Last week, the Central Board of Direct Taxes (CBDT) extended due dates for compliance, return filings, tax audits, providing significant relief to taxpayers due to the pandemic.
It was done well in time to give respite to taxpayers and tax practitioners. Timelines had to be extended a few times in 2020 also but at the very last moment. Taxpayers and tax practitioner were under immense pressure as most companies, and tax practitioner’s clients have been working remotely for the last 15 months.
People are not meeting and working the way they used to work until now. Things have changed, and it looks like this new way of working will stay for an extended time.
Return filing is an event in the whole tax compliance process that has to be accomplished before due dates, but a lot of work has to be done to achieve this. Let’s look at the complete process of compliances to assess whether anything needs to be changed
Tax Compliance Process
Input data required for compliances is available as and when the transaction is executed and is available at the end of the financial period.
Data is transferred manually in most cases to the corporate tax teams, i.e., data has to be downloaded from ERP systems, bank accounts, or other sources. In the case of tax practitioners, they rely on their customer to provide all this data as they don’t have access to such data. How and when that data is provided decides the time required to file the return.
Real work starts once data is received. Let us look at the different steps involved in this
Data Analysis – Reconciliation of data with excel sheets or with some basic tools is the first activity that consumes a lot of time. It is either a specific person job who is expert in doing this or a manpower-intensive job. With remote working, this process becomes cumbersome as there are issues related to training & coordination, which may keep repeating.
Communication – Once the data is analyzed, there are reviews & clarifications required, which often is an iterative process. For example,
- Reviewing and finalizing data within the team
- Clarifications needed from one or multiple customers/vendors
For effective communication, further challenges are faced by teams that are trying to analyze and reconcile transactions, e.g.,
- How to reach out to customers/vendors?
- How to record their responses?
- How to maintain an audit trail?
These are all possible spots/ opportunities to infuse efficiency into the whole tax reconciliation process.
Return Filing – Once the data is ready, return filing is an event in the whole process, and there are many govt utilities and tools available to facilitate the process. Focus has shifted to this event, and in a way, it is correct as accomplishing the task matters.
But what are the possible ways this process can become seamless and automated?
If data transfer is automated, will it make life easier?
If the analysis is automated, will it have a more significant impact?