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transcript
Association of Multimodal Transport Operators of India
Goods & Services Tax: The Model GST Law
24 August 2016
Page 2 Demystifying the Model GST Law
Contents
► GST: The Story So Far!
► Model GST Law
► Business impact and Approach
Page 3 Presentation title 20 August 2016
GST: The Story So Far!
Page 4 Demystifying the Model GST Law
Improved productivity of factors of production
Capital deepening and better ROI
Higher GDP
Eliminate
Cascade Create a
Common
Market
Achieve
Neutralities Broaden
Tax Base Simplify
Tax
Framework
Improved
Compliance
Easy to
Administer
& enforce
India needs GST to improve productivity and eliminate cascade of taxes
Page 5 Demystifying the Model GST Law
GST – Snapshot
Broad base of taxation
Dual rate tax
Taxing principle
► Subsumed - Central Excise, Service Tax,
VAT/ CST, Entry tax, components of
Customs duty, etc.
► Tax on supply of both goods and services
► Dual GST - CGST & SGST levied on
common base
► IGST on inter-state supplies and import
► Decentralized registration and
compliances
► Shift to destination based tax - Place of
Supply Rules
► Flow of input tax credit
GST Progress
Consensus between Centre & State
State Compensation Framework
Agreement on the CAB*
Agreement on taxing framework
GSTN – Design & System Structure
CAB* voting and approval
GST Council & draft regulations
GST rollout & implementation
* Constitution Amendment Bill
Constitution Amendment Bill passed in Rajya Sabha in August 2016 Draft law released in June 2016
GST likely by 1 April 2017
Page 6 Demystifying the Model GST Law
Current regime:
Centralized registration
& compliance (except
J&K)
GST regime:
Registration &
compliance for each
State
► Central billing v local (and combinations!)
► Common credits at Head Office
► Multiple offices supporting a transaction
► Vendors billing centrally
Multi-state operations: ‘Taxable person’ in each state
Page 7 Demystifying the Model GST Law
GST Rate – Recommendations
Particulars Revenue Neutral
Rate
Rate on precious
metals
Low rate goods
Standard Rate (goods
and services)
High/Demerit rate or Non-
GST excise (goods)
Preferred 15% 2%-6% 12% 16.9%-17.7%
40%
Alternative 15.5% 2%-6% 12% 18% to 18.9%
40%
Goods and services covered
General RNR
Bullion Merit goods Standard Rate for
services and goods
Demerit/ Luxury goods
Consistency in classification of Goods & Services across the States
Page 8 Presentation title 20 August 2016
Model GST Law
Page 9 Demystifying the Model GST Law
TAXABLE SUPPLY Goods/
Services
Deemed Supply of Goods/
Services
In the course or
furtherance of business
PLACE OF SUPPLY
India Outside India
Intra-State Inter-State
► Liable to State GST = CGST + SGST
► Registration in relevant State
► Liable to IGST
► Registration in the origin State
Not liable to Indian GST?
The Charge: Levy of tax
Taxable person
B2B (registered customer) –
Location of the customer
B2C (unregistered customer) –
Location of handing over of goods for
delivery
Page 10 Demystifying the Model GST Law
Input tax credit (ITC)
CGST Output
SGST Output
IGST Output
CGST Input
IGST Input
SGST Input
IGST Input
SGST Input
CGST Input
IGST Input
Order of availment
GST credit ► ITC available to registered taxable person on supplies used for
providing taxable/ or zero-rated supplies. ITC not admissible on non-
taxable supplies
► State level maintenance of input tax credits
► Electronic matching critical for credit eligibility, coupled with condition
that payment of tax has been made by the supplier
Credit Availability
Matrix
Output
CGST IGST SGST - State A SGST - State B
I
n
p
u
t
CGST a a r r
IGST a a a a
SGST - State A r a a r
SGST - State B r a r a
Page 11 Demystifying the Model GST Law
Intra state transactions Inter state transactions
Proposed taxes
Current taxes
► Service tax
► C.Excise + VAT +
LBT/ Octroi etc.
