Proposed GST 20… Thinking ahead – Implementation Issues Dept of Central Excise and IMC Joint Workshop 23 February 2015 Presenter: Bhavna Doshi

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 Today’s Agenda Place of Supply of Goods & Services – Implication Issues

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3 Place of Supply  Act to be enacted by Parliament – Article 269A of the Constitution Amendment Bill, 2014  Inter-state trade and import – GST - Exclusive domain of Centre – Article 246A(2)  Revenue Sharing with States – GST Council Current – Origin(Inter-state)/destination ( intra-state) based New – Destination / consumption based

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4 Place of Supply - Significance Which tax to pay – CGST + SGST or IGST? Where to pay? Where to take ITC? Which Tax?How much?

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5 Determination of Place of Supply - Complexities  Several permutations and combinations:  One supplier location and one customer location – both in same State or different States  One supplier location and several customer locations – within and outside State  Several supplier locations and one customer location, and, other combinations based on location of consumption  Import and Export

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 Terms – “Supply”, “Goods”, “Services”  Meaning of “Supply” – Not defined in Bill  What are goods and what are services and what are neither - “service” defined in the Bill  Separate rules for goods and services ? Fundamental Principle : Where it is consumed ?

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7 Place of Supply - Goods  Same as Sections 3, 4 & 5 of Central Sales Tax Act, 1956?  Section 3 – Inter-state:  Sale occasions movement from one state to another  Transfer of documents of title – during movement  Goods passing through territory of other States but origin & destination in same State

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 Place of Supply - Goods  Section 4 – Intra-state:  Essentially, where origin and delivery is within the State  Specific goods – contract for sale –location within the State  Unascertained / Future Goods – location at the time of appropriation to the contract  Single contract – goods at different locations

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9 Place of Supply - Goods  Section 5 – Import /Export:  Occasions Export /transfer of documents after crossing customs frontier  Occasions Import / transfer of documents before crossing customs frontier  Penultimate sale – export ? Article 269A – Import – equivalent to Inter-State

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 Place of Supply – Goods  Stock Transfers  Sale or Return –Approval basis  Job work  Works contract  Goods sourced from one country and delivered/supplied to another country – both outside India or foreign co sourcing and delivering goods in India

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 11 Place of Supply of Services  Current Service Tax Place of Supply of Services as a base – General/Specific Rules ?  Location of Immovable property  Place of Performance  Location of Service Provider  Location of Service Recipient  General Principle – destination – effective use and enjoyment - OECD Draft Paper – February, 2013

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 12 Place of Supply of Services Rule 3 – General - Recipient Rule 4 – Performance - Make available goods Rule 5 - Immovable Property Rule 6 - Events Rule 7 – More than one location - maximum proportion Rule 8 – Both in taxable category Rule 9 – Specified services – Provider: 1. Banking / Finance 2. Online Info / Database 3. Intermediary 4. Hiring of transport – Upto one month Rule 10 – Goods transportation - Destination Rule 11- Passenger Transportation - Embarkation Rule 12 – On board a conveyance – First point of departure Order of application: More than one - later

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13 Place of Supply of Services – Issues ?  How to determine inter-state ?  Location of recipient vs place of consumption  Telecommunication  Banking & Financial Services  Works contract  Sporting/recreational event  Repairs / Jobwork

GST – Is it coming soon ?

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15 Where are we today ? Constitutional Amendment – Bill introduced Empowered Committee – working on several aspects Compensation – Loss of revenue Model - firmed up – C-GST, S-GST and I-GST CST akin tax – phase out / no phase out ? 5

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16 Impact Areas for Businesses  Pricing, Costing, Margins  Supply-chain management  Change in IT Systems  Treatment of tax incentives – package scheme of incentives  Treatment of excluded sectors  Transition issues  Compliance

© 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 17 Professionals Track GST develop ment Review draft legislations – identify likely issues – suggest solutions Perform Impact Analysis Assist industry in issue identification/ advocacy Pre and post - Implementat ion assistance

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