GST in India v1

243

Hours per year doing

taxes

158

India’s rank for ease in tax payment

Indian

Taxation is

COMPLEX

30+

Subsume indirect tax levies

The biggest tax

reform since 1947

GST

Boost to GDP Growth

Opportunity to reimagine…

a

SIMPLE

Enterprise

DIGITAL

and

Endless POSSIBILITIES

Revamp a cumbersome & distributed process…

Purchase Order Deliverables Invoice

Buyer

Seller

Calculate, Aggregate and Remit taxes

Tax Authority

Pre-requisites patch level for GST Implementation

 Tax Procedure

–TAXINN

 Minimum Support Pack level

GST Timelines

Milestones Timeline

Lok Sabha passes GST bill √ Rajya Sabha passes GST bill Aug, 2015 Ratification by not less than 15 states Dec, 2015 Formation of GST council Jan, 2016 Enactment of GST laws Mar– Dec, 2016

Excise

VAT Excise duty, VAT

Service tax

Service tax BCD, CVD, ACD

What is Changing?

Outside India _{BCD, IGST IGST Non-Creditable taxes}

Creditable taxes India CGST, SGST CGST Manufacturer SGST CGST, SGST State A State B 3 S e r Iv Gic Se Tta x Customer Service Provider Vendor Institution Service Provider Customer Vendor Overseas service provider Overseas vendor

Input tax credit under GST

 Illustrative list of Input tax credits currently not available (that might be available under GST):

Credit on inter state purchases/supply of goods

Burnouts on stock transfers and negative list of goods under each state Service tax credit on freight from the place of removal to the customer and other service tax credits currently not available

Excise credits for all business purchase expenses viz. Sales promotion items, gifts, etc

Luxury tax paid in Hotels

Service tax credits on trading of goods

CVD and SAD on imported goods procured for trading of goods/sales promotion

Tax credits on purchase of hardware and software        

Treatment of additional tax proposed on inter-state

transactions

 States allowed to collect additional tax (not exceeding 1%) on supply of goods in course of inter state trade

 No clarity on availability of input tax credit as well as mechanism for this additional tax

 Hon’ble Finance Minister in Lok Sabha has assured that 1% additional tax

levied in the course of interstate supply of goods shall have no cascading effect

• Dual GST Levy :

• Integrated GST ( I-GST on Imports & Interstate Supply of Goods & Services :

• 1% Non Creditable Additional tax would be levied on

interstate Supply of Goods only

• Levied, collected & Retained by the Origin state , for first two years only .

• Adverse Impact on Purchase Costs & Selling prices for first two years .

To be levied by the Central Govt. . 1. IGST = C GST + S GST

2. Paid in the state of Origin and passed on to Destination State through Clearing House Mechanism .

Within the state Supply of Goods & Services : GST = CGST + S GST

Input tax credit under GST

Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of supply of taxable goods and services

SGST:

 VAT / Sales tax

 Entertainment tax (unless it is levied by the local bodies).

 Purchase tax

 Luxury tax

 Taxes on lottery, betting and gambling

 Octroi and Entry Tax

 State Cesses and Surcharges in so far as they relate to supply of goods and

services

CGST:

 Central Excise Duty

• Additional Excise Duties

• Excise Duty levied under the Medicinal and Toiletries Preparation Act

• Service Tax

• Additional Customs Duty - (CVD)

• Special Additional Duty of Customs - 4% (SAD)

Input tax credit under GST

Separate accounts for each state need to be maintained for CGST,

SGST and IGST credits received

Transaction Intra State Inter State

Purchase of

Goods

CGST+SGST

IGST

Receipt of

Services

CGST+SGST

IGST

Input tax credit under GST

Liability of

 Cross utilization between SGST of one state and SGST of another state not allowed

 Credit of taxes paid on petroleum products not available (since it is of GST)

not a part  Refund/adjustment in case of exports, purchase of capital goods, inverted duty

structure on output tax to be completed in timely manner

Credit of

Can be utilized against

CGST

CGST and IGST

SGST

SGST and IGST

Present Indirect Tax (Excise/VAT) System in India

Present Tax

Proposed Indirect Tax (GST) System in India (C-GST & S-GST)

