october 2016 - indo american chamber of commerce american chamber of commerce - gst...transfer of...
TRANSCRIPT
Page 2
Contents
► Current Indirect Taxes Landscape
► GST Snapshot
► GST – Where we stand?
► Model GST Law
► Impact of GST
► GST Transformation: People,
Process, Tax & Technology
► Learnings from GST
implementation across the globe
► GST Implementation Roadmap
Page 3
Current Indirect Tax Structure in India
State TaxesEntertainment
tax
Electricity duty
Luxury tax
VAT 5 % to 14.5%
Customs duty -effective rate
29.4%
Central excise duty
12.5%
cesses
Service tax
15%
Central
Taxes
CST
Under the current tax system, multiplicity of taxes and cascading effect results in the overall increase of
the cost of the product and services
Entry tax
Local Body Taxes
Page 4
Broad base of taxation
Dual rate tax
Taxing principle
► Tax on supply of both goods and services
► Subsumed - Central Excise, Service Tax, VAT, Entry tax, CST,
etc.
► Dual GST - CGST & SGST levied on common base
► RNR rate ~ 18-20% (GST Council meeting- 6,12,18 & 26% plus
Central Cesses)
► IGST on inter-state supplies and import
► Decentralized registration and compliances
► Shift to destination based tax - Place of Supply Rules
► Seamless flow of input tax credit
► Threshold limit for Registration- INR 20 Lakhs / 10 Lakhs
GST –Key featureThe Tectonic Shift
Page 5
Existing Vs. Proposed FrameworkGeneral
TaxPresent Taxable
Event
Excise Manufacture
Service
Tax
Provision of Taxable
Service
VATIntra-State Sale of
Goods
CSTInter-State Sale of
Goods
TaxProposed Taxable
Event
GST Supply
Particulars Current tax regime Under GST Regime
Taxability
► Import of goods - Custom duty
► Domestic clearance of goods -
VAT/CST
► Providing of services - Service Tax
► Export of goods and services - No
tax
► Stock transfers against statutory
forms - No tax
► Import of goods – Basic custom
duty & IGST
► Sale of goods and provision of
services – CGST/SGST/IGST
► Stock transfers becomes taxable
► Statutory forms – likely to be
discontinued
► Export to be zero rated
Compliances► State wise for VAT
► Centralized for service tax
► Multiple State registrations
depending upon the State of
Supply
► Multiple returns e.g. inward
supplies, outward supplies etc.
Place of
Supply
► Goods are taxed in the State of
Origin
► Services are taxed as per Place of
Provision of Service rules
► Goods and Service location is
determine as per Place of
Supply Rules
Input Tax
Credit
► No cross utilization of taxes is
permitted and ultimately is a cost► Free Flow of Credit
Page 6
GST TimelineWhere we stand
► All legislative bills to be
passed in the winter session
of the Parliament and the
State assemblies
(November/
December 2016)
► Establishing Goods and
Services Tax Network
(GSTN) framework by
November 2016
► Testing of software with live
transactions by January
2017
► Outreach program as a part
of change management to
be completed by March 2017
► Go-live date is expected to
be 1 April 2017
GST likely rollout timeConstitutional Amendments
8 Sep 20161
Order appointing date for giving effect to
provision relating to Formation of GST
Council
12 Sep 2016
2
Formation of GST council
► Representation of Centre & States
► Finalizing Model Law and allied matters
including threshold, rates & exemptions
(60 days from the Order)
3
Passage of CGST/ IGST Bills by Parliament
(Centre)
&
Passage of SGST Bill by respective States
(Winter Session - Nov / Dec 2016)
4
Page 7
Model GST LawGeneral
► Separate for goods
and services
► Default for services
continues to be
location of service
recipient
Place of provisionTime of supply
► Separately provided
for goods and services
► Time of supply of
goods shall be earlier
of the following:
► Date of removal of
goods
► Date of issuance of
invoice
► Date of receipt of
payment
► Date when
recipient shows
receipt in his books
► Sale, lease or
disposal for
consideration in the
course or furtherance
of business beside
others
► Self supplies
► Sale/ disposal of
assets
► Supply from one
‘taxable person’ to
another ‘taxable’ or
‘non-taxable’ person
is included – appears
to include supplies
made by one branch
to another i.e. branch
transfers within same
entity
Supply
► Goods include every
kind of movable
property, whereas
Services have been
defined to mean
everything other than
goods
► Works contract and all
‘intangibles’ to qualify
as Service
► Classification to be
based on HSN
► Classification Rules
and tax rates for goods
and services yet to be
notified
Classification
Page 8
Model GST LawCredits
► wide definition of
‘input tax’ – only
requirement of goods
and services having
been used/ intended
for use in course of
furtherance of
business
► Specific exclusions
still continue
► Credit on capital
goods used for
effecting both taxable
and non-taxable
supplies shall be
proportionately
available.
