GST Implementation

Goods and Services Tax, a comprehensive indirect tax, would be the biggest reform in India's indirect tax structure to be levied on manufacture, sale and consumption of goods and services throughout India.

To be implemented by April 2017 as stated in the 122nd constitutional amendment bill passed by Rajya Sabha on the 3rd August, 2016

Comprising of about seventeen indirect taxes like entry tax, luxury tax, service tax, excise tax, VAT, entertainment tax, Octroi, etc., GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer.

On the basis of the input tax credit methodology, the GST would be levied and further collected at each and every stage of the sale and purchase of the services and the goods.

The Model GST law was issued on the 14th June,2016 by the Ministry of finance comprising not only the Integrated Goods and Services Tax (IGST ) and the state/Central Goods and Services Tax(CGST/SGST) but also the valuation of the GST.

A revised draft of the GST released on the 26th November, 2016 comprises of the compensation law stating compensation to the states on the loss of the revenue on the implementation of the GST would be provided. It also consists of the Integrated Goods and Services Tax (IGST) and the Central/ State Goods and Services Tax (CGST/SGST).

GST would be a taxation system possessing dual administration, the administration of the state as well as the center.The dual GST model would comprise of three types of taxation - Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) for intra state transactions and IGST (Integrated GST) for Imports and intrastate transactions.

With the introduction of the GST, the following taxes would be subsumed which are currently levied by Central and State Governments:

Central Levies

State Levies

 Central Excise Duty

 State VAT / Purchase Tax

 Excise duty on medicinal and toilet preparations

 Entertainment Tax

 Additional duty of Excise on Textile and Textile Products

 Tax on lotter, betting and gambling

 Central Sales Tax (CST)

 Entry Tax & Octroi

 Service Tax

 Luxury Tax

CVD and SAD (on import of goods)

 Taxes on Advertisement

 Cesses and surcharges insofar as they relate to supply of  goods or services

 State cesses and surcharges insofar as they relate to  supply of goods or services

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Earlier the taxation system was based on the origin but now with the coming of the GST the taxation system would become destination based. This would impact various aspects of a business like the cash flow, the supply chain, the sourcing, the profitability, pricing and the enterprise resource planning. Planning in advance would provide a good opportunity to the organizations for assessing as well as realigning their business models. Realignment of the business model across the value chain would provide a competitive advantage to the organization as compared to the competitor.

SOURCING

DISTRIBUTION

PRICING & PROFITABILITY

CASH FLOW

SYSTEM CHANGES & TRANSACTION MANAGEMENT

  • Inter-State procurement could prove viable
  • This may open opportunities to consolidate suppliers/vendors
  • Additional duty/CVD and Special Additional duty components of customs duty to be replaced.
  • Changes in tax system could warrant changes in both procurement and distribution arrangements
  • Current arrangements for distribution of finished goods may no longer be optimal with the removal of the concept of excise duty on manufacturing
  • Current network structure and product flows may need review and possible alteration

 

  • Tax savings resulting from the GST structure would require re-pricing of products
  • Margins or price mark-ups would also need to be re-examined
  • Removal of the concept of excise duty on manufacturing can result in improvement in cash flow and inventory costs as GST would now be paid at the time of sale/supply rather than at the time or removal of goods from the factory.
  • Potential changes to accounting and IT systems in areas of master data, supply chain transactions, system design
  • Existing open transactions and balances as on the cut-off date need to be migrated out to ensure smooth transition to GST
  • Changes to supply chain reports (e.g., purchase register, sales register, services register), other tax reports and forms (e.g., invoices, purchase orders) need review
  • Appropriate measures such as training of employees, compliance under GST, customer education, and tracking of inventory credit are needed to ensure smooth transition to the GST regime

imageAKGVG comprises of an expertise team possessing specialization in calculating and implementing the GST. Our dedicated team provides online as well as offline support for sorting out all your queries associated with the functioning and implementation of the GST.

Our intellectual professionals help you in anticipating your policy changes, assessing the impact of such changes on your operations and engaging you with relevant authorities for you to address your concerns and take remedial measures by engaging in constructive dialog with the concerned authorities.

We are fully familiar with your diverse clientele. Our in-depth experience makes us address all your needs irrespective of your needs being extensively diverse belonging to servicing, manufacturing and trading.