Seamless Flow of Credits in a Supply Chain

• 20% GST = 10% C GST + 10% S GST ( Within the state Supply ) , 20% I GST = 10% CGST + 10% S GST (Interstate Supply + Imports )

( IGST) ( IGST) ( I GST) (GST) 1% Add Tax 1% Addl. Tax 1% Addl Tax 1OO + 20 IGST 150 + 30 IGST 200 GST + 40 I 220 + 44 GST 220 + 44 • Finally , the • Transfers of Credits to receiving states by Clearing House

State D gets the S • 1% Non creditable Additional Tax on Interstate Supply of Goods

GST Revenue Customer State “D” Consuming State Dealer State “D” State “C” MFR - 2 State B MFR - 1 State A Vendor

GST & Exports

Exporter

Exports

GST Tax Invoice

Invoice No. (Serially Numbered) Date

Name (Local Buyer) : Mahindra & Mahindra Ltd. Address : Kandivli (East), Mumbai

GST TIN (Tax Payer Identification Number of both – Seller & Buyer)

01 – 04 – 2016

Sale of Goods ( Auto Parts ) Rs.

Net Supply Price……….……… Freight ……….………

20% GST Net Taxable T.O. ….. ……… 10% C GST ……… --- 10% S GST ---100.00 05.00 105.00 10.50 10.50 Total --- 126.00

Specific Requirements as per the State C – S GST Acts. Like Certificate, Time of sale, Name & Address of Printer etc.

Authorized Signatory

Maximise Input Tax Credit Availment (under GST)

 Identify the tax cost (with respect to taxes that are supposed to merged into GST) in the profit and loss account and start capturing the same so as to enable the business to understand the impact of GST

 Identify the existing contracts/PO’s wherein contracts will have to be renegotiated on account of availability of the input tax credit to the vendor as well as the

Company and include clauses for facilitation of renegotiating on implementation of GST

 Review the current operations/distribution models and evaluate the need changes in the operation/distribution models on account of :

for any

 

Availability of full credit under GST system; and

Input Tax Credit Utilization - Solution Approach

• Each GSTN registration to be created as a Business Place

• Each Tax Component (CGST, SGST etc.) to be configured as Transaction Key

• GL accounts can configured for each GST Registration &

Tax Credit can be accumulated at each registration by tax component

Tax Component Key

i.e. Business Place & Transaction

To enable control &

transparency in utilization

• New Transaction to perform utilization

• Comparison of tax credits available vs. payables by GL Account aggregation

Utilization Transaction

Goals Configuration Approach

Manufacturers/ Consumers will download data from the GSTN Portal. • • • Mahindra’s Tata Motors Ashok Leyland Suppliers will upload their Sales Data

• • • Mico Lucas TVs MRF Tyres

GSTN Portal

Manufacturers/ Consumers will download data from the

GSTN Portal Suppliers will upload their Sales Data

Suppliers will upload their Sales Data which will contain the following

information

Sellers GSTIN - Buyers GSTIN Sellers Invoice No:

Invoice Date: Business Place:

Product Category: HSN/SAC Code Gross Value :

GST Value:

Manufacturers/ Consumers will download data from the

GSTN Portal Suppliers will upload their Sales Data

Buyers will download the data from the GSTN Portal

• Match the same with the receipt data in their systems.

• Identify exceptions – Invoice in GSTN not in ERP

• Goods in Transit • Value Mismatch • Material not Received

• Identify exceptions – Invoice in ERP not in GSTN.

• Material received not uploaded by supplier.

• Upload the exceptions on to the GSTN Portal. (Unregistered Suppliers)

Manufacturers/ Consumers will download data from the

PSTN Portal Suppliers will upload their Sales Data

Features by SAP

• Discrepant Invoices – Value Mismatch • Missing in GSTN

• Missing in ERP

• Facility to trigger an Email to the supplier

Manufacturers/ Consumers will download data from the

GSTN Portal Suppliers will upload their Sales Data

Assumptions

GSTN Authorities will provide

• Standard API will be provided for upload download of data, between ERP & GSTN Portal

• System will be capable to manage the humongous volumes

• Compute power of Hana will ease transactions at both ends.