► Maharashtra
SGST + CGST
Proposed taxes
Current taxes
► Service tax
► C.Excise + CST +
Entry tax etc.
► IGST (state in
which POS)
Inter-state or Intra-state supplies
POS
POS
POS = Place of Supply
Page 12 Demystifying the Model GST Law
Activity Current POS Proposed POS (B2B)
Ocean Freight Destination of goods Location of service
recipient
Air Freight
(exempt)
Destination of goods Location of service
recipient
Goods Transport services Destination of goods Location of service
recipient
Warehousing services Location of performance Location of service
recipient
Warehouse rental/ leasing Location of warehouse Location of
warehouse
Logistics Management/
Contract Logistics
Location of service recipient Location of service
recipient
Value Added Services (VAS) Location of performance of
VAS
Location of service
recipient
Place of Supply principles
Present place of supply rules to be read sequentially: (i) Destination of goods; (ii) If location of service provider and service receiver in India – India; (iii) Performance of services; (iv) Location of service receiver
Page 13 Demystifying the Model GST Law
Place of supply – Typical Scenario 1
International freight (IF)
Air Customs clearance
Ocean Port handling
Warehouses
Outside India Customs Station / DTA (State A)
Outbound Inbound
Particulars POPS - Current Regime POS - GST Regime
IF - Inbound – sale of cargo space Destination of goods i.e., in India Customer is registered or its address
is available on record then:
Yes - Location of customer - State B
No- Location of pick up of goods –
Inbound (outside India), Outbound
(State A)
IF - Outbound – sale of cargo space Destination of goods i.e., outside
India
IF - Inbound – purchase of cargo space Destination of goods i.e., in India Location of the freight forwarder -
State A IF - Outbound – purchase of cargo space Destination of goods i.e., outside
India
Customs clearance and port activities Place of performance/ Location of
recipient
Location of customer - State B
Warehousing, CFS, ICD Location of warehouse i.e., in India Location of warehouse - State A
State B
Customer
Page 14 Demystifying the Model GST Law
Place of supply – Typical Scenario 2
Warehousing Port
Packing, labeling etc.
Handling
State B State A
GTA- Road Transportation
Transportation
State C
Contract Logistics
Particulars POPS - Current Regime POS - GST Regime
GTA – Road transportation Destination of goods Customer is registered or its address
is available on record then:
Yes - Location of customer - State C
No- Location of pickup of goods -
State A
Hire of vehicle by GTA Location of GTA <Exempt> Location of GTA - State B
End to end contract logistics Location of customer Location of customer - State C
Warehousing Location of warehouse Location of warehouse - State B
State D Hiring of vehicle for output GTA services
Outbound Inbound
Customer
Page 15 Demystifying the Model GST Law
Place of supply – Typical Scenario 3
Cargo rail terminal
State C State A
GTA- Road Transportation
State D
Warehousing
Particulars POPS - Current Regime POS - GST Regime
GTA – Road transportation from port to
cargo rail terminal
Destination of goods Customer is registered or its address is
available on record then:
Yes - Location of customer - State D
No- Location of pickup of goods - State A
Transportation in containers by rail As above
Location of customer - State D
Location of pickup of goods - State B
GTA – Road transportation from cargo
rail terminal to warehouse/ customer
As above
Location of customer - State D
Location of pickup of goods - State C
Warehousing Location of warehouse Location of warehouse - State D
Port Cargo rail terminal
GTA- Road Transportation
Transportation in containers
by rail
State B
Outbound Inbound
Page 16 Demystifying the Model GST Law
Place of supply – Typical Scenario 4
State B State A State C
Warehousing
Particulars POPS - Current Regime POS - GST Regime
Transportation by inland waterways Destination of goods Customer is registered or its address is
available on record then:
Yes - Location of customer - State C
No- Location of pickup of goods - State A
GTA – Road transportation from inland
port to warehouse
As above
Location of customer - State C
Location of pickup of goods - State B
Contract Logistics Location of customer Location of customer - State D
Warehouse rental costs Location of warehouse Location of warehouse - State C
Port Inland port GTA- Road Transportation
Transportation by inland waterways
Outbound Inbound
Warehouse rental cost
State D
Customer
Page 17 Demystifying the Model GST Law
Value of supply
Supplier and recipient are
not related
Price is the sole
consideration
Transaction Value
Valuation Rules
Transaction at arm’s
length price
Key points
► Introduction of Transfer
Pricing in GST
► Implications on Incentives
► Implications of group
company transactions,
profit share, cost
recharge, preferred carrier
commission etc.
