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GST to create Rs 36,000 crore software market in MSME segment

With the GST expected to be rolled out from September this year, there is a scramble among the software providers to have a bigger pie of the MSME segment whose invoicing and tax compliance IT requirements are estimated to create a Rs 36000-crore market.

Currently, only 90 lakh dealers out of the about 1.5 crore are using software for invoicing and filing returns and the rest are yet to adopt technology for this purpose, according to Mohit Bhambani, chief executive officer of city-based KDK Softwares. However, Bhambani said, there are about 1.6 crore MSMEs who are still not in the tax net. "GST will bring most of the more than 3 crore dealers into the tax fold and create a software market size of Rs 36,000 crore. Under the new regime companies would be required to show the tax they have paid while purchasing raw materials to claim deduction from their tax obligation," said Bhambani on the sidelines of a workshop organized for the startup community at Startup Oasis.

The tax compliance, accounting and invoicing software market is mostly concentrated in Bengaluru and Jaipur, accounting for 90% of the companies who are now building on capabilities to offer GST solutions. While the southern city is home to companies like Cleartax, Winman Software, and Tally Solutions, Jaipur also has the likes of KDK Softwares, CompuTax and Saginfotech leading the pack.

"Jaipur is the accounting capital of India producing 37% of the chartered accountants. On the other hand, Bengaluru is the Silicon Valley of India, the IT hub of the country. Development of tax filing and invoicing software requires both skills in equal measure, pretty much summing up why these two cities enjoy a leading edge," added Bhambani.

As most of the MSME sector will come under the GST regime, the size of client base is expected to grow manifold requiring additional workforce to meet the increasing demand.

Bhambani said KDK already has an employee base of 108 people and they will be hiring close to 100 professionals for its four locations in the country. While there are no formal assessment of the manpower requirement in the sector factoring in the GST regime, it is estimated the leading players will require an additional talent pool of 20,000 professionals.

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