GSTN Process - Registration

registration application online at shared with the State & Central

approved by both Registration

issued online at the GST

GST Registration Process

• PAN based single

registration for CGST, SGST &

IGST

• Per State registration -Different verticals of one

business may obtain separate

registration

• Existing Taxpayers – Transition

system for migration

• Registration for each premises in a State not required

• Addition of place of business under each registration allowed • Transfer of credit to another

unit in a different State not

allowed

GSTN Common Portal

• Common interface between

Taxpayers & Tax Authorities where Taxpayers can fill up the online GST Registration form

• Upon submission of the GST the portal, information would be Tax Authority for their approval • Once the registration application is

Certificate (GSTIN) will be

GSTN Process - Returns

uploaded by the supplier, GSTN the purchase statement of the

real time basis

after sales-purchase details are

GST Returns Process

• Unified return form for all

States/ One Return for CGST, SGST & IGST

• All returns to be electronic • Return expected to be Monthly

(Quarterly for compounding dealers)/ Annual

• All details of sale (invoice wise) to be submitted, purchase details to be populated from

sales of counterparty dealers

• State specific return as State

unit is an independent unit

• IGST assessment by State where return is filed

GSTN Common Portal

• Interface for GST registered

taxpayers to upload their invoice

level sales details by a specified cut-off date

• Based on the sales details

Common Portal would auto-draft counterparty purchaser on a near • Draft return of a taxpayer to be

generated at the Common Portal captured

GSTN Process - Payments

can prepare challan at the common banking system before filing the

at the portal mandatory in case • All Banks authorized by RBI to

Portal

GST Payments Process

• Standardized single challan

for CGST, SGST and IGST

• Different accounting codes

for various types of transactions • Mode of payment of tax can be

online or offline (OTC)

• Tax to be paid prior to filing GST return

• Tax to be paid wherever supply takes place

• SGST to go automatically to the State of taxpayer as per

registration

• Frequency of tax payment as per return

GSTN Common Portal

• Taxpayers would be able to

calculate their tax liability and

make online payments

• Based on draft return, taxpayer portal, pay due tax online through GST return

• Electronic challan generation

of manual payments (OTC) as well be available on GSTN Common

GSTN Process - ITC Mechanism & IGST Settlement

communication on discrepancy transactions in the next return

GST Cross Credit Utilization

• CGST/ SGST/ IGST credit can be utilized for offsetting

liability against same heads

in that order

• CGST/ SGST credit available

after offsetting respective

liability to offset IGST liability • Credit of CGST cannot be used

to offset SGST liability vice-versa

• Credit of IGST available after offsetting IGST liability to offset

CGST/ SGST liability (in order)

• IGST on Imports: as per

return (not like customs duty)

GSTN Common Portal

• To provide Dealer Ledger to view consolidated summary of their tax liability, payment history, ITC entitlement and utilization (set off against tax liability), refunds – anytime on any device

• Invoice matching &

• Credit Reversal of unmatched

• Calculation of IGST Settlement amount based on cross-utilization of credit by dealers

• Intimation of successful

GSTN Ecosystem

Integration of existing IT systems with GSTN

GSTN IT System CTD

Officer Tax Authority Taxpayer

Centre/ State Tax System GSTN Common Portal

Interface File/ API

Centre/ State Tax Database GSTN Database Accounting Agencies & Treasuries Network of Banks & RBI

Interface File/ API

In te rf ace F il e/ API

Rate of GST- Across the Globe

FM has assure that the rate of GST will be less

than the speculated rate of 27% Comment:_{The present indirect tax levy} on goods is: 12.5% (Excise Duty) + 14% (VAT)

Rate of GST – Concessions/incentives

What would happen to current incentives:

• State incentives:

-Area based exemptions VAT deferment schemes • Central incentives:

-Product specific concessions Area based incentives

Place of supply rules and credit

Distribution of accumulated credit at corporate office?

