How would the transition to GST impact an Enterprise Resource Planning (ERP) system?

GST’s impact on ERP systems are multi-fold, as detailed below:

  • Adaptability: The ERP system needs to be checked for the appropriate version and upgraded if required. The necessary upgrade notes may need to be implemented to make the system GST compliant.
  • Business process refinement: All tax-related inward and outward processes will be required to be reviewed, and as applicable, aligned as per GST requirements. Business processes, such as inter-State stock transfers, subcontracting, etc., will need to be closely evaluated, taxes may be levied on such transactions as part of GST. In addition to this, the process for tax utilisation at the month-end will be required to be set-up as per new policies.
  • Tax configuration and computation: Tax calculation procedures are likely to require a major change to accommodate the new taxation requirements. The appropriate consideration will be required so that it fulfills the requirement of monthly tax returns. While making the configuration changes, due consideration must be given so that the system is not only GST ready, but also scalable and adaptable to future changes in the Indian financial environment.
  • Document numbering: Unique sequential numbering for outgoing GST invoices numbering may be specified, these need to be configured as per the directives by tax authorities.
  • Master data amendments: Various master data, such as chart of accounts, material master, vendor master, customer masters, price masters, etc., need to be updated as per the new taxation requirements. The vendor and customer GST registration numbers will be mandatory for availing or passing the credits, and reporting purpose.
  • Reporting and printing requirements: Appropriate reports will need to be developed based on regulatory requirements. The necessary changes may also be required in the existing forms, such as contracts, purchase orders, quotations, invoices, etc., to reflect the correct taxes.
  • Impact on interfaces: The impact on any interfaces with third party tools, if any, should be analysed on a case-to-case basis.
  • Tax credit migration: The tax credits from existing deductible taxes, such as excise, service tax, Value Added Tax (VAT). etc., will need to be updated or distributed to the appropriate account as per the directives of the new tax system.
  • Closure/reversal of partially open transactions: Partially open transactions, such as goods received but invoice not booked, or goods issued for sales but not received by the customer, etc. need to be closed or reversed and migrated to the new tax system.
  • Migration of open transactions: Open transactions, such as contracts, purchase orders, and sales orders, need to be migrated to the new tax system.
  • Managing exceptional transactional requirements: Apart from the target solution for GST, temporary provisions may be required in the system to handle scenarios, such as returns of goods sold or purchased before GST and returned after GST implementation, stock in transit during cutover activities, etc.

How can organisations prepare themselves for this transition?

It is recommended that a detailed GST impact analysis is conducted by organisations from an ERP perspective. We recommend the following guidelines for conducting impact analysis:

  • Business scenario coverage:
    • Ascertain the existing business scenarios to be impacted by GST
    • Identify any relevant business scenarios not mapped in ERP
    • Validate the adequacy of the ERP organisation structure for mapping of the relevant business scenarios.
  • Verify if the localisation version of the ERP system is updated
  • Ensure correctness and completeness of master data (such as vendor, customer service tax registration numbers, VAT registration numbers, etc.)
  • Analyse the impact on various reports which are submitted to the tax authorities.

What should be the support pack level of SAP for being GST compliant?

SAP has provided the following guidelines to ensure smooth transformation to the GST regime:

SAP_APPL release Support pack
SAP ERP 6.0 (600) SP 26
EHP2 FOR SAP ERP 6.0 (602) SP 16
EHP3 FOR SAP ERP 6.0 (603) SP 15
EHP4 FOR SAP ERP 6.0 (604) SP 16
EHP5 FOR SAP ERP 6.0 (605) SP 13
EHP6 FOR SAP ERP 6.0 (606) SP 14
EHP6 FOR SAP ERP 6.0 for HANA (616- SAP HANA) SP 08
EHP7 FOR SAP ERP 6.0(617) SP 07

*Source: SAP’s Solution Approach to GST, SAP, 2015

In addition to the appropriate support pack level, it is necessary that the new tax procedure, i.e. TAXINN, is implemented. Any organisation currently on the old tax system i.e. TAXINJ is advised to upgrade this to help ensure a smooth transition to GST once it is officially rolled out.

How does SAP plan to support GST migration?

Globalisation Services (GS), the localisation wing of SAP SE, is analysing in detail the impact GST on business processes. SAP is expected to be ready with a GST patch, which can be deployed in the existing systems to facilitate transition of organisations to GST. The development of this patch is ongoing and the same likely to be released once the GST law is published.

*Source: SAP GST Preparedness,, accessed on 27 April 2016

Will the GST patch from SAP completely address all GST compliance requirements in the existing system?

No, application of the GST patch is just part of an elaborate and complex procedure. In addition to its deployment, the GST implementation process would consist of:

  • Fine tuning of the business processes involving indirect taxes
  • Restructuring of pricing and tax configurations in line with the GST requirements
  • Changes to the chart of accounts and account determination
  • Modification to custom developments, forms, reports and interfaces
  • Modifications to the master data, mainly materials, vendors, customers and pricing conditions
  • Migration of the open sales/purchase transactions
  • Revaluation of stock and available tax credits in line with the GST law
  • Interface with GST Network (GSTN) for filing returns.

What is the expected time frame for transitioning to the new GST regime?

The timelines would be dependent on various factors such as the number of legal entities, complexity of business processes, volume of master data, correctness and completeness of master data, current version of ERP systems, etc. The GST impact analysis, as recommended, is anticipated to help in estimating these timelines to a considerable extent.