Panel 2 - Goods & Services Tax (GST)

Goods and Services Tax

TaxSutra Conclave | Issues for Discussion

L. Badrinarayanan | Partner

Managing GST Transition When GST is likely to be implemented Where are we now?

Government Legislation – Model POT/POPS IT Infrastructure – GSTN

Trade Book Keeping – event based to consumption based Credit Chain Analysis Supply Chain Impact Long Term Contracts, Sales return, Warranty and After sale

Australian approach for smooth transition

Transition Provisions Treatment for opening credit in the books of accounts on the date of

implementation of GST? CENVAT ( ED +ST ) and VAT credit closing balance CST paid goods in-transit :- GST ? Stock in trade, Work in progress, Raw materials Credit of all taxes subsumed in GST Bad debts Apportionment & Adjustments

Special Time of Supply Rules for transition

Deemed Credit Mechanism

GSTN: How GSTN is going to manage GST for the Centre and the States

Insights on Registration

Insights on Payments & Receipts

Insights on Refund

Revenue Neutral Rate (RNR) What is RNR? Proposed RNR @ 27% but FM promises lower rate Tax on a Common Base

State gains – tax on services Centre gains – tax on distribution of goods

GST Council Floor Rates, Band rates, Exemption, Threshold

Implications for MRPSupply Chain analysis to take care of MRP

Price: Supply Chain Innovation Supply & Procurement Costing Impact

CST VAT on ED 1 % origin based additional tax Contract re-negotiation to pass on benefit

Price Rationalization: International Approach Free Market (Canada) Regulatory (Australia - ACCC) VAT- benefits not passed on by manufactures: CAG -2010

Streamlining of warehouses MRP and distribution margin Sale by Transfer of Document of Title whether Interstate Sale

E-Commerce Treatment of Trade Promotion Schemes – Vouchers, Discounts, etc

Treatment for Place of Supply

Insights from BEPS

Managing Inverted Duty Structures – Credit Implications

IGST: How it Operates How IGST will operate?

Impact of 1% additional Tax

Credit for IGST

Issues with IGST

Input Service Distributor Need for robust ISD Rules

Managing Common Inputs and Input services

Transfer of Credit from one unit to another

Refund of excess credit if no transfer?

Area Based Exemption Factory

Excise Exempt Units

BuyerCurrent ScenarioCost : X (No ED)No credit on inputs

Post GST Cost : Y (X-input credit) + 27 +1 (IGST + 1%)Customer

Tax refund from Govt.(27 – IGST)• GST: input credits available and output taxable• Refund scheme for existing units• Working capital increase for buyer• Contract re-negotiation to pass on benefit• Anti-forestalling measures in Transition

Credit Issues Credit is sacrosanct for GST System to work Accumulated / unutilized credit :- EU Approach (Refund) Apportionment & adjustments Credit on equipment or inputs lying in stock on which no credit has been taken VAT /Carousel Fraud: collected but not deposited

Who should suffer – the innocent customer or the duped Government?

Mahalaxmi Cotton 2012 (51) VST 1 (Bom)

International Approach – ECJ : Optigen, Fulcrum & Bond C-354/03

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Panel 2 - Goods & Services Tax (GST)

Business

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