Much is talked about the transformation (and the challenges) which GST brought about in the area of Indirect taxation in India.
For a diverse country like India, introducing “One Tax” as a concept and as the law governing the entire nation hasn’t been a straight forward one.
The law, as well as the systems evolved and as we see today deviations and relaxations state-wise, industry-wise, business turnover wise etc. exist. That was expected.
Over the period, new compliances such as e-way bill and now e-invoicing under gst emerged. And every new compliance requires the industry to evaluate the current practices and upgrade their systems and processes.
Having seen businesses having disparate and dated systems, heavily customized, and home-grown solutions, and not to forget the cost of overhauling; thus, migrating to new systems is often easier said than done.
Despite all the challenges faced by Government to develop a nationwide law and system, catering to taxpayers at various levels of preparedness; and by taxpayers to make their varied internal systems and practices work in sync, GST compliance had withstood the test of time.
That’s how I see it.
Even if not 100% compliance, even if not always timely, GST as a data source is getting deeper, wider and richer.
1. The length and breadth of GST Data
According to the stats (2021) published on GST Portal, there are about 1.26 CR taxpayers. That’s almost 20% increase from 2017 when GST was introduced.
All taxpayers registered with GST have a unique identification number (GSTIN) and are classified into various types such as Regular, E-commerce operators, UN Body, Regular but opted for composition scheme etc. The compliance requirements including the return to be filed (read it as data available) are based on the registration type.
If we look at the breakdown of taxpayers by their registration type and map the returns that are filed by them, almost 85% of the taxpayers need to report their sales and tax liability details on monthly basis, next 13% on a quarterly basis.
Even if we discount this number to weed off non-filers and late filings, still about for 60% i.e. for 70 lakh taxpayers, some data on monthly basis is available.
And let us not forget a sizeable percentage of this filing base would be medium and small entities; for whom reliable and recent data before GST was difficult and costly to obtain.
2. Types of GST Data
Apart from the data filed in returns, which could be aggregate or even at the invoice level in certain taxpayers, select details of taxpayers such as their address, nature of operations etc. and their entire return filing history for all the taxpayers is available for public consumption. An overview of the data available in GST system
a. Publicly Available GST Data
The publicly available i.e. without taxpayers’ consent, a repository of GST data itself is quite rich. For any GST registered taxpayer, we can get basic taxpayer details such as its legal name, the constitution of business (whether proprietor, firm, company etc.), main location and additional locations from where the business operates and the full filing history of the taxpayers also is available.
An important point to note is that with GST, businesses had to opt for state-level registration. Thus a business entity (say having a PAN) could have more than one GSTINs registered in different states or even within the same state for different business verticals. The pattern of GSTIN has the PAN embedded and hence identifying GSTINs belonging to a PAN is no rocket science.
b. Proprietary i.e. GST Returns Data
The returns to be filed by taxpayers are determined by their nature of registration. 85% of the taxpayers registered as regular or normal type need to file GSTR 1 (which covers granular as well as partially aggregated details of outward supplies, advances received and HSN summary) and GSTR 3B (which covers aggregate details of turnover, tax liability and settlement). For the next 13% who have opted for composition, currently file CMP 08 (block amounts for turnover and tax payment).
Regular taxpayers do file other returns, some at quarterly and annual frequency, while some are the on-need basis. Other types of taxpayers also furnish different returns.
On the basis of outward supply details filed by the taxpayer, the GST system actually becomes the central repository of transactions between registered taxpayers. Thus the Government not only asks for data but also is in a position to provide data. GSTR 2A and the new GSTR 2B, are two important auto-drafted returns which include details of the purchase of goods and services by a taxpayer (based on their suppliers GSTR 1 and other returns). Imports data from ICE-GATE will also be available henceforth.
So, net-net, from GST Returns for a regular taxpayer, one can know
- Details of sales categorized into sales to other businesses, consumers and exports
- Purchases from other businesses and imports
- Tax liability and its settlement using cash and input tax credit
- States to which supplies are made
- Summary of goods and services supplied, HSN wise or in absence of HSN, with description
3. The Technology (API) effect
Policy and legal matters aside, another important aspect of GST implementation in India which has had a significant impact on the availability of data and its usage has been the underlying technology framework.
A complete-API driven platform for all interactions with Government system, most important sending and receiving data, makes it easier for solution providers to design innovative, efficient and handy solutions.