► Pure agent of service
recipient – Consistent with
service tax legislation
► Clarity required on
bundled supply – If supply
consists of both taxable
and non-taxable
components, then the
value to be deemed as
such part as is attributable
► Rules provide for rejection
of declared value by the
authorities
Comparative Value – Goods/ services of like kind and quality
supplied at same time to other customer
Adjusted for difference in date of supply, quality, quantity and
freight/ insurance depending on place of supply
Computed value method – Cost + charges for design or brand +
profit and general expenses
Residual method – Value determined using reasonable means
Page 18 Demystifying the Model GST Law
► Registration number (GSTIN) to 15 digit PAN based number
► Existing registrants registered with either States or with the Centre will be auto migrated to GSTIN
► For service providers, migration process to be as below –
► For central excise and VAT registrants, State VAT databases would be taken as the source. Similar procedure
would be adopted for additional generating GSTIN and obtaining additional data through state tax authorities
State Code PAN Entity
Code Blank Check
Digit
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Option to be available on ACES portal to intimate the state/s where service provider would like to get registered
Data already available in the existing databases would be cleaned, verified and migrated to GST portal
ACES would auto check GSTIN created for different states
GSTIN created would be communicated to the service provider along with request for additional data
GST - Registration
Page 19 Demystifying the Model GST Law
► Return for CSGT, SGST, IGST
► However, separate returns to be filed for each state in which the entity is registered
► All revenue, cost and related transactions to be reported at invoice level
► Revenue and procurements reported would be matched by GSTIN one to one with
corresponding information reported by customers and vendors respectively
Sr.
No
Return Nature of the return Due date of the return Draft return
1
GSTR
1
Details of outward
supplies made
10th of the succeeding month
2
GSTR
2
Details of inward
supplies made
15th of the succeeding month
3
GSTR
3
Monthly return 20th of the succeeding month
4
GSTR
8
Annual return 31st December of the next
financial year
GST returns
Page 20 Demystifying the Model GST Law
Provisional registration valid for 6 months
issued to all persons registered under the previous
law
Every person to
furnish prescribed information for grant of registration
Carry forward of CENVAT
credit/ input tax credit as disclosed in the last
return furnished
CENVAT would
have to be eligible
ITC under the earlier law as well as the new GST law
Unavailed CENVAT on capital goods not
carried forward in a return to be allowed in certain situations
CENVAT in respect of inputs held
in stock allowed in
certain situations
Pending proceeding of appeal,
etc. initiated before to
be disposed of as per
earlier law
Transitional provisions
Page 21 Demystifying the Model GST Law
► Special Purpose Vehicle (SPV) set-up by GOI and all State Governments for enabling the IT
Infrastructure for GST
► To have a self-sustaining revenue model, GSTN would be able to levy user charges on the
taxpayers and the tax authorities availing services
► Exclusive national agency responsible for delivering integrated GST related services involving
multiple tax authorities
► Provide common registration, return filing and e-payment services to the taxpayers
► Ensure integration of the GST Common Portal with existing tax administration systems of Central /
State Governments and other stakeholders
► Provide Analytics and Business Intelligence to tax authorities
► Carry out research, study best practices and provide training to the stakeholders
Goods and Services Tax Network (‘GSTN’)
Page 22 Demystifying the Model GST Law
Current regime versus GST regime
Current regime
Single pan-India tax on services - service tax
Input tax credits (ITC) restricted to service tax
Common pool of input tax credits
Centralised registration and assessments
Place of supply for international deliveries not favorable
Compliances for entry tax/ octroi/ local body taxes
GST
State level taxes
Larger pool of ITC on goods and services
Potential blockage of credits
State level registrations & assessments
Place of supply rules aligned to international tax jurisdictions
Entry tax, octroi, local body tax subsumed into GST
Page 23 Demystifying the Model GST Law
► Centralised registration under GST
► Treatment of International freight (both inbound and outbound) as
a zero rated supply
► Alignment of ocean freight with air freight?
