Goods and Services Tax (GST) : Roll-out, Impact & Preparedness. Focus on Japanese subsidiaries/ JVs in India.

1. GST AND ITS
EFFECT ON
INDUSTRY
For Education Purpose only

2. © 2016, Vaish Associates Advocates
Central
Levies
Customs
Duty
Service
Tax
Excise
Duty
Cess
Central
Sales Tax
Electricity Duty
Entertainment Tax
Entry Tax & Octroi
Luxury Tax
VAT
State
Levies
Current Tax STRUCTURE
Stamp
Duties
Electricity
Duty
BEING
SUBSUMED
BCD on
Imports and
Export
Duties
Excise duty
on
Petroleum
NOT BEING
SUBSUMED
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3. GST
INTRA-STATE SUPPLIES INTER-STATE SUPPLIES
CGST SGST IGST (CGST+SGST)
GST Structure
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4. SUPPLY
Supplies in course of or in furtherance
of business without consideration to
be taxed in following cases:-
1. Related party supplies
2. Branch transfers supplies
Taxability Of Composite & Mixed
Supply
KEY CONCEPTS
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Includes all forms of supply
of goods/services such
as sale, transfer, barter,
exchange, license, rental,
lease or disposal
Importation of services, for
consideration whether or not in the
course or furtherance of business
EFFECT: Branch transfer of goods and
inter-branch services brought in the tax net
(when in separate states).
- Qua Goods: Critical for inter-state
movement of Credit.
- Qua Goods and Services: Businesses to
consider working capital changes
Also, liquidated damages and employee
benefits will come under tax net.
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5. IGST
IGST credit fungible
against CGST AND SGST
output liability – in
addition to IGST output
liability
Inter-state supplies are supplies where:
• Location of supplier and Place of
supply are in different states
(determined in terms of
place of supply provisions)
• Supply of goods and/or services in
the course of import in the customs
territory of India
• Supply of goods and/or services
when supplier is in India & POPS
is outside India
• Supplies of goods/services to & by
SEZ developer
KEY CONCEPTS
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EFFECT:.
- Qua Goods: Bill to ship to transactions. would be complex to determine
tax and credit flow.
- Qua Services: Temporary branches would also need to obtain
registration
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6. © 2016, Vaish Associates Advocates
INPUT TAX
CREDIT
CREDIT FLOW ACROSS STATES:
In pre-GST period, CST not part of the
credit chain
CGST/SGST fungible against IGST
under GST Businesses to relook supply
chain/procurement strategies
CREDIT BLOCKAGES OF PRE-
GST REGIME REMOVED:
CVD, SAD, Excise Duty and Service
Tax are currently not part of the VAT
credit chain.
SAD, VAT/CST etc. are not part of the
Service Tax credit chain
KEY CONCEPTS
GST ITC MATCHING:
Every supplier will be required to be upload three monthly returns for every state registration namely
details of outward supplies, details of inward supplies and consolidation of monthly invoices. Details of
outward supplies for the supplier must correspond with the details of inward supplies of the recipient.
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7. GST CREDIT UTILIZATION MECHANISM
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CGSTInput Tax SGST IGST
CGST
SGST
IGST
Output Liability
FIRST CHARGE
SECOND CHARGE
THIRD CHARGE
NOT AVAILABLE
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8. GST RATE STRUCTURE
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28%: Luxury/Sin
Goods and
Services: De-merit
rate
12% & 18%: Most
Goods and
Services: Revenue
Neutral Rate
5%:Essential Goods
and Services: Merit
Rate
PERCENTAGE OF SPREAD
RATE
Exempted and Zero
Rated Goods and
Services
In addition to above rates, a new cess i.e. ‘GST compensation cess’ for first 5 years will levy
on specified items
CGST/S
GST-
cap of
14%
IGST-
cap of
28%
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9. Page 9
TRANSACTION Valuation
- Value = ‘Transaction value’ [price actually paid or payable] where the supplier and recipient
are not related and price is sole consideration for the supply.