Imagine the wish of data-consumers wanting to have deep and recent data getting fulfilled with GST data and that too in a consumable fashion via APIs, and of course after obtaining the due consent from the taxpayer.
Connecting to the GST system for APIs can be through designated parties, in this case, GST Suvidha Providers (GSP). As an additional security measure, for any interaction between the taxpayer and GST system, a session is initiated using OTP authentication by the taxpayer. Important to note, the taxpayer should have enabled access via API. It is a one-time setting to be done by the taxpayer by logging on to GST portal and updating the API access preference.
The APIs for GST Data are defined return-wise and within a return for separate sections.
This compartmentalization of data further makes it easier for data consumers to get only the relevant data they need rather than having to get the full returns data.
The public data does not need explicit consent from taxpayer and is also available through APIs via GSP. Once API access is enabled and working with GSP to get GST data is like A-la-Carte. Order what you need.
4. Emerging Use Cases
Yes, it is more than just a gem. A mobile app, which gets you the GST public data and more, at your finger-tips. That’s one of the many possibilities.
The core data as well as the underlying technology lead to many possibilities coming up in and around GST data. The current processes which are not seamless due to manual interventions or lack of data can be transformed to gain efficiencies. And the field is open for new ideas. Below image shows some of the use cases that can be easily implemented.
While these are some of the common and apparent use-cases of GST data, more innovative could be envisaged, not only for businesses but also at the macro level for the economy. For instance, the Government can look at GST data to see the consumption pattern of goods and services state wise. This can provide insights for framing policies and campaigns like Vocal For Local.
GST Data helping MSMEs grow
It is worth highlighting, small businesses or MSMEs who are registered with GST could be major beneficiaries once the lending landscape evolves to consume and provide finance based on GST data.
MSME sector though a sizeable portion in the economy and is in dire need of funds, is often outside the radar of banks and financial institutions due to the high cost of acquisition and inadequate data. MSME sector having no choice ends up borrowing from the informal sector for acquiring funds. The higher interest rates just drain them of their liquidity.
Here is where GST data-based lending could provide some respite, however not all MSMEs are registered under GST. That’s where the upcoming framework of Account Aggregator could extend the horizon.
5. Some challenges to be addressed
The future with GST data-based transformation looks rosy and it is, albeit a few catches.
Seamless sharing of GST data across entities requires the API access to be enabled and initiating a session with OTP authentication. These two steps create friction as for many taxpayers the return filing is managed by tax practitioners and authorized signatory is often director or CFO equivalent, to whom the OTP is sent. While this friction is surmountable with some education and handholding, the advent of Account Aggregator should further make this process easy.
Coming to GST data itself, late filing and inconsistencies in data one needs to be mindful of.
Inconsistencies are more due to varying levels of information such as different digits of HSN based on turnover, different filing frequencies, and various levels of aggregation.
With Government taking measures of ease compliance, and once taxpayers start realizing benefits, timely compliance could eventually happen.
Meanwhile, using common data points from various GST returns and combining data from other sources such as bank statements etc. can be considered to overcome these data issues and gaps.
6. A bit of Crystal-gazing
There are a handful of fintech and financial institutions and also taxpayers, who have implemented some of the use cases highlighted above. The upcoming frameworks and governance models viz. Account Aggregator, Data Empowerment and Protection Architecture (DEPA), Open Credit Enablement Network (OCEN) will be the next game-changers impacting each and every participant and entire fintech landscape.
Along with it, new compliances such as E-invoicing and linking of GST data in Income Tax forms will open up newer possibilities for analyzing the data and deriving insights for existing and more use-cases.
Amongst the many use cases, digital lending should be the quick one to take off. A huge market, primarily for a small ticket or a fixed purpose loan or as the term used now is sachetized loans, awaits to be tapped.
Hoping all these technology and policy transformations backed by GST data will help the economy revive again.
IRIS Credixo-GST Data-based Lending Solution
IRIS Credixo (Data based Lending solution) stands at the intersection of Data and Lending Experience. It allows lenders to grow volumes, stand out from the competition and gather meaningful customer data to provide seamless “lending in the box” credit experience and design tailored customer journeys.
Credixo offers set of APIs covering publicly available GST data and consent based data filed in GST returns. Additionally pre-processed data sets, reports and insights are also available as enhanced data APIs which can quickly plug into any system. Banks, lending institutions and fin-techs can integrate these APIs in their credit models and provide faster and seamless lending experience to the MSMEs.