• Head office would incur standard costs and accumulate input credit

• HO might have Nil or marginal output tax liability

Credit utilization dependent on seller declaration?

• Auto-drafting of purchase statement of a dealer from the invoice based sales details uploaded by the counterparty dealers

Credit on Businesses’ indirect spends by employees?

Transition provisions

• Refund, not credit – Accumulated credit at the cut off date cannot be carried forward

- Input and input services - CENAVT - Capital goods – CENVAT and VAT - VAT credit

• Defer capital expenditure/purchases • Treatment of Way-Bill/ C-Form/

Checkposts

• Treatment of Existing Area based

Exemptions/ Benefits under State Industrial Policy

GST: Areas of Impact in SAP System

Tax Registration

Master Data Maintenance

Tax Configuration & Computation

Document Numbering

Business Process Localization

GST Tax Postings

Utilization

Reporting Tax Register

Input tax credit utilization against payable for GST Taxes GST Input and Output Tax postings

Extend Support to currently localized Business Processes Outgoing Invoice Numbering

Configure Tax and Pricing procedures; Tax computation Business Partner Tax Data, GST Accounts

Tax Registration

GSTIN – GST Identification number

 Single registration for CGST, SGST and IGST

 Individual registration to be obtained in each state of business establishment

 PAN based registration number – Up to 15 characters in length

Tax Registration - Proposed Solution

Master Data Maintenance

Business Partner Tax Data

 GST reg. no. to be captured for each Registered Customer and Vendor

GST Tax Accounts

 Separate tax A/P and A/R accumulation might be required at GST registration level

 To be defined for CGST, SGST and IGST separately

Tax Account - Proposed Solution

Tax Configuration and Computation

 Region level rate variations may exist

 New condition types/access sequences and account determination

Tax Configuration and Computation- Proposed Solution

Tax Configuration and Computation- Proposed Solution

Tax Configuration and Computation- Proposed Solution

Tax Configuration and Computation- Proposed Solution

Document Numbering

Unique sequential numbering for outgoing GST invoices

 Criteria for legal numbering may be specified by govt.

 It could be for example:

–Registration level

–Document type (Invoice / Credit Memo)

–A combination of above

Document Numbering- Proposed Solution

Document Numbering- Proposed Solution

Document Numbering- Proposed Solution

Business Process Localization

Sales - Proposed Solution

Sales - Proposed Solution

Procurement - Proposed Solution

Procurement - Proposed Solution

Stock Transfers - Proposed Solution

Stock Transfers - Proposed Solution

Stock Transfers - Proposed Solution

Outgoing GST Invoice

 ‘Consideration’ Value for tax calculation.

 Will it be a pure tax Document? Example:

Stock Transfers - Proposed Solution

Stock Transfers - Proposed Solution

Incoming GST Invoice

 ‘Consideration’ Value for tax calculation.

 Will it be a pure tax Document? Example:

Subcontracting - Proposed Solution

Subcontracting - Proposed Solution

Subcontracting - Proposed Solution

Subcontracting - Proposed Solution

Subcontracting - Proposed Solution

Outgoing

 ‘Consideration’ Value for tax calculation.

GST Invoice

 Will it be a pure tax Document? Example:

Subcontracting - Proposed Solution

Subcontracting - Proposed Solution

Incoming GST Invoice

 ‘Consideration’ Value for tax calculation.

 Will it be a pure tax Document? Example:

GST Tax Postings

 Separate accumulation of credit and payables for

–CGST

–SGST

–IGST

 Separate accumulation at Registration level

 Automatic Tax posting to respective accounts from business processes

GST Tax Postings - Proposed Solution

GST Tax Postings - Proposed Solution

Utilization

 Utilization of Input tax credit would be as under

–Input CGST to be utilized against output CGST and IGST

–Input SGST to be utilized against output SGST and IGST

–Input IGST to be utilized against output IGST, CGST and SGST in the order of IGST, CGST and SGST

Utilization - Proposed Solution

Utilization - Proposed Solution

Reporting

 Tax register

– CGST

– SGST

– IGST

Tax Register - Proposed Solution