Tax compliance solutions

Tax compliance solutions

Tax compliance solution is a generic term used to describe the available softwares to perform tax compliance for income tax, corporate tax, VAT, service tax, customs, sales tax, use tax, etc. The solution automatically calculates your complete tax liabilities to the government, keeps track of all the transactions (in case of indirect taxes), keeps track of any tax credit you are eligible for etc. The solution can also automatically generate any forms or filings required for tax compliance. The solution will have pre-defined tax rates and slabs and can allocate your income or revenue in the right slab itself. The aim of the solution is to provide the user with easy calculation and minimize any human interface and hence the chances of error. Tax compliance solutions have been present in developed countries for long in the form of tax calculators mainly for direct taxes, such as Income tax and corporate tax. Gradually some more complex and customized tax compliance solutions were designed and developed by organizations around the globe.

Tax compliance solutions can be divided into two main categories, namely Direct and Indirect Tax compliance solutions.

Direct tax compliance solutions

A direct tax is one paid directly to the government by the persons (juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include income tax, corporate tax, and transfer tax such as estate (inheritance) tax and gift tax.A basic compliance solution for Income tax in the form of tax calculator was in existence since long. They are so popular now a days that even Government of India provides a income tax calculator [ [ Income Tax Calculator] Retrieved on 20th June 2008] on their website.
Corporate tax compliance solutions have also been in existence for years, more often than not with the Finance & Accounting softwares or financial module of ERPs. These suits have the facilities to maintain General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets along with some basic taxes [ [ Financial Features of SAP ERP] Retrieved on 20th June 2008] .

Indirect tax compliance solutions

An indirect tax (such as sales tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. Indirect Tax compliance has always been much more complex as compared to the direct taxes. Most of the indirect tax compliance solutions have separate modules for VAT, Service Tax, Customs etc.

VAT compliance solution

Value Added Tax (VAT) legislations have a common structure across countries (or states in case of India), certain peculiarities are observed for individual countries. Some of these peculiarities are in the areas of handling of credit of capital goods, sale of scrap and second hand goods, formats of mandatory submissions and audit exercises.The solution address these peculiarities and reduce tax related transaction costs. Since these solutions are generally designed and developed by Tax experts, they understand that the domain of VAT compliance spans across maintenance of records of stock transfers across and within states, all sales and purchases made by registered last mile supply chain entities (be they manufacturers, dealers or traders), input credit reversals, determination of taxable value, maintaining tax credit registers, handling issues pertaining to works contract, entry taxes and Central Sales Tax (CST) and mandatory submissions.

The solution can provide the user with:

*Automated computation of value added tax liability applying tax positions taken by clients in an IT enabled framework
*Automated generation of payment instruments (challans) and returns (monthly, quarterly and annual)
*System driven maintenance of input and output tax credit registers
*Reconciliation of:

*Stock registers with actual sales and purchases taking return of goods, free supply etc. into account
*Tax credit registers with stock to account for credit reversals in cases of warranties etc.

*Organization-wide management of the various consultants (tax service providers) that provide services such as filing returns, procuring blank forms from government offices etc. for various regional offices of the organization. This results in a single point of contact for all VAT related service provider relationships. It also holds the promise of a uniform and stricter implementation of service level agreements made by the organization.
*Implementation of tax positions taken by organizations with respect to their supply chain partners
*Procurement and orchestration of dispatch of CST forms in a timely manner

ervice tax compliance solution

Service tax compliance more often than not commence with capturing tax positions and include maintenance of credit registers, handling reverse charges, rebate claims on export of services along with payment of tax and filing of returns.

The solution can provide the user with:

*Automated computation of service tax liability applying tax positions taken by clients in an IT enabled framework
*Automated generation of payment instruments (challans) and returns
*System driven maintenance of CENVAT credit registers factoring the complexities of:

*Transfer of CENVAT credit etc.
*Interplay on account of excise levies

*Handling specific processes pertaining to:

*Input service distributors such as maintaining records of credit transferred across registered premises
*Premises with centralized accounting / billing systems insofar as reporting needs of premises that come under the centrally registered premise

*Export of services and corresponding claims of rebate
*Handling reverse charges of service tax
*Tracking differential liability in cases of provisional assessments


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