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Understanding GST and Its Impact on India's Indirect Tax Landscape

This article explores the proposed GST structure, its impact on tax rates, input credits, cash flow, and operational efficiency, and the advantages and challenges of implementing GST. Practical challenges, vendor management, pricing, and supply chain network design are also discussed.

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Understanding GST and Its Impact on India's Indirect Tax Landscape

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  1. GST Update for Assocham • Delegates 06th Oct 2016

  2. What will GST do?

  3. GST expected to change India’s indirect tax landscape

  4. Proposed Indirect Tax Structure

  5. GST impact GST Impact • Tax Rates Input Credit Cash flow impact Ops Efficiency

  6. GST Impact – Explained with illustration

  7. Assumptions • Assumptions: • For sake of simplicity, following tax rates have been assumed • Excise Duty : 10% • VAT : 10% • CST : 2% • CGST : 10% • SGST : 10% • IGST : 20% • Value addition done at each stage is 10% over cost of Purchase

  8. GST Impact in Inter State Supply of Goods Set off Available Set off Not Available

  9. GST Impact in Intra State Supply of Goods Set off Available Set off Not Available

  10. Advantages & Issues in GST • Advantages: • Reduction in Multiplicity of Taxes • Mitigation of Cascading effect / double taxation • Development of Common National Market • Simpler tax regime: • Fewer rates and exemptions • Conceptual clarity (Goods Vs Services) • Reduction of Black economy • Issues: • Big change in political landscape due to it being destination based taxation • Valuation in case of Stock transfers, free supplies? • Taxability of Racks, Crates, Bottles, Visison returnable basis? • Business to ensure vendor undertake timely compliances – commercial safeguard to be in place • Treatment of existing tax benefits and other transition issues

  11. Practical challenges in GST • Implementing GST across big organizations will be a challenge especially the IT set up where there will be a dearth of quality resources for the short time window till April 17 • Challenging to train people in the organization and across the value chain including distributors • It will be tough to implement GST in service companies as they are not used to the multiple registrations and related complexities • Government needs to train its resources to be ready for the new regime • Need to remove the policing mind set and start trusting the tax payers and relate systems and processes

  12. Vendor Management Key vendor and customer contracts to be reviewed to check there is an appropriate tax / change in law clause to incorporate changes due to GST regime Change in Pricing to be analysed based on GST rate, availability of credits, exemptions etc. and appropriate changes to be made in contracts Negotiations – Vendors should be asked to pass on any benefits in Pricing and customers may be asked to pay additional costs Any New vendor contracts to factor GST Impact Contracts to include Statutory Compliance clause to ensure credit is available

  13. Opportunity to review overall Supply Chain Network Design

  14. Thank you

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