- Any amounts paid by recipient that are obligation of supplier to pay
- Taxes levied under any other law(s) (other than SGST / CGST or IGST)
- Incidental expenses incurred by supplier at the time or before supply
- Subsidies on the supply which are directly linked to the price excluding subsidies provided by
the central & state government
- Goods / services supplied FOC / below cost, by recipient
- Post supply discount which is agreed as per the agreement and input tax credit has been revered
(and linked to invoice), to not be included
- Discounts allowed as a normal trade practice and reflected on the face of the invoice
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10. Preparing
for GST
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11. © 2016, Vaish Associates Advocates
Nature Time period No. of returns per
annum
Return for outward supplies 10 days from end of month 12
Return for inward supplies 15 days from end of month 12
Monthly return (regular dealer) 20 days from end of month 12
Quarterly return for dealer under composition scheme 18 days from end of Quarter 4
Return for Input Service Distributor 13 days from end of month 12
Return for Tax Deducted at Source 10 days from end of month 12
Annual Return 31st Dec from end of year 1
Total returns in a year (assuming Taxable Person is (1) a monthly dealer in a state and is paying CGST, SGST
& IGST and (2) an ISD)
61
Compliance Requirements – returns
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12. New formats of
invoices, waybills,
returns/ challan etc.
Classification of
goods and
services
Compliance
Key compliance requirements on introduction of GST
Manner of
computation and
payment
Statutory Forms –
likely to be
discontinued
Reporting of
accumulated
credits
Migration of
registrations - PAN
based taxpayer
identification number
Rate change to be
implemented
Redesign IT
Systems
Periodical returns
Compliance Requirements – Transition
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P 12For Education Purpose only

13. ACT OF SEAMLESS FLOW OF CREDIT ON PROFITABILITY – ON MANUFACTU
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CURRENT TAX REGIME GST
Intra-State purchases 200.00 Intra-State purchases 200.00
C Excise @ 12.5% 25.00 CGST @ 9% 18.00
VAT @ 5% 11.25 SGST @ 9% 18.00
Inter-State purchases 100.00 Inter-State purchases 100.00
C Excise @ 12.5% 12.50 IGST @ 18% 18.00
CST @ 2% 2.25
Imports 100.00 Imports 100.00
BCD @10% + cesses 10.71 BCD @10% 9.00
CVD @ 12.5% 13.75 IGST @ 18% 19.62
SAD @ 4% 4.98
Intra-State /imported services 50.00 Intra-State /imported services 50.00
S Tax @ 14% 7.00 CGST @ 9% 4.50
SGST @ 9% 4.50
Inter-State services 25.00 Inter-State services 25.00
S Tax @ 14% 3.50 IGST @ 18% 4.50
Total input cost 565.94 Total input cost 571.12
Other costs / Value addition 100.00 Other costs / Value addition 100.00
Gross cost 665.94 Gross cost 671.12
- CENVAT Credit (66.73) - CGST Credit (22.50)
- VAT ITC (11.25) - SGST Credit (22.50)
- IGST Credit (42.12)
Net cost 587.96 Net cost 584.00
Margin 89.29 Margin 93.97
Assessable value 677.25 Assessable value 677.97
C Excise @ 12.5% 84.66 CGST @ 9% 61.02
VAT @ 5% 38.10 SGST @ 9% 61.02
Total output taxes 122.75 Total output taxes 122.03
Sale price (tax inclusive) 800.00 Sale price (tax inclusive) 800.00
Margin Percentage 15.19 Margin Percentage 16.09
Tax Cost 12.96 Tax Cost 9.00
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14. IMPACT OF SEAMLESS FLOW OF CREDIT ON PROFITABILITY – ON TRADER
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CURRENT TAX REGIME GST
Intra-State purchases 200.00 Intra-State purchases 200.00
C Excise @ 12.5% 25.00 CGST @ 9% 18.00
VAT @ 5% 11.25 SGST @ 9% 18.00
Inter-State purchases 100.00 Inter-State purchases 100.00