For ensuring implementation of GST across all segments of your industry including supply chain, accounting, tax and IT, We possess the presence throughout India.

imageA holistic approach would be required for a smooth shift to the GST as it would impact various aspects of the business. The major focus areas related to the transition would be as:
image 1. Understanding the structure of the OrganizationIn depth understanding of the structure as well the location of the plants (if the organizations are manufacturing organizations) and the branches (if the organizations are trading organizations) of the organization is required.2. Nature of businessKnowing whether the organization is a manufacturing organization, a trading organization or else the servicing organization and the amount of tax to be levied as per the applicability at different transactions. For example, purchase/sale, local/central, receiving and provisioning of services, Import and/or export of goods and/or services.3. Applicability of Input taxUnderstanding the various transactions that can be used for availing the credit with respect to the goods and services.4. Liability to pay output taxIn depth understanding of whether the organization needs to pay the output tax liability or not.5. Availing and utilization of Input Tax CreditComplete understanding of where Input tax credit can be availed and where it can’t be and the methodology for utilizing the same.6. Registration requiredHelping the client know the type of registrations required at varied places of the business and distribution and provision of goods and services respectively.7. Impact on Profit and Loss statement and the Balance sheetPossessing thorough understanding of the transactions on which ITC cannot be availed and was rather expensed with. Also knowing whether ITC can be availed now or not as such transactions would now fall under the items of the Balance sheet instead of the profits.8. Impact on price and cost price of goods and servicesThe proposed GST Law would remove the multiple taxation thus giving way to the utilization of the ITC, The impact of the ITC on the procured goods and services. Also, the pricing of the produced and traded goods and services yet to be provided needs to be worked on.imageFocusing on multiple aspects would be required for the Implementation of the GST.These aspects are as: 

  • Deployment of the target operating model and enhancement of the varied business processes and transactions.

 

  • Testing of the systems of the IT, updating and handling the issues pertaining to the migration and cut-over

 

  • Implementation of the processes for managing the impact of the cash flow extensively

 

  • Effective navigation through transitional and cut off issues like pre-GST credit and pre-GST stock of goods

 

  • Drawing up of new contracts related to the sales or procurement, revision of the clauses of the tax mentioned in the contracts especially the long-term ones, etc.

 

  • Revision of the setup of the tax compliance, tax manuals, statutory records templates, calendars of the compliance, Frequently Asked Questions, etc.

 

  • Effective Communication with the stakeholders including channel/suppliers partners.

 

  • Evaluation of the fate of the litigations that are pending and the time period required for judicial pronouncements in the pre-GST regime

imageGST would bring in enormous challenges which need to be converted into opportunities by taking the support of the stakeholders and sensitizing them. The key area of focus while implementation of the GST road map would be the Training. This training can be availed by: 

  • Senior management on important strategic areas

 

  • Business teams on the impact expected by the implementation of the GST and the route for future for specified groups like sales, supply chain,IT,etc. and locations like head office, depots and factory, etc.

 

  • The tax team on the major changes that can impact the framework of the compliance

 

  • Suppliers and channel partners for explanation of the promotional schemes, discount structures and changes in the prices


imageGST could completely change the existing business processes by: 

  • Defining of all the maps of the processes at varied levels up to L4 and L5.

 

  • Making the processes aligned with the revised Standard Operating Procedures (SOPs).

 

  • Dealing with the changes that are sensitive like the reconfiguring of the matrices of the escalation, major performance indicators at multiple levels.

 

  • Identifying the skills and the training that possess enhancement requirements

 What is GST?  The contemporary India has a tax system in which a number of taxes are being paid by the tax payers. With the coming of the GST, the tax payers will have to pay only one tax in place of many taxes like central excise, entry tax, value added tax, Octroi and a number of other taxes. This would be one of the biggest reforms in the tax reform system since the independence, 1947.   The impacts of the GST would be manifold like  Ease of  doing the Business: Since every state has its own taxes, therefore, a company indulged in business in various other states has to pay the taxes according to that specific state yet after the coming of the GST this complex system will come to an end making the functionality of the business easy.  Expansion of the business would become easier - A business possessing the turnover of over Rs.5Lakh has to pay the VAT registration and after the implementation of the GST this amount would increase from Rs. 5lakh to Rs.10 lakh. The repercussion of this would be paying lower taxes after acquisition of business to Rs.50lakhs. This new system would ease the companies burdened because of the tax system.   Simple method of paying the Taxation - Taxes are to be paid by the companies at various junctures. GST would make the entire methodology of paying the taxes to be easier.   The monetary reduction in Logistics, Cost as well as time would be beneficial - Vehicles get delayed moving from one state to another because of the necessity to pay the taxes as per the state. The coming of the GST would help eliminate this problem.   Though implementation of the GST possesses enormous benefits yet implementing the GST would need the expertise and we possess that kind of an expertise. 

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