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07/07/18 CMA. TCA Srinivasa Prasad 1

CMA. TCA Srinivasa Prasad+91 947 770 [email protected]

Credits&Acknowledgements

OurInstituteHQ(forvariousBulletins,Webinars)EIRC&SIRC(fortheirinputsthroPDprograms)

CMA.Niranjan Mishra,CCM(2015-19),ICAICMA.AshokBNawal,CCM(2015-19),ICAI

CMA.MGopalakrishnan,Cost&ManagementConsultant&President(2011-12),ICAI

CMA.SanjayBhargave,TaxConsultant&CCM(2011-15),ICAI

CMA.Bhogavalli GuptaTaxExpert,HyderabadCMA.PravinAroteHRConsultant,Pune

VariousotherContributorswhowishnottobenamedVariousBloggersintheInternetonGST

Ukkunagaram Chapterfortheopportunitytoself

CMA. TCA Srinivasa Prasad 207/07/18

Objectives&Outlines

PostGSTScenarioShortcomingsintheearlierTaxRegime

GST-ParadigmshiftOpportunitiesChallenges

FocusAreasforProfessionalsCostOptimisationandProfitability

CMA. TCA Srinivasa Prasad

4

07/07/18

Post GST - Tax Structure in India

• Direct Taxes– Income Tax– Corporate Tax– Wealth Tax

• Indirect Taxes– Customs Duty– GST

• Foreign Trade Policy

CMA. TCA Srinivasa Prasad7-Jul-18 6

Shortcomings in theearlier Tax Regime

• Absence of National Markets in the true sense• Absence of full-setoffs against Stock Transfers• Cascading effect of• VAT & CST was payable on Central Excise element also.• Entry Tax Regimes in many States• VAT rates, procedures differed from State to State• Double Taxation – Sometimes by both States & Central• Conflicts in identifications – Goods or Services?• Loss of Man-hours at various points in the Tax Chains


Ø Change in Taxable Event – GST is on “Supply”Ø GST is destination based tax.Ø Uniformity in tax rate and tax structure.Ø One Nation, One Tax.Ø Common list of Exemptions .Ø Hassle free movement of goods.Ø No Different AdjudicationsØ Anti Profiteering clause – effects on tradeØ Increase in complianceØ No Distortion in supply chain due to skewed tax-planning

GST – Paradigm Shift


OpportunitiesTrade and Business :-• Common Economic Market• Restructuring of business .• Improvement in supply chain management.• Reduction in corruption.• More opportunities to professionals.Government :-• Growth of revenue in States and Union .• Development in Infrastructure of the Country• Better control on tax administration • Creating Trust amongst the other countries.


OpportunitiesResearchers :-• Impact of GST on regional growth• Impact on Society.• Exploring Tax Planning under GST.• Impact on Transaction Cost.• Strengthening Internal Control to have better

compliance under GST.


Challenges

Trade and Business :-• Competition & Compliance• Meeting Working Capital requirements.• Robust IT infrastructure-Computer literacy among the

tax payers


Challenges

Government :-• Allocation of revenue to states• Compensation to States and Local Bodies.• Effect on Regional Growth.• Controlling inflation• Curb Tax evasion.• Creating trust amongst tax payers.


General:-• GST preparedness among tax payers as well as

Government is missing• Lack of clarity on GST provisions-Half cooked meal• Increased compliance, with increase in the number of

returns to be filed annually• Preparedness of IT system- GSTN is backbone of GST• Lack of skilled resources and need for change in mind

set

CMA. TCA Srinivasa Prasad

Challenges

7-Jul-18 17

Value Creation

• Understand the Law• Understand the Business of the Client.• Understand the procedures and systems followed by

client.• Identify Gaps • Change focus from compliance to value creation• Indentify scope for re engineering• Explore possibilities of Tax Planning • Explore possibilities of Cost Reduction


Scope for Re Engineering

Supply Chain Management

• Movement of Goods• Hub and Spokes arrangement for distribution • Warehousing Services – scope for outsourcing• Inventory Management – JIT • Centralized vs Decentralized Billing


Procurement of Goods

Imports

• Concessional rate of duty in case of imports from preferential trade countries.

