We would prefer to get listed on an international exchange: Archit Gupta

Launched in 2011, ClearTax is a pioneer in the fintech-powered taxation and compliance sector. The start-up has witnessed a rapid growth in the number of taxpayers driven by two primary factors: demonetization and implementation of goods and services tax (GST). In fact, the personal income tax related services segment, which is a business to consumer (B2C)-focused offering, has recorded almost a 100% growth year on year. Archit Gupta, co-founder and chief executive officer, ClearTax, tells Ashish K Tiwari about the overall business and more. 

Last few months must have been a busy time at your firm with income tax returns filing.

Both our business to business (B2B) and business to consumer (B2C) sides of the business are keeping us busy. This is the first tax assessment year after the implementation of GST. We’d built a new vertical last year to offer enterprises simplified solutions to file GST returns. Our income tax filing platform is looking to process nearly 4 million tax returns (40 lakh) this year, which is the highest for any platform in the country. On the other hand, we have delivered our GST solutions to over 40,000 companies, including large enterprises such as Puma, Hardcastle Petrofer, Lenskart, Inox AP and Epson among others. In the online space PhonePe, Myntra and Jabong are using our platform. We are looking to reach 1 lakh businesses in the coming years. We have emerged as a market leader in terms of customer acquisition and growth, which is faster than that of our next five competitors put together.

What is driving these businesses to use the ClearTax platform when they could easily do it using in-house resources?

The ClearTax GST software helps enterprises manage their SAP, Oracle and Tally interfaces. Also, the ClearTax interface is integrated with the government portal to provide enterprises with comprehensive change management and tax filing assistance. It’s not efficient for businesses to do it by themselves, especially on an enterprise-scale. ClearTax is providing a specialised software which understands the GST law and is updated with all the recent developments in terms of compliance regulations. The ClearTax GST software, unlike conventional ERP software or MS Excel, is a specialised taxation solution that offers end-to-end assistance by integrating multiple sources of enterprise data. Our software uses intelligent algorithms that employ machine learning to match invoices to relevant entries and corporate customers reported an increase in data matching by 60% after using our software. Enterprises can also share the software with suppliers, vendors and distributors and ensure GST compliance of the entire supply chain.

What are your commercial terms like for the B2B clients?

It varies depending upon the size, scale and problems to be solved. For example, a business having a presence in multiple cities will have 30 GSTNs, three to four PAN accounts, possibly for different entities focused on trading, manufacturing, or distribution and so on. So the commercial terms will be different from an organisation which is smaller in scale and size. Chief financial officers of large enterprises may need to pull out dashboards, which are super specific in our software, understanding the transactions and commercials will then work differently. The good news for us is that we have emerged as market leaders in SaaS-based GST solutions, while we are already strong in the consumer space have been scaling up at a very rapid pace. We will be doubling our GST filings in the next four months. So far we have seen 20% to 22% month-on-month growth and it’s been a phenomenal growth trajectory that is expected to continue for the next three to four years. This year, our revenues from the B2B segment are close to about 65% while the rest is accounted for by the B2C segment.

Isn’t Tally a significant player in this area?

Tally operates in the small business space and ClearTax targets its solution to large businesses and their end-to-end requirements. We offer them the option to integrate our interface with that of any solution ERP, including Tally. Besides this, we also have our own Tally Connector. Clients can install the ClearTax Tally connector in Tally and use the software. It really doesn’t matter what software you’re using for accounting or bookkeeping, we can help businesses integrate multiple interfaces. We have recently launched the E-Way Bill solution, where businesses can generate an e-way bill on goods being moved across different locations.

How is the market response to the e-way bill offering?

This solution has simplified a critical aspect of trading, i.e. the movement of goods, allowing companies to generate e-way bills and goods transporters benefit from a reliable and accurate mechanism of filing invoices and calculating tax liabilities. Large and mid-sized companies benefit from this solution as the intrastate supply of goods is often undertaken without any e-way bill. As 80–85% trade is undertaken within the state, the applicability of e-way bill goes down. In the next one or two years, state tax authorities are likely to start providing e-way bill services. But for that, the system needs to stabilise further and the issue of scalability needs to be further looked into.

On the B2C side, are individuals going for basic plans for filing their ITRs on the website?

It’s a free e-filing platform, where one can upload his/her Form 16 themselves. The other segment is that of assisted services. In the case of individuals with salaried income, it starts at Rs 799 and can go up to Rs 3,599 if they have income from capital gains or foreign income. For traders, professionals and freelancers and businesses, the plans range from Rs 2,499 to Rs 6,500.

You are also selling mutual funds on the platform?

We focus on tax saving and ELSS funds and also have a concept called baskets, wherein we have funds that you select based on what works for you. For example, if you’re investing in your child’s future, we have created a combination of various equity and debt funds of short, mid and large-cap, along with the historical and potential future returns on each and the investment strategy to help investors take the right decisions. It’s still in its early days but we have scaled 10x since April and we’re looking to scale up further in about 18 months. Following this, we will be the biggest platform with our GST and other B2B solutions expected to grow exponentially in the next 24 months.

Will you grow further to become a lending platform? Maybe things like background checks and so on.

Our focus is on asset-building. Our customer base is between the age group of 22 and 33 years, i.e. the millennials. Approximately 75% of our audience are either in their first or second jobs and are usually first-time savers, so building assets is an important thing. We help them by starting to build a portfolio with as little as Rs 500 or Rs 1000. We feel lending for a new house, car motorcycle, fund education etc. is not really for us. We have seen on our platform that about 40% of the people don’t maximise 80C and that’s a lot of money going out of your pockets – almost as much as a 20-30% cut in their salary.

Given the volumes, you must be profitable by now?

No, not yet. We are investing ahead of the curve now and we are putting a lot of money into research and development (R&D), sales and education. We raised $15 million (roughly about Rs 100 crore) from SAIF, Sequoia, Founders Fund, Peter Thiel, Max Levchin in Seed and Series A and the first round of money came in from Y-Combinator, which is a US-based accelerator. Now we are very well capitalised. We don’t lose out money on transactions, big TV campaigns. We are making money on every transaction but still, we are still in the investment phase. We spend 45% of our revenues on R&D and technology.

Will you be exploring other areas of taxes such as international taxes etc?

Cross-border taxation is not our key focus at the moment. We will think about it at a later stage. In today’s term, it’s not a large market and our focus remains on the domestic market. Once we plan to expand internationally, we might explore and choose geographies or where there is a higher volume of cross-border trade.

Do you plan to get listed say three to five years from now?

A listing should be possible for us easily. We would prefer to get listed on an international exchange than an Indian exchange because a tech company gets valued differently in international exchanges as compared to Indian ones.