2.  GST – Why?  Legal Requirements for proposed GST  Features of GST Model  Procedural Aspects  Current State of Play  Issues under Discussions  Impact on Industry  Areas where Industry can contribute 2

3.  Reduce barriers of inter-state trade & create a Common National Market  Redress the imbalance in taxation between manufacturing & the service sector  Private Investment choices should be influenced by economic considerations and not by tax rates or tax exemptions  Reduce multiplicity of taxes and ensure transparency  Reduce the incidence of taxation by expanding the taxable base  Mitigation of cascading / double taxation 3

4.  Constitutional amendment to enable  the Centre to levy & collect CGST beyond manufacturing stage  the States to levy & collect SGST on Services  Model legislation for CGST, IGST & SGST  Rules to be drafted for Place of Supply Rules  to determine location of supply of goods or services  to determine whether supply is intra-state or inter-state  Rules to be drafted for laying down procedures for the administration of CGST, IGST & SGST  specific measures to be made for Dispute Resolution & Advance Ruling 4

5.  Destination based taxation  Dual GST Model  Central GST (CGST) & State GST (SGST) on intra-state supplies  Integrated GST (IGST) on inter-state supplies  Integrated GST (IGST) on imports  Additional Tax not exceeding 1% on inter-state supplies of goods alone  Taxation on a common base  Common taxable event - Supply of goods or services or both for a consideration  Export of goods or services – Zero rated  Common list of exempted goods or services 5

6.  Optional Threshold exemption for both components of GST  Optional Compounding scheme for taxpayers having taxable turnover up to a certain threshold above the exemption  All goods or services likely to be covered under GST except:  Alcohol for human consumption - State Excise plus VAT  Electricity - Electricity Duty  Real Estate - Stamp Duty plus Property Taxes  Petroleum Products – to be brought under GST from a later date on recommendation of GST Council  Tobacco products – under GST plus Central Excise 6

7.  Three tier GST Rate structure –  Merit rate for essential goods  Standard rate for goods and services in general  Special rate for precious metals  Floor rate with a small band of rates for standard rated goods or services for CGST & SGST  HSN based classification of goods  Service Tax Accounting based classification of services 7

8.  Centre’s Taxes proposed to be subsumed- in the nature of indirect taxes on supply of goods or services  Central Excise Duty  Additional Excise Duty  Excise Duty levied under the Medicinal & Toiletries Preparation Act  Service Tax  Additional Customs Duty commonly known as Countervailing Duty (CVD)  Special Additional Duty of Customs (SAD)  Surcharges & Cesses 8

9.  State Taxes proposed to be subsumed- in the nature of indirect taxes on supply of goods or services  State VAT / Sales Tax  Central Sales Tax  Purchase Tax  Entertainment Tax (not levied by the local bodies)  Luxury Tax  Entry Tax (All forms)  Taxes on lottery, betting & gambling  Surcharges & Cesses 9

10.  Tax payments by supplying dealers in their own State  Availability of seamless credit to buying dealers  Utilization of Input Tax Credit by buying dealers  CGST credit for paying CGST & IGST in that order  SGST credit for paying SGST & IGST in that order  IGST credit for paying IGST, CGST & SGST in that order  No credit of Additional Tax 10

11.  Credit of SGST used for payment of IGST – to be transferred by Exporting State to the Centre  Credit of IGST used for payment of SGST – to be transferred by Centre to Importing State  Inter-Governmental Transfers to take place at the end of Tax Period based on the Return filed by the taxpayer  Fund settlement a matter between Centre & States  No role of taxpayer in inter-governmental fund settlement  Central Government to act as a clearing house and transfer the funds across States 11

12.  Uniform State wise e-Registration  Common e-Return for CGST, SGST, IGST & Additional Tax  Common periodicity of Returns for a class of dealers  Uniform cut-off date for filing of Returns  Mandatory reporting of supply & purchase invoice details prior to or along with filing of e-Return  System based verification of returns on monthly basis  System based validations of ITC availed, utilized & Tax payments  Single challan for all four type of tax payments 12

