Role of GSP and ASP in GST India regime- Whitepaper by Avalara India Page 1 of 6

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Role of GSP and ASP in GST India

Implementation of Goods and Services Tax (GST), scheduled to take place beginning July 1, 2017, is
going to require a collective effort of the all the stakeholders: central and state governments, Central
Board of Excise and Custom (CBEC) and state tax departments, taxpayers along with their tax and
software consultants, Reserve Bank of India (RBI) along with banks, and the IT platform provider, i.e.,
GSTN.

The Goods and Services Tax Network (GSTN) is a non-profit, public private partnership company.Its
primary purpose is to provide IT infrastructure and services to central and state governments,
taxpayers and other stakeholders, thereby facilitating the implementation of the Goods and Services
Tax (GST).

The GST system project is a unique and complex IT initiative.It seeks, for the first time, to establish a
uniform interface for the taxpayer and a common and shared IT infrastructure between the center and
states.It will thereby integrate multiple tax department websites, bringing all the tax administrations
(center, state, and union territories) to the same level of IT maturity, with uniform formats and
interfaces for taxpayers and other external stakeholders. Unlike the present-day taxes, GST is going to
be on a digital platform from its inception.

With a view to address this IT challenge in an effective manner, the center has set up a special purpose
vehicle called GSTN.It will be at the center of the IT ecosystem under GST.

The common GST portal developed by GSTN will function as the front-end of the overall GST IT
ecosystem.The IT systems of the CBEC and state tax departments will function as back-ends and will
handle tax administration functions such as registration approval, assessment, audit, adjudication, etc.
For taxpayers, GSTN will provide common and shared IT infrastructure and cater to functions facing
taxpayers, such as filing registration applications, filing returns, creating challan for tax payment,
settling IGST payment (like a clearing house), and generating business intelligence and analytics.
Checking the claim of Input Tax Credit (ITC) is one of the fundamental pillars of GST, for which data of
Business to Business (B2B) invoices will be uploaded by taxpayers and matched by GSTN.

Tax automation will thus become critical to meeting regulatory requirements under GST.A high level
of synchronization is required between the taxpayers system and the GSTN system, which will be very
difficult to achieve without automation.

Item-level details in invoices with reconciliation of sales register with auto populated purchase register
and auto reversals will be key data processing requirement under GST compliance.Having the ability to
reconcile invoices with sales registers, auto populated purchase registers, and ITC reversals will be
essential under GST compliance.

Sale and purchase transactions data that will be uploaded by the taxpayer to the GSTN portal will, for
the first time, contain a Combination Key comprised of the suppliers GSTIN, invoice number, financial
year, and HSN/SAC Code.This will make each line in GST database unique.Correct data entry of this
key field will therefore be very important for taxpayer compliance.Wrong data feeding in this
important field may result in mismatches between seller information and the buyers claim for GST
credit, and, unless rectified, eventual denial of credit to buyer.For this aspect of GST compliance,
support from enriched APIs (Application Programming Interfaces) is of great value to taxpayers.

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GSPs and ASPs: important constituents of IT ecosstem

From a taxpayers point of view, this front-end may be accessed directly through the G2B portal
provided by GSTN.Alternatively, taxpayers may opt to use third-party applications for interacting with
the GST returns system, such as desktop and mobile applications, and other mediums.
The GSTN Portal will be at the front-end of the GST IT ecosystem for all taxpayers in all parts of the
country.

When making the above choice, the taxpayer needs to note that the interface and features exposed by
the GST portal will be uniform for all taxpayers and might be basic in form and design.On the other
hand, third-party applications are expected to have richer interfaces and features required by specific
groups of taxpayers (e.g., large taxpayers with completely automated financial system, SME with semi-
automated system, and small size with no system).Also, due to its sheer size, the GST filing portal will
not be as nimble as those provided by third-party applications

Taxpayer convenience will be key to the success of GST India regime.Taxpayers therefore have the
option to use third-party applications, which can provide varied interfaces on desktops, laptops and
mobiles and can connect with the GST filing system.Third-party applications will connect with the GST
filing system via secure GST system APIs.The majority of GST system functionalities related to
taxpayer GST compliance requirements shall be available to these applications through GST APIs,
which the applications will enrich and enhance as a convenient front-end for taxpayers.

Accessing the GST filing system directly through the G2B portal may not be a good option for many
taxpayer organizations, who may instead access it via third-party applications. These applications have
the benefit of being much more user friendly and customer focused.They will connect with the GST
filing system via secure GST System APIs.Developers of such applications have been given generic
names: GST Suvidha Provider, or GSP, and Application Service Providers, or ASP.

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GSPs and ASPs thus will provide much needed support to taxpayers in the IT ecosystem for GST.But,
while the extent of support provided by a GSP may be limited to providing enriched access to the G2B
portal, support provided by ASPs will extend much further and will address most taxpayer compliance
difficulties.

ASPs will focus on taking taxpayers raw data on sales and purchases and converting it into the GST
returns.These GST returns, or GSTRs, will then be filed on behalf of the filer with GSTN via the GSP.

