, and most importantly compliance with the new TCS regime. Recognizing the need for a digital fabric that is intelligent, intuitive, and integrated. EY has developed ‘DigiTCS’ powered by SAP’s Business Technology Platform an automated solution for TCS compliance. Being hosted on SAP Cloud Platform, making it scalable, secure, modular and integrated with customer’s SAP ERP.

“Our customers need to stay compliant with the evolving regulatory tax framework. As SAP is the financial system of record for majority of Indian enterprises, we responded swiftly to ensure required provisions form part of our solution offering. Together with EY, we deliver DigiTCS — a comprehensive solution powered by SAP Business Technology Platform. With this we will empower companies to adapt to the new Tax regime providing them ease of deployment, security and no disruption to their existing process and business,” said Anand Raisinghani, Vice President, Platforms and Technologies, SAP India

“Newly expanded TCS provisions are likely to expand the compliance burden for Crompton Greaves.  With our volumes, we were very clear that we need a Digital solution to not just comply, but also be ready with right quality data to support reconciliations and audits, and that’s where EY came in,” said V A Joseph, Vice President – Finance, Crompton Greaves Consumer Electricals Limited

“The extension of our alliance with SAP to Direct Taxes is in sync with our vision of ‘One-Tax’ platform. We understand the clients’ need to do statutory reporting compliances using the same underlying data, having access to integrated dashboards and analytics, while, also being able to view tax compliances within their own SAP instance. Accordingly, while majority of the validations and interface with Government websites would be enabled through the SAP Cloud Platform, reports may also be pushed back to client systems, thereby creating a Tax ERP”, said  Venkatesh Narayan, Tax Technology and Transformation leader