Gst gm foundation-3

Gst gm foundation-3

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  GROW AND SHARETOGETHER! V Ramaratnam & Company, www.vramaratnam.com 1
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  What is GST? GSTis a value added tax, levied at all points in the supply chain with credit allowed for any tax paid on inputs acquired for use in making the supply. It would apply to both goods and services in a comprehensive manner Ø  In simple terms it is a tax levied when a consumer buys goods or services. Ø  GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at an all India level. Ø  Through a tax credit mechanism, this tax is collected on value- added goods and services at each stage of sale or purchase. Ø  The system allows the set-off of GST paid on the purchase of goods and services against the GST which is payable on the supply of goods or services. Ø  This is how consumption is taxed in most developed countries
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  What are thebenefits of GST for Companies? •  GST has been envisaged as a more efficient tax system, neutral in its application and distributionally attractive. The advantages of GST are: •  Wider tax base, necessary for lowering the tax rates and eliminating classification disputes •  Elimination of multiplicity of taxes and their cascading effects •  Rationalization of tax structure and simplification of compliance procedures •  Harmonization of center and State tax administrations, which would reduce duplication and compliance costs.
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  What are thebenefits of GST for Companies? Destination principle Ø  The GST structure would follow the destination principle. Ø  Imports would be subject to GST in the same manner as domestic goods Ø  Exports would be zero-rated Ø  In the case of inter-State transactions within India, the State tax would apply in the State of destination as opposed to that of origin. There would be an integrated GST (IGST) which is an aggregate of Inter State GST and State GST Ø  An additional 1% tax has been proposed to be levied by the centre which will be passed on to the origin state
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  What taxes willbe eliminated as a result of GST? Central taxes proposed to be eliminated •  Central Excise Duty •  Additional Excise Duty •  Service Tax •  Special Additional Duty (SAD) •  Countervailing Duty (CVD) •  Central Surcharge •  Cess
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  What taxes willbe eliminated as a result of GST? State taxes proposed to be eliminated •  StateVAT / Sales Tax •  Entertainment Tax •  Luxury Tax •  State Cess and Surcharge
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  What will beout of GST? —  Levies on petroleum products —  Levies on alcoholic products —  Taxes on lottery and betting —  Basic customs duty and safeguard duties on import of goods into India —  Entry taxes levied by municipalities or panchayats —  Entertainment and Luxury taxes —  Electricity duties/ taxes —  Stamp duties on immovable properties —  Taxes on vehicles V Ramaratnam & Company, www.vramaratnam.com 8
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  IMPACTS OF GSTONYOUR SUPPLY CHAIN Sourcing •  Inter State Procurement may prove viable •  Opportunity to consolidate suppliers spread across India Distribution •  GST will result in changes in both procurement and distribution arrangements •  The current product flow will need to be re-examined and altered Pricing and Profitability •  The tax savings from GST will need to passed on to consumers, hence products need to be re-priced •  Margins and Mark Ups would need to be reexamined Cash Flow •  Excise Duty would be removed as a result cash flow will improve. GST is payable at the time of sale and not at the time of removal from the factory V Ramaratnam & Company, www.vramaratnam.com 10
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  IMPACTS OF GSTONYOUR SUPPLY CHAIN Information Technology Changes •  Changes to existing systems in terms of changes in master data, system design and re-customizations •  Existing open balances and transactions need to be migrated to the new system •  Changes to supply chain reports such as purchase register, sales register •  Changes to forms such as purchase orders, invoices •  Need for training employees, educating customers V Ramaratnam & Company, www.vramaratnam.com 11
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  Illustration on TaxCredit Supplier Input Cost Value added Sale price Rate of GST GST - output Tax credit Net GST payable Manufacturer 100 30 130 10% 13 10 13-10 = 3 Whole seller 130 20 150 10% 15 13 15-13 = 2 Retail Seller 150 10 160 10% 16 15 16-15 = 1 V Ramaratnam & Company, www.vramaratnam.com 12
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  Rates ofTax Ø  Therewith be a two-rate structure –a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. Ø  For CGST relating to goods, the States considered that the Government of India might also have a two-rate structure, with conformity in the levels of rate with the SGST. Ø  For taxation of services, there may be a single rate for both CGST and SGST. It will be total of the rate as applicable under CGST & SGST. Ø  Government is considering pegging the revenue neutral rate of GST at a rate between 18% to 22%.This represents the aggregate of CGST and SGST payable on the transaction. V Ramaratnam & Company, www.vramaratnam.com 14
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  Current Status ofGST in India Ø  The Government proposes to roll out GST from April 1, 2016 Ø  The Bill was approved in the Lok Sabha but did not pass muster in the Rajya Sabha. It has now been referred to a select committee for scrutiny Ø  The select committee is expected to report to the Rajya Sabha sometime in July. The house can then approve the recommendations Ø  After both the houses of parliament pass the bill at least 50% of India’s 29 states have to approve the constitutional amendment. Ø  The bill has to finally be approved by the President of India V Ramaratnam & Company, www.vramaratnam.com 15
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  V. Ramaratnam &Company, Chartered Accountants, Chennai. [email protected] www.vramaratnam.com THANKYOU! V Ramaratnam & Company, www.vramaratnam.com 16