1. GST Update for Assocham
Delegates 06th Oct 2016

2. What will GST do?

3. GST expected to change India’s indirect tax landscape

4. Intra State Taxable Supply
Proposed Indirect Tax Structure
Intra State Taxable Supply
Excise and Service Tax will be known as CGST
Local VAT and other taxes will be known as SGST
Inter State Taxable Supply
Excise. Service tax and VAT will be integrated
Into IGST which is sum of total CGST and SGST
Import from Outside India
Custom Duty
(To continue
as is)
In place of CVD and SAD, IGST will be charged

5. GST Impact Tax Rates Input Credit Cash flow impact Ops Efficiency

6. GST Impact – Explained with illustration

7. Assumptions Assumptions:
For sake of simplicity, following tax rates have been assumed
Excise Duty : 10%
VAT : 10%
CST : 2%
CGST : 10%
SGST : 10%
IGST : 20%
Value addition done at each stage is 10% over cost of Purchase

8. GST Impact in Inter State Supply of Goods
Set off Available
Inter State Sale of Goods
Current Scenario
GST Scenario
Particulars Rs
RM / PM Manufacturer (State A)
Value of RM PM
100.00
Excise
10.00
CGST
VAT
11.00
SGST
Sale Price
121.00
120.00
PepsiCo (State A)
Purchase Price
Excise Set off
-10.00
CGST Set off
VAT Set off
-11.00
SGST Set off
Cost
Value
110.00
IGST
22.00
CST
2.42
Additional Tax
0.00
123.42
132.00
Distributor (State B)
Entry Tax
3.00
IGST Set off against CGST - First
-12.10
IGST Set off against SGST - Residual
-9.90
126.42
139.06
13.91
12.10
152.97
145.20
Consumer (State B)
Excise paid
Central Tax Paid
CST Paid
State (A) Tax Paid
VAT Paid
State (B) Tax Paid
Entry Tax Paid
Total Tax Paid
30.33
24.20
Set off Not Available

9. GST Impact in Intra State Supply of Goods
Intra State Sale of Goods
Current Scenario
GST Scenario
Particulars Rs
RM / PM Manufacturer
Value of RM PM
100.00
Excise
10.00
CGST
VAT
11.00
SGST
Sale Price
121.00
120.00
PepsiCo
Purchase Price
Excise Set off
-10.00
CGST Set off
VAT Set off
-11.00
SGST set off
Cost
Value
110.00
12.10
133.10
132.00
Distributor
-12.10
13.31
146.41
145.20
Consumer
Excise paid
CGST Paid
VAT Paid
SGST Paid
Total Tax Paid
24.31
24.20
Set off Available
Set off Not Available

10. Advantages & Issues in GST
Reduction in Multiplicity of Taxes
Mitigation of Cascading effect / double taxation
Development of Common National Market
Simpler tax regime:
Fewer rates and exemptions
Conceptual clarity (Goods Vs Services)
Reduction of Black economy
Issues:
Big change in political landscape due to it being destination based taxation
Valuation in case of Stock transfers, free supplies?
Taxability of Racks, Crates, Bottles, Visis on returnable basis?
Business to ensure vendor undertake timely compliances – commercial safeguard to be in place
Treatment of existing tax benefits and other transition issues

11. Practical challenges in GST
Implementing GST across big organizations will be a challenge especially the IT set up where there will be a dearth of quality resources for the short time window till April 17
Challenging to train people in the organization and across the value chain including distributors
It will be tough to implement GST in service companies as they are not used to the multiple registrations and related complexities
Government needs to train its resources to be ready for the new regime
Need to remove the policing mind set and start trusting the tax payers and relate systems and processes

12. Any New vendor contracts to factor GST Impact
Vendor Management
Contracts
Change in Law Clause
Change in Pricing
Scope of Negotiation
Key vendor and customer contracts to be reviewed to check there is an appropriate tax / change in law clause to incorporate changes due to GST regime
Change in Pricing to be analysed based on GST rate, availability of credits, exemptions etc. and appropriate changes to be made in contracts
Negotiations – Vendors should be asked to pass on any benefits in Pricing and customers may be asked to pay additional costs
Any New vendor contracts to factor GST Impact
Contracts to include Statutory Compliance clause to ensure credit is available

13. Opportunity to review overall Supply Chain Network Design

14. Thank you