GST IMPACT · PDF fileGST IMPACT REPORT 1 ABC ... Credits Flow under current tax and GST...

©2016 Reina Consulting LLP. All Rights Reserved

GST IMPACT REPORT

©2016 Reina Consulting LLP. All Rights Reserved 1

ABC

30-03-2017


CONTENTS


GST Impact - An Overview

Overview of Proposed GST in India

GST Impact on your sector

Credits Flow under current tax and GST Regime

GST Impact on Your Business

Our Understanding of your Business

Financial Impact of GST on Your Business

Factors Causing Positive/ Negative Impact

Anti-Profiteering Measures

GST Impact on Your Working Capital

Guidance for Migration to GST

Admissibility of Existing Unutilised Credit

Changes in IT & Accounting System

Discussion Points with Vendors

Impact on Existing Contracts

Supply Chain and Distribution Strategy

Key Compliances

Registration

Mandatory Returns/ Statements

Invoicing Requirements

GST Payments

Scope Limitations


GST IMPACT ON YOURBUSINESS

3

This section highlights the financial impact of GST on your business along

with the underlying reasons. The analysis helps you determine how your

net profit will change in GST regime or how you can adjust revenues to

earn the existing net profit. Additionally, this section explains how GST will

impact your working capital requirements and also how you can comply

with anti-profiteering measures


OUR UNDERSTANDING OFYOUR BUSINESS

4


OUR UNDERSTANDING OF YOUR BUSINESS

Nature of Business :

Manufacturer

Number of States of Operations :

3

Data Period :

01-04-2015 to 31-03-2016


Note: Please click on the table above to download the excel version

CURRENT TAX REGIME

Profit & Loss Account

for the period 01-04-2015 to 31-03-2016

Particulars Assam Delhi Haryana Common Total Particulars Assam Delhi Haryana Common Total

INR INR INR INR INR INR INR INR INR INR

Opening Stock - - - 1,00,000 1,00,000 Sales 1,80,000 80,000 5,00,000 - 7,60,000

Purchase - Goods 1,50,758 72,727 4,01,515 - 6,25,000 Closing Stock - - - 2,00,000 2,00,000

Purchase - Services - - - 2,40,000 2,40,000 Other income - - - 7,500 7,500

Non-creditable taxes 12,042 0 45,652 6,000 63,695 Net loss 66,195

Other expense - - - 5,000 5,000

Net profit -

Total 10,33,695 Total 10,33,695

Indirect Tax Statement

as on 31-03-2016

Particulars Assam Delhi Haryana Common Total

INR INR INR INR INR

Input tax credit

- Excise Duty/SAD/CVD 8,000 9,545 - - 17,545

- VAT/Entry Tax 11,600 4,000 48,770 - 64,370

Input tax credit - Service tax - - - 30,000 30,000

Total 19,600 13,545 48,770 30,000 1,11,915

Output tax liability

- Excise duty 15,500 - - - 15,500

- VAT/CST 18,460 4,000 65,625 - 88,085

Total 33,960 4,000 65,625 - 1,03,585

GSTImpactReport_ABC_945.xlsx


FINANCIAL IMPACT OF GSTON YOUR BUSINESS

6

₹


KNOW THE FINANCIAL IMPACT OF GST ON YOURBUSINESS (COMPARATIVE VIEW)


Particulars Current

GST -

Revenue

Constant

GST - Profit

constant

Sales 7,60,000 7,60,000 7,12,853

Purchase 8,65,000 8,65,000 8,65,000

Non-creditable Taxes 63,695 16,548 16,548

Net Profit (66,195) (19,048) (66,195)

Particulars Current

GST -

Revenue

Constant

GST - Profit

constant

Total Output Tax Liability 1,03,585 1,45,000 1,36,315

Total Input Tax Credit

Available 1,11,915 1,61,497 1,61,497

Net Tax Liability (8,330) (16,497) (25,182)

Total positive/ (negative ) GST imapct 47,147

7,60,000 7,60,000

(66,195)(19,048)

(2,00,000)

(1,00,000)

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000

Current GST - Revenue Constant

Revenue Constant

Sales Net Profit Linear (Sales) Linear (Sales)

7,60,000 7,12,853

(66,195) (66,195) (2,00,000)

-

2,00,000

4,00,000

6,00,000

8,00,000

10,00,000

Current GST - Profit constant

Net Profit Constant

Sales Net Profit Linear (Sales) Linear (Sales)


HOW YOUR CURRENT FINANCIAL STATEMENTS WILL APPEARUNDER GST REGIME (IF REVENUE REMAINS CONSTANT)



GST REGIME ( REVENUE CONSTANT)


for the period 01-04-2015 to 31-03-2016






Indirect tax cost 4,499 - 5,667 6,382 16,548 Net loss 19,048

Other expense - - - 5,000 5,000

Net profit -

Total 9,86,548 Total 9,86,548

Indirect Tax Balances

as on 31-03-2016


INR INR INR INR INR

Input tax credit

CGST/SGST 13,836 14,545 63,636 92,018

IGST 18,650 4,545 16,667 29,618 69,480

Total 32,486 19,091 80,303 29,618 1,61,497


CGST/SGST 20,000 - 1,00,000 - 1,20,000

IGST 9,000 16,000 - - 25,000

Total 29,000 16,000 1,00,000 - 1,45,000



HOW YOUR CURRENT FINANCIAL STATEMENTS WILL APPEARUNDER GST REGIME (IF PROFIT REMAINS CONSTANT)



