1. GST
The Game Changer
Presentation by CA Mahesh Jain
23rd August 2015

2. Agenda GST Concept / Structure
High Level Understanding of Impact of GST
Suggested Plan for smooth transition to GST

3. Ved Vyas in epic Mahabharat :
The King should behave like those bees which collect honey without causing harm to the tree.

5. GST

6. Present Indirect Tax Structure of India
Present Tax Structure
Excise Duty on Manufacturing of Goods
Service Tax on Provision of Services
Custom Duty on Import / Export of Goods
VAT / CST on Sale of goods
Entry Tax on Entry of goods

7. Central Govt. State Govt. GST Design Subsumed in GST Outside GST
Central Excise
Service Tax CVD/SAD
CST
Basic Customs Duty
Stamp Duty
Excise on Alcohol
Octroi?/LBT?/ Municipal Tax
Entertainment Tax?
State VAT
Entry Tax
Luxury Tax
Lottery Tax
Subsumed in GST
Outside GST

8. Benefits of GST Focus of Businessmen from Taxes to Business
GST THE GAME CHANGER
Abolition of multiple layer of taxes & events
Mitigation of Double & Cascading Taxation
Development of Common National Market
Increase in Voluntary Compliance
Efficient Administration by Government
Reduced Litigation
Tax Booster for Government
Estimated 2% push to GDP growth
Focus of Businessmen from Taxes to Business

9. What is GST Destination based Consumption Tax:
One taxable event : i.e. ‘Supply’ instead of multiple taxable events in the present structure.
Uniformity in tax rates.
Composite levy: on both Goods & Services
Each Stage : On value addition in the value chain
Seamless Credit : Availability of all input taxes against output taxes unlike in present structure where tax credit is not available in various cases / events.

10. Proposed GST Rates Revenue Neutral Rate : RNR Current Regime
GST Regime
Excise
12.5%
CGST
13.5%
VAT
12.5% to 14%
SGST
13.5%
Service Tax
14%
Total
27%
CST 2%
Total ??
Likely List of GST rates
Exempted : basis necessities like Wheat, Rice, Milk, sugar, etc.
1%: Goods like Bullion, Diamonds and Precious Metals
Essential Nature : 12% ??
Residuary : RNR

11. GST Structure Transaction Structure Set off against Who will collect
Within State – Goods & Services
CGST
Central Government
SGST
State Government
Interstate - Goods & Services
IGST = (CGST+SGST) + 1% additional tax on Goods
Fungible % additional tax is cost
Collected by Center. Retain CGST, transfer SGST
Import of Goods
BCD + IGST
IGST is Fungible.
BCD is cost
Collected by Center. Retain CGST & BCD, transfer SGST
Import of Services
IGST = (CGST+SGST)
Fungible
Collected by Center. Retain CGST, transfer SGST
Export of Goods & Services
Nil
Input credit refundable NA

12. Pricing, Margins, Schemes
Overall GST impact
GST THE GAME CHANGER
Cash Flows
Distribution
Sourcing
IT systems
Accounting
Compliance
Pricing, Margins, Schemes
PAN based identification
New formats of invoices, waybills, returns/challans etc.
Invoice level compliance
Rate change to be implemented
Classification of G&S
Manner of computation of payment
Revisiting sourcing mix local / inter-state / imports / exempt zones
Vendor price renegotiation
Revisit manufacturing arrangements
Valuation for imports for computing IGST
Manufacturing arrangement (i.e. Own/ Tolling / Contract manufacturing)
Tax impacts on long-term contracts; indent Commission
Revisit HSS, Bond sales, stock transfers
Single or multiple warehouse
Check posts to continue ?
Marketing Schemes / Credit Notes / FOC supplies
Revisit Value Chain
Revisit Sales to unregistered buyers who are channel partner
Chart of Account
Accounting of Goods Receipts
Payment to Supplier – Check with GST credit
State Wise Booking
Separate Accounting of IGST, CGST, SGST
Payment from Customer – Check with GST credit
Master databases (vendor, customer, material, tax rates)
Transaction Type – Inter-state or Local
Templates (Invoice, Purchase order)
Tax computation
Statutory filings (Return/ Declaration forms)
MIS Reports like price comparative reports
Validation of Input tax credit with GSTN
GST on stock transfers
Withdrawal of ‘Form C’
Exemptions to Refunds
Import GST
State wise Credit Utilization

13. GST Impact on Product Pricing
Levied only on Cost
GST Impact on Product Pricing
Value Chain
Current 12.5% %
GST 12.5% +12.5% =25%
VAT Levied on Cost + Excise
Manufacturer to Wholesaler:
Cost of goods manufactured (inclusive of Profit)
10,000
Excise Duty / CGST
1,250
VAT / SGST
1,406
Invoice to Wholesaler
12,656
12,500
Cost + Excise + 10% Margin
Wholesaler to Retailer:
Sales Price (adding margin of 10%)
12,375
11,000
CSGT -
1,375
VAT / SGST
1,547
Invoice to Retailer
13,922
13,750
Retailer to Consumer:
Sales Price (adding margin of 10%)
13,613
12,100
CSGT -
1,513
VAT / SGST
1,702
Invoice to Consumer
15,314
15,125
Selling Price Of Whole Seller + 10% Margin
Cost Savings to Consumer
189
% Cost Savings 1%
Taxes Paid To Govt
2,952
3,025
Customer Gain = Govt. Gain = 73 Total 262
Wholesaler margin on ED = Retailer margin on ED = 137 Total 262

14. Input credit validation on invoice matching
In progress: Government IT Infrastructure for GST
GSTN
Registration process
Return process
IGST settlement
Input credit validation on invoice matching
E-payment

15. What would it take? Preparation of Transition Roadmap
Align business processes to GST regime
Software solutions to meet GST requirements
Training of all personnel on new processes