BPM-EAI

Before, our honorable Finance minister, tries to make things a little less complicated by rolling out GST, I decided to tread upon, not-so-favored and not-so-glamorous topic of process of tax filing.

Tax return filing as a process, I remember, used to be a bit on a cumbersome side. With whole set of documents in the shape of forms (SARAL- ITR form), to be filled and attaching supporting documents and making a queue to file returns at local Income tax office or designated booths or hiring agents who can do the same for you, for a certain fee. Now with the advent of e-filing and subsequent simplification of form, you just don't need to be a part of the queue. Everything could be done at comfort of your office desk or living room sofa. This certainly is a case wherein a process has been re-engineered to suit the interest of common man. Although I do not have stats to prove, but in my opinion E-filing would have definitely helped more people to be tax-return-filing-compliant, if I am allowed to put it that way.

Alright, with this small primer, I would like to touch upon other areas in this domain wherein BPM could be leveraged to simplify the process. Since, we would appreciate that scope is huge; I would restrict myself to one particular area of taxation viz. Service tax. To get an overview of this, feel free to visit Service Tax page maintained by Central Board of Excise and Customs.  To give you a brief, the concept of Service Tax came into force w.e.f. 01-07-1994 with just 3 services and rate of 5% to begin with. Right now the net has been widened to cover more than 100 services and effective rate (including Education Cess @ 2% + Secondary and Higher Secondary Education cess @ 1 %) comes out to be 10.3 %.

Without further ado, let's concentrate on the process aspect of service tax filing. If I am a service provider, let me enumerate the various stages to go through to comply with the rule books.

Registration:
Every service provider of a taxable service is required to register with the jurisdictional Central Excise Office. A registered service provider is referred to as an assessee. Service tax is administered by CBEC (Central Board of Excise and Customs). You have to fill form ST-1 in duplicate and submit the same with a copy of PAN Card and Address Proof. Afterwards, you need to collect your registration certificate.

Before I go into the process of Service tax filing, let's understand certain general procedures.

Every person providing taxable service is required to issue (within 14 days of completion of service) an invoice or a bill or a challan duly signed by him / her or a person suitably authorized. Such invoice, bill or challan should follow certain standard and contain certain set of information.

Similarly, every input service distributor, distributing credit of taxable services should issue an invoice, a bill or challan signed by him or her or a person suitably authorized for each of the recipient to whom credit was distributed and such invoice, bill or challan as in earlier case should follow certain standard and contain certain set of information.

Service Tax Payment:
As per Government of India Service tax website:

1. In case of Individuals or Proprietary Concerns and Partnership Firm, service tax is to be paid on quarterly basis. The due date for payment of service tax is the 5th of the month immediately following the respective quarter. For the purpose, quarters are: April to June, July to September, October to December and January to March. However, payment for the last quarter i.e. January to March is required to be made by 31st of March itself.
   (Refer Rule 6 (1) of Service Tax Rules, 1994)
2. In case of any other category of service provider than specified in 1 above, service tax is to be paid on monthly basis, by the 5th of the following month.  However, payment for the month of March is required to be made by 31st of March itself.      
   (Refer Rule 6 (1) of Service Tax Rules, 1994)

Returns:
As per Government of India Service tax website:

1. Every assessee is required to submit a half yearly return in form S.T.3 or S.T.3A (in triplicate) along with copies of T.R.6 challans. For the purpose of filing returns half year is counted from April to September and October to March. In case the assessee has opted for provisional payment of service tax he is required to file the service tax return in form S.T.3A. (Rule 7(1) of Service Tax Rules, 1994)
2. Date of filing of Returns: The half yearly return is required to be filed by the 25th of the month following a particular half year. (Rule 7(2) of Service Tax Rules, 1994)

Although, similar to Individual Income tax returns filing, we have an option to e-file return as well.

So in a nutshell the process is like:

Alright, so as a process, a cake walk for process analysts. Or is it?

Let me go into the certain fine prints of this process. Take a fictitious case of a tower firm operating in NCR (National Capital region) including Gurgaon, Noida and Delhi, which is in the business of erecting towers for Mobile companies, Power companies etc. Now where does it need to file challans and returns and what would be the appropriate rate of tax. This would fall under works-contract where in Service tax is charged at 4 % of contract value under composition scheme.

Now regarding location of filing, it has to be done in 3 state jurisdictions since Gurgaon happens to be in Haryana, Noida in U.P. and Delhi is a separate jurisdiction. So every time, the process has to be repeated 3 times at 3 different jurisdictions.

Now where would a typical BPM solution fit in this scenario?

• Since tax rates are nothing but rules which need not be tampered on a daily basis or even monthly / quarterly basis, these can be made a part of the rules engine and accordingly updated as and when there is a change.
  
• Most of the forms are pretty standard and can be prefilled fetching from legacy data. That is the system would generate a signature ready tax return or a challans for that matter. This would greatly reduce time and cost overheads.
  
• Document management system would ensure that there is a copy of each and every transaction invoice as well as challans and returns. This would be of great help during the time of audits.
  
• Report generation facility could be used to analyse tax behavior of the organization.
  

In the era of scams and malpractice, where with each passing day regulatory authority is tightening the noose, the onus lies with the companies to comply with the laws of the nation and tax compliance is definitely one of those.

Can BPM deliver or not or will people ask for it, is definitely a question to think over.
Feedback, comments and suggestions are most welcome.