Although GST may have set out to be ‘good and simple’, it is one of the most complex transitions for businesses. Clubbing 500-odd taxes to a one-tax system under GST was never going to be easy.
A countless number of modifications have already taken place. And the worst is still to come. A tidal wave of three billion invoices is expected to hit the network on 20 September. The big question is will the GST Network be ready to support the filings of returns? As one chartered accountant (CA) says, “The GST portal, till today, has not run continuously for 24 hours straight. I shudder to think what will happen when we file the returns.”
Fair to say that the software makers, whose presence businesses barely registered, are now suddenly most companies’ first line of defence. Those who need them the most are small and medium enterprises (SMEs). “SMEs have been the least ready for GST because they’ve been thinking that GST has anyway been in talks since 2006 so it will never get implemented. So they are surprised,” says Prabhu Govindan, managing partner at KPSN Consulting, a Chennai-based accounting firm.
As things stand today there are about 60 million SMEs in India, and only about 6.5 million are under the tax net, says Goenka. Unlike in the earlier tax regime when companies with a turnover of less than Rs 1.5 crore were exempt from filing returns, now even those with Rs 20 lakh need to file returns.
This means a legion of new SMEs could potentially adopt GST accounting and filing products. Will they pick the ubiquitous Tally that has changed little in all these years but somehow still stayed relevant or the newer savvier tech companies like Zoho, ClearTax and SAP (if the SME is slightly larger)?
Going by the number of its existing customers, Tally looks formidable.
The potential gold mine
From 1988 to 2004, Tally grew to just 1 lakh customers. Today, it has 1 million. That’s a cumulative annual growth rate of 21%. Not much by today’s standards. But Tejas Goenka, the executive director and Bharat’s son, says it has taken the last 10 years for the company to steady itself.
With the launch of VAT, Tally ramped up from about 80 to 800 employees in three months and went from 200 partner sellers to 20,000 in a span of three years, says Tejas. This sudden spurt was too much to handle for the company. “The good outcome is we wouldn’t have been this big if we hadn’t taken that call. The bad outcome was that the selling style, too, got diluted. We didn’t have a structured way of communicating the value of the product. It took us time to stabilise on all these fronts,” says the 28-year-old Tejas.
If VAT was a huge business potential for Tally, GST is another one in the making. But this time, it is treading with caution thanks to the lessons learnt the last time.
“We are not focusing on adding new customers but making sure we convert the existing customers into being GST-ready,” says Bharat. The company is able to convert 30,000 of its customers into adopting GST-ready upgrades, on a daily basis. “We have never seen this kind of efficiency,” says Bharat, who was the company’s only programmer for the longest time. “We were earlier converting about 3,000 customers but in 20 days since the launch, we already have 5 lakh GST-upgraded customers.”
Customers: Tally’s moat
When every other company, today, needs to go and spend on acquiring customers, for Tally, it is just about convincing its existing set who has stayed with it for all these years. “Tally is targeting CAs who are comfortable using it and making sure they don’t switch. CAs, too, mostly recommend the software to companies who usually go with what the CA suggests,” says a Bengaluru-based CA who did not want to be named as he enjoys a close relationship with Tally.
Businesses, too, are upgrading to the Tally GST version without giving it a lot of thought. “We are sticking with Tally since all the accountants are comfortable with it. It’s like an amateur accountant’s gold standard. Plus upgrading is easy,” says Senthil Natarajan, who runs a Rs 300-crore fruits and vegetable retail chain in Tamil Nadu called Kovai Pazhamudir Nilayam.