C Excise @ 12.5% 12.50 IGST @ 18% 18.00
CST @ 2% 2.25
Imports 100.00 Imports 100.00
BCD @10% + cesses 10.71 BCD @10% 9.00
CVD @ 12.5% 13.75 IGST @ 18% 19.62
SAD @ 4% 4.98
Intra-State /imported services 50.00 Intra-State /imported services 50.00
S Tax @ 14% 7.00 CGST @ 9% 4.50
SGST @ 9% 4.50
Inter-State services 25.00 Inter-State services 25.00
S Tax @ 14% 3.50 IGST @ 18% 4.50
Total input cost 565.94 Total input cost 571.12
Gross cost 565.94 Gross cost 571.12
- SAD Refund (4.98) - CGST Credit (22.50)
- VAT ITC (11.25) - SGST Credit (22.50)
- IGST Credit (42.12)
Net cost 549.71 Net cost 484.00
Margin 117.77 Margin 109.27
Assessable value 667.49 Assessable value 593.27
CGST @ 9% 53.39
VAT @ 5% 33.37 SGST @ 9% 53.39
Total output taxes 33.37 Total output taxes 106.79
Sale price (tax inclusive) 700.86 Sale price (tax inclusive) 700.06
Margin percentage 21.42 Margin percentage 22.58
Tax Cost 74.71 Tax Cost 9.00
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15. Supply chain STRATEGY CHANGES
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Procurement
Goods stocking points
GST registered vendor mapping
Supply Chain
Distribution structure
Warehouse Network
Warehouses. Centralize as per requirementsStocking Points/Suppliers: Centralize or Decentralize
as per requirements
Job-work
Models:
re-visit
3PL
providers can
be
leveraged
Consignment
size as per
requirement
Inter-state/
Intra-state
Procurement
SOP for
Vendors to
ensure smooth
flow of credit
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16. Other considerations
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TRANSFER
PRICING FOREIGN TRADE POLICY
SUPPLY CHAIN
DECISIONS
GST
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17. IMPACT ON OVERALL BUSINESS
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Information Systems
• Changes to Master and Transaction records
• Vendor Coding to map GST registrations
• Systems design changes for
• VAT to GST compliance
Supplier
• End of old system (e.g. sales tax) exemption
• Use of preferential GST Vendors
• Use of self-billing/other billing best practices to
maximise credits
Implications of GST
Pricing
• Revising pricing structure
• Structure of offers/financing
Finance
• Impact on cash flow and working capital
• Identification of transaction and GST liability
• Maximisation of GST input tax credit on procurement
• Registration & compliance
• Cancellation of licences
Human Resource
• Education and Communication
Marketing Strategies
• Effect on demand
• Pricing strategies
• Effect on current
inventory
Strategy- Restructuring of
Businesses
• Impact on corporate structures e.g.
restructuring, new projects and
transactions
Legal
• Impact on current and future
contracts
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18. GST RELATED SERVICES: ROADMAP
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Advisory and Litigation
Compliances under GST and Linked Optimization based on feedback
Transitional Issues
Hand-holding into GST: IT Implementation, Training etc.
Implementation Roadmap
Tax planning and risk mitigating strategy
GST Impact Analysis
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19. For any clarification, please contact
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All rights reserved.
www.vaishlaw.com
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Shammi Kapoor
Partner
Vaish Associates Advocates
1st Floor, Mohan Dev Building
13, Tolstoy Marg, New Delhi 110001, India
E: shammi@vaishlaw.com
Phone: +91 11 42492525
Fax: +91 11 23320484
Hitender Mehta
Partner
Vaish Associates Advocates
9th Floor, Mohan Dev Building
13, Tolstoy Marg, New Delhi 110001, India
E: Hitender@vaishlaw.com
Phone: +91 11 42492525
Fax: +91 11 23320484