1. MSME Sector and Goods and Services Tax (GST) May 14, 2013 New Delhi S Madhavan Co-Chairman, Task Force on GST Federation of Indian Chambers of Commerce and Industry

2. Current State of Play Constitution of three Committees by the Empowered Committee - Revenue Neutral Rates of Central GST and State GST - Place of Supply Rules - Dual Administrative Control - Threshold and exemptions in GST regime - Taxation of Inter-State Trade - GST on imports Draft Reports of the Committees deliberated upon by the Empowered Committee in its meeting on 10 th and 11 th May, 2013, in Musoorie; Reports yet to be finalized 2

3. Issues of Specific Relevance to MSME Sector Threshold Limit - Rs.1.5 crores for Central Excise - Rs.10 lakhs for Service Tax - Different Value Limits for VAT for different States - Likely threshold limit Rs.25 lakhs Dual Administrative Control - Central GST - Central Government (Excise & Customs) - State GST - State VAT Authorities 3

4. 4 Implications of GST for the MSME Sector  Supply Chain Management - Possibility of lowering cost of operations due to: - Compression of the supply chain - Disintermediation - Unfettered credits throughout the chain - Centralization and Uniformity of Sourcing - Traditional hub and spoke distribution model is seriously challenged - Impact of tax payments on stock transfers - Impact of replacement of exemptions by refund of taxes  Product pricing: - B2C and B2B supplies - Product affordability - Product reach/market share

5. 5 Conclusions Engagement with External Stakeholders  Stay actively engaged in all dimensions of the GST debate  Make representations to the Government to ensure that all issues pertaining to GST implementation are addressed Internal Preparations  Identify areas in business models/supply chains/processes which need to be re-engineered  Identify requirements of reconfiguration of IT systems, modification in documentation, MIS and accounting  Identify training needs, both internal as well as external  Get ready for a smooth transition to the new tax regime

6. Thank You 6