GST- Transition and Implementation Issues

GST Transition: Impact on Business, People and Technology Information Technology Supply Chain Internal/ Human Capital GST Procurement and Sales Tax and finance Transition Management Business Policies © 2017, Vaish Associates Advocates Risk Technical Forum

GST Transition- Supply Chain, Procurement and Sales Redesigning of supply chain purely on basis of logistics cost and customer service considerations Review strategizes for consolidation/deconsolidation of warehouses, depot, branches, stock level etc. To identify locations where any credit accumulation or credit leakages taking place Supply Chain Sales     Procurement Impact of GST Re-visit procurement strategy in view of credit, compliance and registration considerations Contract negotiations consequent to increase in rates and credit considerations Four- way match: PO vs. GRN vs. Invoice Vs. GSTN Inclusion of appropriate GST clauses in the agreements Change in tax rates and hence pricing- Effect on demand Compliance with the Anti profiteering provisions-Remodelling of pricing strategies Reviewing of the policy for advance receipts, debit note/credit note Review of Discount policies and promotional schemes © 2017, Vaish Associates Advocates

GST Transition- Tax and Finance, Internal/Human Capital   Tax And Finance Internal/ Human Capital Understanding the changed positions regarding taxability, availability and utilization of credit, exemptions etc. To evaluate the GST impact on each level of supply-chain on as is business scenario and under certain assumed scenarios Impact on cash flow, credit and budgeting Tax impact on Inter-unit transactions between state borders Impact of valuation rules on inter-company / inter-unit transactions Understanding new compliances, documentation etc.   Impact of GST Awareness sessions to appropriate people in IT, HR, accounting, tax etc. Detailed training on new Standard operating procedures and changes effected Organization restructuring-Management hierarchal/ reporting change GST impact on corporate plans e.g. restructuring, new projects and transactions Whether floating a new entity for separate business verticals; © 2017, Vaish Associates Advocates

GST Transition-IT System   Master Data System configuration Transaction Processing Reporting Formats Modifications to the current master data elements to ensure the GST related information is captured Importance of Location of Supplier, HSN Codes and Assessee codes Creation and blocking of G/L accounts Modification to tax codes, tax determination rules, tax structures which are implied during sales and purchase transactions Impact of GST Modification to process for capturing of tax postings during sales and purchase transactions of goods and services Realignment of processes of availing tax credits during various business transactions Changes to existing business and taxation reports being generated from the ERP systems. Creation of new reports to ensure compliance to GST related taxation norms Changes in the format of invoice, credit/debit memo etc. Changes in the formats for the PO, Open contracts etc. Important to educate /train the end users on the process and system changes © 2017, Vaish Associates Advocates

GST Transition- Internal Policies   Employee reimbursement policy Inter Company transactions and Cross charges Review of policy for tax accounting of employee expenses and reimbursements (eg Luxury taxes on Hotel bills, severance pay etc. Review of policy for free gifts, canteen services etc. to the employees Impact of GST Review of policies related to Inter Company transactions, Cross charges and sharing of resources Are the existing billing systems able to record intercompany GST transactions? © 2017, Vaish Associates Advocates

Return of goods after appointed date Pending refund/rebate claims Transition management in relation to compliance, documentation and awareness Inventory Management Transition of Credit Return of goods after appointed date Transition of Credit Inventory management for existing stock on the appointed day:- - Stock of Inputs in warehouse - Stocks of inputs in transit - Stocks of finished goods in warehouse Impact on production plan and procurement plan Migration of tax balances and open business transactions such as Open Purchase Orders, Open Sales Orders, etc. as per realigned business processes and enterprise structure Pending proceedings of appeal, revision, review initiated before the appointed day to be disposed of in accordance with the provisions of the earlier law Transition of most credit on input as well as finished goods allowed, provided last 6 months returns have been filed Credit in last returns to become sacrosanct – Important to map all credits in returns of current regime 50% deferred credit of capital goods would be allowed- Item wise details to be provided Details of goods sent out without payment of excise duty, on approval to be given separately for each location 40% credit on finished stocks, where no tax invoice available - (of CGST) for the persons not registered earlier but registered under GST - (of SGST) for goods taxed with Vat only at first point of sale Sales return/ semi finished goods returned by Job workers post 6 months to be considered as supply, and also, the input tax credit enjoyed by the manufacturer will be liable to be recovered Sales returns/ semi finished goods returned by Job workers prior to GST cut off date to be tracked separately The pending refund claims will be disposed of in accordance with the provisions of the existing law- to be paid in cash No refund of amount carried forward as credit under GST Pending refund/rebate claims Pending Proceedings © 2017, Vaish Associates Advocates

Suggested Approach for GST Transition Identifying key areas of impact across the value chain of operations Assessing GST impact under various assumed business scenarios and finalizing business strategies Reviewing Sales and Purchase contracts-Contract Negotiations- Training the Vendors Change in business processes to align to the new tax regime Update of various software solutions across all locations to meet the proposed structure Preparedness for Transitional Period so as to avail transitional credit and not to lose any ITC Training of all personnel on new processes © 2017, Vaish Associates Advocates

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