13.  Constitution Amendment Bill passed in Lok Sabha  Pending with Select Committee of Rajya Sabha  GST Council to be constituted after enactment of Constitution Amendment Bill  Reports under approvals:  Place of Supply Rules  IGST Model  Business processes relating to Registration, Refunds, Return & Payments 13

14.  Model GST Law being drafted:  Authorizing the Central & State Governments to levy GST on intra-state supplies (CGST & SGST)  Authorizing the Central Government to levy GST on inter-state supplies (IGST)  Levy of GST on imports  GSTN already incorporated as a Section 25 company in March 2013  GSTN already received bids for establishing IT framework 14

15.  Rates of CGST, IGST & SGST  Threshold limits of exemptions & compounding  List of exempted goods & services  Transitional provisions for treatment of accumulated CENVAT credit  Dispute Resolution Mechanism  Centre-State mechanism for deciding on future changes in rates & changes in the exemption list for goods and services  Distribution of responsibility between the Centre & State in implementing the three pillars of the compliance verification system – Return Scrutiny, Audit & Anti-evasion  Treatment of existing area based exemptions  Treatment of current exemptions 15

16.  Procurement  Inter-state procurement of goods & services – location no longer a constraint due to credit eligibility  Inter-state vs. Intra-state GST – no longer impact the sourcing decision  Manufacturing  Multiple small size plants vs. mega plants  Decision based on impact on logistics cost vs. manufacturing cost  Relocation of plants based on overall costs & service levels  Costing  Impact on cost of input /service - rate change, full creditability and/or withdrawal of exemptions 16 Operational

17.  Distribution  Warehouse need not be State specific  One warehouse can supply to more than one state & one state market can actually be serviced by more than one warehouse  Location of warehouse may get decided by the center of gravity of demand cutting across many states  Size of warehouse would be more determined by the market opportunities proximate to the warehouse location  Distribution network to align with market demand & competitive advantage  Warehousing may need relook 17 Operational

18.  Pricing  Impact on overall pricing of the goods & services – factoring of GST credits  Supply Chain  Impact on cost of operations o Compression of the supply chain o Disintermediation o Unfettered credit throughout the supply chain o Uniformity in Sourcing Decisions – Centralization  Tax Challenges  Place of Supply Rules; Transition stock; Negative list; saving clauses, etc. 18 Operational

19.  Working Capital / Cash Flow – likely increase  Higher tax outgo on procurement of goods & services  Shift in taxable event from manufacture to supply  Shift in point of tax collection  Replacement of exemption by refund schemes  Taxability of branch transfers/inter office supplies/captive consumption  Input credits  Availability of accumulated credits on transition to GST  Continuity of ISD concept  Amplified credit availability  Credits for mixed supplies  Credits on goods from excluded sectors 19 Financial

20.  Redesign IT systems  Accounting  Change in formats of invoices, reports, returns, etc.  Redefining the logic & updating the masters  Training / Communication  Staff training on compliance requirement  Realigning with procurement & distribution partners  Regular communication with stake holders  Compliance requirement  Registration  Tax payments  Statutory declarations and Returns 20 Infrastructural

21.  GST would lead to de-centralization of indirect tax function  Focus on strategy, processes & technology to manage indirect taxes  Greater stake in accurate reporting due to significant input tax credits as compared to the present scenario  Tax administration to use IT enabled platform & processes, e.g. tax data warehouse, online tracking of inter-state movements, information exchange etc.  Need to re-design & re-engineer the tax function 21 Tax Management

22.  Treatment of procurement of goods & services for exports  Treatment of royalty/license fee in valuation of imported goods under GST regime  Valuation in case of stock transfers  Treatment of deemed sale (i.e. lease, works-contract, etc.)  Classification of goods & services  Manner of exemptions for backward areas  Place of Supply Rules  Transitional issues  Dispute resolution mechanism 22

23. THANK YOU