iTax-FourthShift: Two-Way Integration Tale

ITC Filtrona is a joint venture between ITC Limited and Filtrona International, UK. The company manufactures filter rods and boasts a capacity of more than 10 billion filter rods per annum.

Manual Computation of Excise and VAT

ITC Filtrona was using FourthShift ERP implemented by SoftBrands. The ERP does not consider Indian taxation requirements and thus, ITC Filtrona had to resort to local excise software for VAT and excise requirements. However, these solutions would not support updates that had to be effected due to regulatory changes. There was also a lack of synchronisation between the excise software and the ERP. ITC Filtrona, thus, experienced difficulties due to the lack of essential tax computation provisions in their ERP.

“Previously, we were using Syntrax software. It had no scope to include education cess, apart from excise and VAT, which were calculated manually in the invoice,” says Raghvendra, assistant manager (Commercial), ITC Filtrona. Moreover, the solution could not export transaction data from the excise software to FourthShift ERP. All of that was done manually. However, post integration with the iTax software, the manual work of excise and VAT calculation is done away with and seamless flow of transaction data from FourthShift to iTax and vice the versa is possible.

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“Indian companies using global ERPs face a couple of broad-based issues on tax computation. Firstly, the global ERPs do not understand Indian tax requirements. Secondly, these ERPs are ill-equipped to incorporate the required changes in the tax provisions effected by the government from time to time,” says Arun Dixit, CEO, Udyog Software. ITC Filtrona chose the iTax software from Udyog to enable efficient local tax calculations.

Two-Way Integration of iTax and FourthShift

ITC Filtrona wanted to maintain the fabric of FourthShift as it was earlier and additionally incorporate the mechanism for excise and VAT computation without making any customisation in FourthShift. This was in tune with a company policy to keep the ERP standardised. The company wanted to move from a stand-alone excise software to one that would seamlessly integrate with the ERP. This led ITC Filtrona to go for a two-way integration between the ERP and iTax, the excise software from Udyog Software.

“In fact, this was the first time Udyog was doing a two-way integration as ITC Filtrona didn’t want to change the ERP,” says Dixit. iTax was installed with both to and from data transfer facilities using the ERP. Purchase and production data exported from FourthShift into iTax now gets converted into an XML format and is subsequently imported into the iTax module. Similarly, the data after tax calculations is imported from the iTax module into an XML format and later exported back to FourthShift. Additionally, the solution also generates excise statutory reports, registers and challans.

For example, while generating a typical sales invoice, sales related data is entered in FourthShift, which is transferred into iTax for excise and VAT calculations. From there, post tax calculations, the final data related to the transaction is exported into FourthShift again. iTax has been designed in a way that the ERP can understand the data exported from iTax.

For processing the overall transaction information for quarterly reports, iTax has a specially developed module that captures transactions and exports data in CST format. In case, there are any changes to be made during the financial reconciliation, no separate journal entry is required. FourthShift ERP can automatically handle the issue. This saves a huge amount of time for the Accounts department in preparing the quarterly reports for excise and VAT.

As per the system used before, the Accounts department maintained separate Excel sheets for excise- and VAT-related returns and it took almost four to five days for the completion of the entire process. After the iTax implementation, the same process can be done in a day’s time.

The Outcome

The major benefit to ITC Filtrona has been faster generation of a customised set of MIS and quarterly reports. Prior to the roll-out, a team of three-four employees dedicated for VAT and excise computation took about a day for filing quarterly reports. Now the same resources can be used for other productive purposes.

“One of the biggest advantages has been the reduction in time taken for identifying ‘Sales Recognition Figures’,” says Raghvendra. Generally, the sales figures include samples send, goods rejected etc. On a monthly basis, the net sales figures are calculated to get the exact sales amount. This process was earlier done manually, which took an entire day. After adopting iTax, the net sales are accounted for in less than an hour’s time.

“The implementation took about about five to six months with an approximate cost of Rs 1.5 lakh,” concludes Raghvendra.