A government bid to democratise access to accounting software by making it free for small companies and ensure compliance with the indirect tax regime will give a leg-up to Indian software product companies, helping them scale their user base and strengthen business.
The Goods and Services Tax Network (GSTN) last week allowed small businesses, with a turnover of 1.5 crore or lower, to download a software that would help create invoices and account statements, manage inventory and prepare GST returns.
Six firms are listed on the GSTN website which will offer software free of cost to the targeted 8 million small businesses, or nearly a seventh of India’s estimated 55 million SME base.
The move by the government is aimed towards making digitisation easier for small companies, said a senior executive of GSTN.
“The GST Council wanted to help small businesses digitise and thereby have hassle-free compliance. These should also help them in streamlining day-to-day operations,” said the official, who did not want to be named.
Zoho Books, part of Zoho Corporation, one of the selected vendors, said that this would encourage higher adoption of the software and increase engagement with its entire cloud suite of software products. “We definitely want to help SMEs maintain proper books so that getting access to credit becomes easier and we also want to expose them to latest technologies,” said Sivaramakrishnan Iswaran, director, product management at Zoho Corporation.
“Once they start using Zoho Books and when they grow beyond the particular size, we are assuming they will stick to us and that will increase the subscriber base.”
Iswaran said that the 1.5 crore turnover figure is the “magic number”, beyond which companies may be in a position to afford a decent software, even if they can’t afford a big accounting team.
India is witnessing a surge of software product firms that offer their software as a service. They also adopt a freemium model of business that encourages customers to use their basic product for free and pay a monthly rental fee to use additional features. Other home-grown companies also feel that the move would increase their visibility and help them target a large base of potential users.
“For us, reaching out to every nook and corner and to 3 million taxpayers who have turnover of 1.5 crore and below would not have been easy. So we thought it could help us get more visibility,” said Nitin Patel, director, Relyon Softech, which offers Saral Accounts, a GST software. He said the agreement to offer these accounting and billing software services is for two years. “In cases where some companies use our solution beyond the listed free applications, it would be a paid service. (Also), the assumption is some of these companies may continue to use our solutions after two years.”
An industry analyst said that these companies may treat this as a marketing cost to onboard more small businesses, which eventually may buy services which are not free.
Tally Solutions, a large Indian service provider of enterprise resource planning software, which also offers a GST compliance software tool, only offers a paid version. The company believes that free and paid software vendors will be able to co-exist.
“We are happy with the initiative taken by the government since it will be a major driver for automation in SMEs,” said Tejas Goenka, MD of Tally Solutions.
He added, “We do not have a free version of Tally and are not intending to offer it anytime soon. Having said that, this situation of co-existence of free and paid software has been there for decades and finally businesses will choose whatever is best for them.”
Analysts say that technology investments will help improve compliance across the industrial ecosystem.
“It is incumbent upon the government to provide some support, especially for smaller taxpayers, to contain the cost of compliance,” Uday Pimprikar, partner & national leader, Indirect Tax, EY India.
Source: Economic times.