► Classification of freight forwarding services as P2P or P2A
► Corresponding tax treatment as that of airlines/ shipping lines with regard t
international freight
► Clarity needed under the GST law to avoid similar litigation as under service tax law
► Grandfathering of abatements?
► Presently abatement available for GTA, ocean freight (inland and international),
transport through railway containers
► Removal of check posts and universal compliance across states
Key Issues
Page 24 Presentation title 20 August 2016
Industry issues & Approach
Page 25 Demystifying the Model GST Law
Key business impact areas
Cash Flows Profit & Loss Accounting
Pricing Customer /
Vendor Master Inventory
Management
Contract Management
Business Process IT Systems
Page 26 Demystifying the Model GST Law
GST Touch Points and Challenges
Restructure operations and distribution model
Efficient Credit Management
Inter-dependencies between project streams
IT transformation & Integrating multiple applications
New asks and effective change management
Getting ready for POS – the new big change!
Challenges in GST
implementation
Program manage
ment
Compliance
Technology refresh
Accounting and
reporting
Supply chain
Indirect tax
impact assessment
Advocacy
Change management and training
Page 27 Demystifying the Model GST Law
Approach and Timelines
► The 4-Phase work approach applies an all-encompassing methodology, ensuring that the following key
areas are considered from the perspective of GST:
► The 4-Phase work approach will provide an effective transition programme for the implementation of
GST to review the relevant areas of the business that would be impacted and identify issues for
resolution
Legal & transitional
issues
Tax & regulatory compliance
Documentation & systems impact
Education & training
Vendors & customers
communication
Impact study
Implement & Testing Post –
implementation
Phase I Phase II Phase IV
Constant Communication
Knowledge Sharing
Project
Team
Change Assess–
ment
Phase III
Timeline 2 Months 7 Months 2 Months
August2016
October2016
April 2017
June 2017
Page 28 Demystifying the Model GST Law
Your Critical Success Factors
Protect customer experience 1
Reduce disruptions to day-to-day business operations 2
Maximize input tax credit 3
Minimize cash flow impact 4
Utilize technology platform to automate GST 5
Ensure compliance to GST regulations 7
Be GST enabled on-time 8
Produce timely GST reporting 6
Page 29 Demystifying the Model GST Law
Scope Limitations
► The said presentation only seeks to summarise some of the relevant provisions of the Model GST Law
issued by the Ministry of Finance in June 2016. Please note that the same should not be considered to
be a complete summary of all provisions
► The present presentation should not be considered as an advice of any manner
► The comments are based on the draft model law issued by the Ministry of Finance in June 2016. All
comments are preliminary and not binding on any regulators or Indian Revenue authorities and there
can be no assurance that the regulators or Indian Revenue authorities will not take a position contrary
to our comments
► Our comments are based on the Model GST Law released in June 2016. We do not have responsibility
to update the same unless specifically asked and agreed to do so
► Our comments are for internal purposes of AMTOI only and are not binding on any tax or regulatory
authorities. In case the same is shared with any internal parties, Ernst and Young Is not liable in case
any breach occasions with respect to the same
Page 30 Demystifying the Model GST Law For discussion purpose only
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