Widened credit pool
► Restrictions on
availability of credit for
non-taxable supplies
(like exempt supplies)
continue
► Mechanism for
computation of
ineligible credit in case
of use of common
goods & services yet
to be provided
Credit on payment of
tax by vendor
► Credit of input taxes
available only when
tax deposited by the
vendor
► Need for businesses to
protect themselves in
case of default by
vendors
► Adequate
indemnity to be
inserted in vendor
agreements to
cover risk
► Other measures
► Electronic filing of
refund claims
► State-wise for IGST/
CGST/ SGST
► Refund only allowed
on account of exports
and inverted duty
structure
► Provisional refund of
80% in case of exports
Restrictions of credit
on non-taxable supply
Refund mechanism
overhauled
Page 9
Model GST LawValue of Supply
Supplier and recipient are not related
Price is the sole consideration
Transaction Value
Valuation Rules
Transaction at arm’s length price
Comparative Value – Goods/ services of like kind and quality supplied at same time to
other customer
Adjusted for difference in date of supply, quality, quantity and freight/ insurance
depending on place of supply
Computed value method – Cost + charges for design or brand + profit and general
expenses
Residual method – Value determined using reasonable means
Page 10
Model GST LawTransitional Provision
Provisional certificate of registration valid for 6 months issued to all
persons registered under the previous law
Every person to furnish prescribed information for issue of certificate
of registration
Carry forward of CENVAT credit/ input tax credit as disclosed in the
last return furnished
Transfer of credit permissible only when same is eligible under earlier
law as well as new law
Unavailed CENVAT credit on capital goods, not carried forward in a return to be allowed in certain situations
Credit of eligible duties and taxes in respect of inputs held in stock allowed in certain situations
Pending proceeding of appeal, revision, review initiated before the appointed day to be disposed of in accordance with the
provisions of the earlier law
Page 11
Paradigm Shift in Compliance- As per draft Rules
Return In relation to To be filed by
GSTR 1 Outward supplies
(sale, stock transfer,
export)
10 of next month
GSTR 2 Inward supplies
(purchases, import)
15th of next month
GSTR 3 Final Monthly return 20th of next month
GSTR 7 Tax deducted at
source
10th of next month
GSTR 9 Annual return 31st December of
next FY
ITC ledger Continuous
Cash ledger Continuous
Tax ledger Continuous
Return Time period To be filed by
Excise
ER 1 Monthly return 10th of next month
ER 4 Annual return 30th November of next FY
VAT return in each State
Monthly / Quarterly return As prescribed
Annual return As prescribed
Audit reports As prescribed
Service Tax
ST 3 (Half yearly)25 days from half year
end
Annual return 30th November of next FY
Present Compliance Regime GST Compliance Regime
Page 12
Tax Payer
GSTN
Uploading of supply details by 10th of
succeeding month
To file GSTR 1 by 10th
of succeeding month
Inward supply details in GSTR 2 to be auto
populated on basis of GSTR1 filed by supplier
Modifications in details and filing of GSTR 2 by
15th of succeeding month
Reconciliation to be done by 20th of
succeeding month
Pay tax
GSTR 3 to be filed by 20th of succeeding
month
Multiple inter-dependent return filing steps
Page 13
Transitional provisions
► Provisional certificate of
registration valid for six months
issued to all persons registered
under the previous law
► Input tax credit available under the
existing indirect tax law to
continue under the new GST
regime
Tax incentives
► Exemption on purchases for
export incentive zones (Export
Oriented Units, Software
Technology Parks of India Units)
may be discontinued
► Special Economic Zone benefit
likely to continue
► Area based exemption ~ Net
Refund
GST rate band
► Standard rate: 18% to 20% (GST
Council ~ 6% to 26%)
► Lower rate: 12% [essential goods
and services (pharma,
health/education services, etc.]
► Zero rate: Exports (exceptions
may include marketing support,
testing, cloud-based services,
etc.)
Some tax minutiae
► Place of supply / Time of supply ~
Specifics
► Transition stock ~ Inbuilt taxes
► Inter-unit transfers - Taxable
► Valuation principle for transfer –
Related party
► Input credit ~ Matching concept
► Sales return ~ reverse supply
ERP infrastructure & Change
management
► Requirement for GST compliant
ERP systems (invoicing, tax rates,
accounting/capturing taxes and
credits)
► Process mapping
► Employee related claim
documents, policies
► Contracts ~ GST clause
Compliance
► Transaction level details to be
reported
► Compliance to increase
significantly. Estimated 39
returns/statements in a year for
each state
► Reconciliation between supplier
and customer returns
Impact areas under GST
Page 14
GST Transformation: People, Process, Tax & Technology….areas impacted and readiness required
► Sourcing strategy
► Terms & conditions
► Negotiations
► Payments processing
Supply Chain Accounting and HR
Tax and finance
Information
Technology
Compliance
Change
management
► Impact analysis and tax positions
► Working Capital management
► Change Management
► GST awareness training
► GST communication
► SOPs
► GST registrations
► Transition provisions
► Return reporting and documentation
► Testing
► System Changes
► GSTN
Compliance
► Auditability
► Automation
GST
► Chart of
Accounts/Masters
► Tax accounting
► Policies
► Controls
► Compensation
management
Page 15
Goal
2. 100% Compliance
3. Business value
creation
1. No business
disruptionTimely manage
risks and
opportunities
Start early:
Several months in
advance for readiness
and implementation
Significant impact
on policies,
procedures and
controls
IT implementation
takes time and
requires testing
Comprehensivene
ss: Mapping of all
possible scenarios
for flow of goods
and services
Governance
GST Steering
Committee, PMO
and Change
management are
critical
GST Insights
Learnings from GST implementation across the globe
Page 16
August/ Sept
2016
April 2017
and looking
ahead
On-boarding and kick off
Go – live and post implementation
Impact assessment
Business process design
Considerations
IT Implementation and testing
30- 50 days action plan:
► Mapping of scenarios and process heat maps
► IT landscape mapping and impact assessment
► Awakening the organization – GST workshops
Risk/opportunity
assessment
Steering
Committee /
PMO
Change
Management plan Technology
enablement
50-100 days implementation plan
► Policy/ SOP changes
► Transition/ Cut – over plan
► IT implementation and testing
► Go live and compliance testing
Transition plan/
cut over
GST Implementation Roadmap
Thank you
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