GST – “Goods and Service Tax” is a destination based consumption tax. GST Act may be called the Central / State Goods and Service Tax Act 2016 and extends to whole of India including Jammu and Kashmir.
Taxes subsumed under GST are VAT / CST / Purchase Tax /Service Tax / Excise Duty / CVD / SAD / Entry Tax / Entertainment Tax / Luxury Tax / Cesses and Charges on goods and services.
Considering the federal structure of India, GST is proposed to be introduced as a dual tax structure with Central Goods and Service Tax (“CGST”) and State Goods and Service Tax (“SGST”). Further, Integrated Goods and Service Tax (“IGST”) is proposed for inter-sate and Import transactions.
There shall be levied a tax called the Central/State Goods and Services Tax (Goods and Service Tax) on all intra-State supplies of goods and/or services at the rate specified in the Schedule to the Act and collected in such manner as may be prescribed.
“Integrated Goods and Services Tax” (IGST) means tax levied under this Act on the supply of any goods and/or services in the course of inter-State trade or commerce.
Supplies of Goods and Services in the course of inter-state trade or commerce shall include:
1. Supply of goods/services in the course of inter-state trade or commerce means any supply where the location of the supplier and the place of supply are in different states.
2. Supply of the goods in the course of import into the territory of India till they cross the customs frontier of India shall be deemed to be supply of goods in the course of inter-state trade or commerce.
3. Supply of services in the course of import into the territory of India shall be deemed to be supply of services in the course of Inter-state trade or commerce.
4. Supply of goods and/or services, when the supplier is located in India and the place of supply is outside India, shall be deemed to be supply of goods and /or services in the course of Inter-state trade or commerce.
5. Supply of goods and/or services to or by a SEZ developer or an SEZ unit shall be deemed to be a supply of goods and /or services in the course of inter-state trade or commerce.
6. Any supply of goods and/or services in the taxable territory, not being an intra-state supply and not covered elsewhere above, shall be deemed to be supply of goods and /or services in the course of interstate or commerce.
|GST Snapshot||Taxes to be subsumed|
It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act.
Basis the latest media reports, the date when the GST shall becomes operational is 01 July 2017.
GST is likely to be implemented from 01 July 2017. Introduction of GST would change the way business is done. Since GST is not only the tax change it but complete Business Transformation in the following ways.
|Change in the Sales and Purchase||Presently the sales and purchase transaction of the company is being managed according to the present Indirect Tax Regime so the business of the company has to adopt the change according to the GST law.|
|Change in Supply Chain||GST involves the change in the procurement pattern of the company as the inter-state procurement shall be beneficial to the company as compared to earlier regime wherein CST became the cost to the company.|
|Change in the IT system||Since the GST involves not only the tax change but involves changes in the tax system of the company wherein the credit of the goods shall be eligible to the service business assesse and vice versa. Thus it becomes vital to adopt IT changes in order to become GST compliant company.|
|Profitability Impact on the Company on account of the GST||The present Indirect Tax involves huge cascading effect of the taxes which add to the cost to the product/services.
Under GST regime,
– Credit availability
– Increase Credit Pool
– Re- negotiation of the purchase price with the vendors
– Re-negotiation of the sale price with the customers
– Transactions with Related parties at arm length prices
|Cash Flow Impact||Since GST involves the minimal exemptions and there shall be more payment of the taxes as compared to the present Indirect Tax Structure. So business needs to identify the cash flow impact of the Company in the following ways
– Transaction with related party to be arm length even the same is without consideration
– Higher GST rate
– FOC supplies to be taxable at related parties
– Upfront excise exemptions may go away with
– No deferment of the credit on capital goods
|IT system changes/ Accounting/ Training to Management to adapt to the GST compliant Company||Below are the changes which are required for the smooth transition to the GST regime and becomes more GST compliant
IT system Changes
GSTExpertise Team has been closely involved with the GST initiative through its specialized team of experienced professionals, including former government officials who advise businesses as well as governments. AT GSTExpertise we are focused to provide the GST transitional solutions in identifying the impact of GST on their operations, and engage in a constructive dialog with relevant authorities for remedial measures to address any concerns. The team has extensive knowledge has diverse Indirect tax and GST experience through extensive interactions with both the Centre and the State Governments authorities in India.
We GSTExpertise.com Team with its past experience in handling the GST migration work for companies from small companies & mid size companies to large Multinationals. Through our past experience, we have identified the following action plan which the Company should do for migration to the GST regime.
All the above can be managed through the GSTExpertise team which runs the project with average period from 15 days to 1.5 months and extend up to 3 months for the pre implementation phase.
We at GSTExpertise specializes in giving end to end solutions in pre implementation phase and even at post implementation when the GST law becomes live i.e 01 July 2017 so that the company won’t even loose penny of credit under the GST regime.