• Project Imports• Advance Authorization, DFIA• BCD payments by using licenses available in the markets


Procurement of Goods

Domestic

• Outsourcing compliance in various states.• Job work planning• Input Tax Credits on border line cases• ISD vs Cross charge• Whether to claim conditional exemptions.• CST – no longer a cost.• Negotiations with Vendors in view of Anti Profiteering.


Exports

• Rebate vs Refunds.• Drawback• SEIS and MEIS• Review EOU / SEZ• Place of supply in case of export of service.


Process Re Engineering

• ITC Maximization.- Sales Mix• State Specific benefits – Area based refunds.• Valuation – Risk of revenue neutrality.• Discounts and Other Marketing Schemes.• Proper Classification. • Mixed Supply, Composite Supply and Works Contract.• Contract Management- Drafting correct terms and

conditions.


Suggested Steps

• GST Due Diligence – Health Check.• Avoid unpleasant surprises – interest and penalties• Periodical internal control review.• Cross Audit• Knowledge updates and Training Programs.


Thefactorswhichwillhavebearingonfinancialimpact

• Saving arising from non-payment of Octroi, Entry Tax etc• Refund of accumulated credit on account of inverted duty

structure• Various Contracts and In-house services provided to

employees

7-Jul-18 CMA. TCA Srinivasa Prasad 27

Savingarisingfromnon-paymentofOctroi,EntryTaxetc.

• The indirect effect of such levy is that:• Most of the godowns are constructed outside the erstwhile

octroi limit• The vehicles have to wait outside the Octroi Nakas for hours

together for payment of• The octroi will be abolished from the appointed date i.e. from

01/04/2017.• It will heavily benefit the transporters, as the turn-around of

vehicles will considerably increase, as vehicles will not have towait at Naka.


The Question is

Have we found out the actualreduction in Transport Costs

Have we re-drafted/re-entered the Purchase and other relevant contracts, taking into consideration the aspects

discussed earlier?


RefundofAccumulatedCreditonAccountofInvertedDutyStructure

• In many cases, the duty payable on the finished goods is lessthan the credit available to the manufacturer.

• For example, the duty payable on pharmaceutical products is6% where as the inputs like bulk drugs, packing materials, etc.attract duty @ 12.5%.

• Thus credit availed on inputs remains accumulated with themanufacturer of the pharmaceutical products.


The Question is

Do we have any such issue in the industry we are connected with?


RefundofAccumulatedCreditonAccountofInvertedDutyStructure

• The credit cannot be used as credit on inputsand input service is higher than duty paid onfinished goods.

• The Section 38(2) of the GST Act specificallyprovide for refund of such un-utilized credit ofduty.

• This will definitely reduce the cost ofproduction of such products.


The Question is

Do we take the full advantage o0f the provisions of the Act?

Do we have a cross-check mechanism for the same?


In-houseservicestoemployees

• In accordance with Section 7 of CGST Act 2017, “Meaning & Scopeof Supply” clearly mentions the inclusion / exclusion of employeeproviding services to employer or employer is providing services toemployee as well as the relation with each other. We give belowthe brief thereof.

• Employee providing services to the employer in the course ofemployment is neither goods nor services. (Schedule III to Section7-Sr. 1)

• Employee and employer are related (Explanation (a) (iii) tosubsection (5) of section 15 of CGST Act 2017.

• Supply to related person even without consideration is taxablesupply (Schedule I to Section 7 – Sr. 2)

• Gift to employees exceeding Rs. 50,000/- per employee per yeareven without consideration is taxable supply.

• (Schedule I Section 7 – Proviso to Sr. 3)


The Question is

Have we taken note of this so far?

