Cryptocurrency and blockchain can solve the GST credit logjam affecting India Inc
A smart contract is one that has all the features that a legal contract should have, including an agreement to make a particular transaction. A smart contract's mandatory requirements will be addressed on the next section. A smart contract is not limited to monetary contracts. Rather, it is quite possible for a smart contract to be a provider of the third and mandatory requirement of the contract – a contract's creator. A smart contract is not the creator of the contract, but it does grant the creator the ability to enforce the contract's terms.
When placed on a blockchain, smart contracts become self-operating computer programs that can automatically execute actions when specific conditions are met. Because they are on the blockchain and can be coded in any way that the programmer wants, these smart contracts are extremely flexible and can implement any sort of a command that is agreed upon, without any possibility of it being hampered or interfered with.
Since not much of the code exists outside of Ethereum, a smart contract's beauty and functionality are purely a product of its designers' intelligence. Ethereum is the perfect candidate for smart contract development because of its ever-expanding ecosystem of applications. Additionally, it is the only platform where development is happening entirely through the code, while other platforms rely on human intervention.
The applications of such a system are virtually (pardon the pun!) limitless. In countries such as India, especially, where tax legislation has become such that tax benefits of companies depend on the compliance of the company’s suppliers, the benefits of smart contracts become absolutely clear.
You may be wondering, why aren't these enforced in the same way as law? Well, for one thing, the money supply of any given territory is vulnerable to manipulation and theft. A smart contract, therefore, goes a long way towards securing your money against these variables. Governments and other institutions across the globe are anxious to introduce this type of financial inclusion in some form – whether it is as a consumer product, or as a legal construct
Now, apply smart contracts to this process. Suppose the entire process of invoice uploading, applying for input tax credit, and disbursing that credit is put on a smart contract blockchain. The contract can be set to automatically execute the transfer of credits as soon as the invoices are uploaded. That is, the companies will no longer have to apply for credit.
These code contracts in this case represent the body of code that is created to make sure that all parties agree. But the contract is something else. It is not so much the code, but the agreement. This becomes really important as soon as the code starts representing an agreement between the parties, this contract becomes a time bound agreement that has to be put into practice as soon as the parties have achieved the specified objective.