ASPs will act as a link between the taxpayers and the GSPs. The GSTN client ID and GSTN client secret
for ASP will be generated by GSP from the portal, which will be provided by GSTN.Its a kind of sub-
license generation.

A GSP may also offer the services of an ASP to meet a clients particular data processing requirements,
and provide customized solutions to a large number of organizations.This provides combined GSP and
ASP support.

An important point to note here is that whether a taxpayer goes for direct access to G2B portal or
chooses the more comfortable option of using GSP services, a provision is made in the IT ecosystem
under GST for the taxpayer to have complete control, security, and privacy while interacting with the
GST system.

Services provided b GSPs and ASPs

GSPs acting as ASPs are expected to enable taxpayers to comply with the provisions of GST law
through their web platform.These application service providers should provide taxpayers and other
stakeholders with innovative and convenient methods of interacting with the GST Systems, from
registration, to uploading invoice details, to filing returns.

ASPs can come up with an application to provide GST filing facility in existing software, or, with the
help of ASP partners, they can develop an end-to-end solution with which corporates, consultants, and
taxpayers can manage their sale/purchase and GST filing: e.g., an offline utility-like spreadsheet;
taxpayers could fill out their invoice details and then upload it on the GST portal for processing.

Similarly, for tax consultants (TC), ASPs can provide a dashboard that displays a list of all his/her clients.
Clicking on a client would give the TC a snapshot of the clients actions/ pending actions.

GSPs and ASPs in action

With respect to the GST IT ecosystem, taxpayers can be divided into three broad categories, namely:

Users with standalone or networked systems that are not connected to the Internet
Users with applications with API interfaces such as Tally, SAP, Oracle, Ramco ERP, Microsoft ERP
and many more.
Users with applications that are in the cloud and can work in both offline and online mode, have
well-defined API based architecture, and use latest technologies.

Users in the first category will necessarily need a third party (GSP/ASP) to help them upload invoice
data, file returns, etc., generated from their accounting software.However, many in the other two
categories will prefer to have GST Access in a user-friendly enriched form through the GSP/ASP
network, even though they may be in a position to directly consume APIs in the form provided by
GSTN.

Specific Services

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As for specific services, after receipt of raw data from the taxpayer, GSPs either themselves or with the
help of ASP partners shall provide the taxpayers with the following services:

Compile invoice wise data from the business units.

Upload invoice wise sales register (supply data) in GSTR-1 within 10 days from the end of the
month.

Download purchase data, i.e., inward supplies (receipts or purchase) in the form of draft GSTR-2
from the GST Portal.The draft GSTR-2 will be automatically created based on the GSTR-1 filed by
corresponding suppliers.

Cross-match purchases made with those downloaded from the GST portal.After reconciliation
with the books and draft GSTR-2, upload the final GSTR-2.Reconciliation of the purchase register
and data downloaded in the form of GSTR-2 from the GST portal will be carried out by the ASP
for the benefit of taxpayer.

The GST Portal will then generate the GSTR-3, based on the GSTR-1 and GSTR-2.

Other dealers, including casual dealers and those opting for the composition scheme, will also be
required to file returns.

Vital Check points to consider before appointing ASPs

Since a major part of the support provided to a taxpayer in the GSP and ASP network relates to the
enriched interfaces offered by ASP, taxpayers need to pay particular attention when choosing an ASP.

As ASPs will be processing raw data pertaining to a taxpayers sales and purchases, they will need
access to the businesss sensitive information.Raw data provided by the taxpayer should contain all the
sensitive information relating to the sales & purchases of the Organization, such as:

To whom does the taxpayer sell and where do the sales occur?
What does he sell?
How much does he sell and at what price?
From where and from whom does a taxpayer purchase?
What does he buy?
How much does he buy and at what price?

In short, an ASP will have all the data required to establish the profit percentages for the business of a
taxpayer, across the businesss entire range of products and services.Hence, before appointing an ASP,
the taxpayer needs to consider following:

Data privacy and protection. An Asps ability to strictly maintain data privacy under properly
drafted non-disclosure agreements, data security strengths, and the ASPs arrangements for the
protection of shared data.

Value-added services. The extent to which an ASP provides other value-added services, such
as trend analysis, tax alerts, and legal support.

Data retrieval and audit trail., An ASP facility for data retrieval are very important, especially
given the statutory requirements for record preservation.For a taxpayer to justify claims before
tax authorities, an audit trail must be available.

Conclusion

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Role of GSP and ASP in GST India regime- Whitepaper by Avalara India Page 5 of 6

An important part of GST compliance will be filing data with the GSTN.An IT ecosystem under GST,
through a network of GSPs and ASPs, will help corporate and tax consultants achieve better data-based
compliance under the GST regime.

Avalara Technologies is an ASP partnering with multiple GSPs in India to provide cloud-based, GST
compliance solutions to business corporations and accounting firms.

To learn more about how Avalara can help you with GST compliance automation, contact us through
https://www.avalara.com/in/products/gst-returns-filing (https://www.avalara.com/in/products/gst-returns-
filing)

This whitepaper is contributed by CA Mukund Abhyankar.

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