Can we act on this taking into account the Legal Laws, HR Policy

and as well as GST?


The Question is

Whether we have made other function officials like HR,

Materials, Contracts aware of the new Act and its implications?


Taxes subsumed in GSTCentral Taxesû Central Excise Duty, û Additional Excise Duties on Goods of special importance, Textileû CVD, SADû Excise Duty levied under the Medicinal and Toilet preparations

(Excise Duties) Act, 1955.û Service Tax,û Central Surcharges and Cesses on Excise/Service tax

States Taxesû State VAT/Sales Tax, Purchase Taxû Entertainment tax (unless it is levied by the local bodies), Central

Sales tax (levied by Centre and collected by States)û Octroi and Entry Tax, Luxury Tax, Taxes on lottery, betting and

gambling.û State Surcharges and Cesses


Cesses Abolished 1. Education Cess on taxable services 01.06.2015 2. Secondary & Higher Education Cess 01.06.2015 3. Education Cess on excisable goods 01.07.2017 4. Secondary & Higher Education Cess 01.07.2017 5. The Mica Mines Labour Welfare Fund 21.05.2016

Act, 2016.6. The Salt Cess Act, 1953 21.05.20167. The Merchant Shipping Act, 1958 21.05.2016 8. The Limestone and Dolomite Mines

Labour Welfare Funds Act, 1972 [2 Cesses] 21.05.20169. The Tobacco Cess Act, 1975 21.05.2016 10. The Iron Ore Mines, Manganese Ore Mines

and Chrome Ore Mines Labour Welfare Cess Act, 1976 [3 Cesses] 21.05.2016


Cesses Abolished 11. The Textile Committee Act, 1963 21.05.201612. The Cine-workers Welfare Cess Act, 1981 21.05.201613. Cess on cement [by notification] 01.07.201714. Cess on strawboard [by notification] 01.07.201715. Research & Development Cess 01.04.201716. The Rubber Act, 1947 – Cess on Rubber 01.07.201717. The Industries (Development and Regulation).

Act, 1951, Cess on Automobile 01.07.201718. The Tea Act, 1953 – Cess on Tea 01.07.201719. The Coal Mines (Conservation and Development)

Act, 1974 – Cess on Coal 01.07.201720. The Bidi Workers’ Welfare Cess Act, 1976 –

Cess on Bidis 01.07.2017


Cesses Abolished 21. The Water (Prevention and Control of Pollution)

Cess Act, 1977 – Cess levied on water Consumed by certain industries and by Local authorities. 01.07.2017

22. The Sugar Cess Act, 1982, Cess on Sugar The Sugar Development Fund Act, 1982– 01.07.2017

23. The Jute Manufacturers Cess Act, 1983 –Cess on jute goods manufactured 01.07.2017or produced wholly or in part of jute

24. The Finance Act, 2010 – Clean Energy Cess 01.07.201725. The Finance Act, 2015 – Swachh Bharat Cess 01.07.201726. The Finance Act, 2016 – Infrastructure Cess

and Krishi Kalyan Cess 01.07.2017


The Question is

What about useful utilisation of the Man-power who were involved in

those areas?

How did we reap the benefit of their released time?


Conclusion

• The impact of the above factors on each of the organizationswill vary.

• It is up to the organization to determine the impact of each ofthe factors on their finance and re-arrange the business inorder to ensure that the adverse impact is minimized on GST.

• Also, through proper tax planning and supplier performances,the cost can be optimised/reduced


Take away

Can we make a paper on Cost Optimisation/Cost Reduction

for the Organisation we are connected with and

submit to the Management?


Take away

Targeted Date for the Paper?



CMA. TCA Srinivasa Prasad+91 947 770 [email protected]

Thanks for your time andinputs

cma. tca srinivasa prasad [email protected] …€¦ · tca srinivasa prasad 42. cessesabolished...

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