Taxing times Indirect Tax Forum

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Daisy Caldwell
5 years ago
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1 Indirect Tax Forum 1 November 2016

2 Getting ready for Indian GST Slide 2

3 GST Roadmap August 2016 CAB passed April 2017 September 2016 Constitution amended, President s assent, formation of GST council Oct-Nov 2016 Finalisation of GST rates Recommendation of Model laws by GST council Backend IT systems to be ready Change management and trainings December 2016 Passage of GST laws Development of front end and backend IT processes Trainings in IT systems January to March 2017 Notification of GST Rules Testing of IT systems for all stakeholders Outreach workshops for industry Slide 3

4 GST Proposed regime 1 GST To bring a fundamental shift in the way business transactions are taxed in India 2 Multiple State and Central indirect tax levies to be subsumed under GST Less tax cascading Increased investment 3 Dual GST model likely to have multiple rates (6, 12, 18 and 26%): CGST SGST Improved cash flow position Improved competitive position of Indian producers Broader base, lower taxes 4 Inter-state transactions proposed to be covered under IGST, to be levied by Central Government (likely tax rate for IGST to be sum of CGST and SGST) Simpler and rational tax structure 5 Input credit mechanism to ensure no cascading effect and minimal blockage of funds Improved administration (simplicity and lower cost of administration) Slide 4

5 What is changing? Consumption tax One market Growth of organised sector Business plans Service sector State taxation Destination based consumption tax as compared to current regime of origin based taxation To remove state barriers and make India one common market GST to discourage parallel economy Business plans would be driven by commercial imperatives rather than by tax Service sector to be subject to State level taxes for the first time Slide 5

6 How will GST impact my bottomline? How can I create more value? 1 2 How can I be compliant? Can I build competitive edge? 3 4 Slide 6

7 In our experience companies drive value with potential benefits worth 4-13% across value chain Sourcing Manufacturing Sales and distribution Pricing Indirect/Capex vendors Plants Excisable depots Sales/Distribution team Market/Sales leadership Remodel cost of supplies Fact-based negotiation with the suppliers Evaluate Change in Manufacturing locations and strategy Re-evaluate contract manufacturing and job work arrangements Redesign distribution and sales network Remodel warehouse footprint Redesign pricing structure Margins, discounts, incentives, promotions, return pricing Integrated Planning Adapt to redesigned value chain, optimise inventories, working capital and service Opportunities of 2-4% in sourcing and 2-9% in network across the value chain Slide 7

8 In our experience companies drive value with potential benefits worth 4-13% across value chain Increased credits Savings by network restructuring Savings on procurement Transition impact Change in tax rate Pricing decision Impact of area based exemptions Absorb benefit? Pass through the supply chain? Competitive pricing Slide 8

9 Managing compliances under GST Need for a robust process/technology framework 1 Separate registrations in each state (SGST/ CGST/ IGST) 2 Multiple state-level filings 3 Multiple credit pools 4 Cumbersome reconciliation requirements 5 Need for technology intervention Slide 9

10 IT readiness GST Impact on ERP and associated applications can broadly be classified into the following heads Master data Configuration Developments including reports Roles and authorisations Master data amendments Tax configuration and computation Document numbering Roles and Authorisation Business process realignment Reporting and printing requirements Impact on interfaces Tax credit migration Closure or reversal of partially open transactions Migration of Contracts Slide 10

11 IT readiness Some changes to be made to ERP and other transactional systems Controls and compliance 1 Finance and control 2 Tracking of CGST, SGST and IGST Utilisation of input tax credit Statutory reporting Tax procedures P&L Chart of accounts Tax codes Registration numbers Reports 3 4 Procurement Sales and distribution Procurement schemes Tax compliant warehouses Vendor master Process domestic and import procurement of goods and services, etc. Print layouts and reports Pricing procedures Customer master Pricing master Process domestic and export sale of services, debit and credit notes, etc. Print layouts and reports Slide 11

12 GST Impacting whole business 6 Tax impact 1 Business model 5 Project management GST impact IT system 2 Compliances 4 Contract arrangements 3 GST is a multi-function transformation program, impacting the whole organisation It needs to be managed and reported rigorously to be compliant and capture value Slide 12

13 Preparing for GST requires a whole of business approach Assess Design Construct Implement Operate and review GST impact analysis Transition plan Representation with Government Supply chain management Evaluation of IT systems and processes Deliver change Pricing Supply chain implementation Vendor management Process reengineering IT reconfiguration Communication and training modules Review of SoP Compliance monitoring Compliance review PMO Pre GST Intervention Post GST Slide 13

14 Thank you This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers LLP. All rights reserved. In this document, "" refers to the UK member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details CR-OS

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