GST REGIME ( PROFIT CONSTANT)


for the period 01-04-2015 to 31-03-2016






Indirect tax cost 4,499 - 5,667 6,382 16,548 Net loss 66,195

Other expense - - - 5,000 5,000

Net profit -

Total 9,86,548 Total 9,86,548

Indirect Tax Balances

as on 31-03-2016


INR INR INR INR INR

Input tax credit

CGST/SGST 13,836 14,545 63,636 - 92,018

IGST 18,650 4,545 16,667 29,618 69,480

Total 32,486 19,091 80,303 29,618 1,61,497


CGST/SGST 18,759 - 93,796 - 1,12,556

IGST 8,752 15,007 - - 23,759

Total 27,511 15,007 93,796 - 1,36,315



FACTORS CAUSING POSITIVE/NEGATIVE IMPACT

10


UNDERSTAND THE FACTORS CAUSINGPOSITIVE/ NEGATIVE IMPACT

Credit with respect to

input services e.g. rent,

advertisement etc.

-1%

Total Positive/ (Negative) GST Impact

on your business : 47,147 INR

This is on account of the following increase in Input tax credits i.e.

credit not available in current tax regime but available in GST regime

92

2%

Credit with respect to inter-

state procurements

0%

Credit with respect to imports

(except BCD)

99%

Credit with respect

to Excise Duty

Service Tax CST Customs Excise

Note: The non-creditable taxes will further reduce to the extent input tax credit is passed to the customer in case of a first/ second stage dealer


ANTI-PROFITEERINGMEASURES

12


ANTI-PROFITEERING MEASURES IN GST LAWTHAT YOU MUST KNOW

GST Law mandates reduction in prices of goods/services supplied in

case of

Reduce

Prices to

Pass

Benefit

Increased

CreditsReduced tax

rates

increased tax credits reduced tax rates|

13


THIS IS HOW YOU CAN COMPLY WITHANTI-PROFITEERING MEASURES

Basis the data shared, if you continue to earn the same profit under GST regime as is being earned the

current tax regime, sale price/ revenue may be adjusted as per the table below:

Note: The above analysis is basis the entity level details shared. It is advisable to undertake the product level analysis to identify the required price reduction in each product


Particulars Current

GST -

Profit

constant

Net Profit (66,195) (66,195)

Purchase 8,65,000 8,65,000

Non-creditable Taxes 63,695 16,548

Sales 7,60,000 7,12,853

Particulars Current

GST -

Profit

constant

Total Output Tax Liability 1,03,585 1,36,315

Total Input Tax Credit Available 1,11,915 1,61,497

Net Tax Liability (8,330) (25,182)

Overall Price Reduction Possible in GST to Earn the Same Profit 47,147

7,60,000 7,12,853

(66,195) (66,195) (2,00,000)

(1,00,000)

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000

Current GST - Profit constant

Net Profit Constant

Sales Net Profit

Linear (Sales) Linear (Sales)


GST IMPACT ON WORKING CAPITAL

15

This section highlights the impact of GST on your working capital on

account of change in ITC and output tax liability under GST regime along

with the suggested action points where additional funds are required or

there is blockage of funds on account of GST


PREPARE IN ADVANCE FOR YOUR WORKING CAPITALREQUIREMENTS UNDER GST

16©2016 Reina Consulting LLP. All Rights Reserved

• Favourable change in rate of tax vis-à-vis current tax rate

• Free flow of input tax creditsFactors Causing Positive Impact

• Unfavourable change in rate of tax vis-à-vis current tax rate

• IGST on stock transfer which are currently exempt

• Discontinuation of exemptions

Factors Causing Negative Impact

• It is critical to understand the impact of GST on your working capital so that a plan can be chalked out in

advance to fund the additional working capital requirement (if any) or release the additional funds available (if

any)

• Before analyzing the specific impact on your business’s cash flow, let’s understand the various factors

causing impact on working capital


(A) THIS IS HOW CHANGE IN INPUT TAX CREDITS (ITC) UNDER GST WILL IMPACT YOUR WORKING CAPITAL


Particulars Reference INR

ITC - Current tax regime (A) 1,11,915

ITC - GST regime (excluding ITC on stock transfer) (B) 1,61,497

Increase in ITC (C)=(B)-(A) 49,582

Period (in months) for which data is provided (D) 12

Increase in ITC per month (E)=(C)/(D) 4,075

Vendor credit period (F) -

Impact on Working Capital (G)=(E)*(F) -

No Impact on Cash Flow due to change in ITC -



(B) THIS IS HOW CHANGE IN OUTPUT TAXES UNDER GST WILL IMPACT YOUR WORKING CAPITAL


Particulars Reference

Scenario -

Revenue

Constant

Scenario

- Profit

Constant

INR INR

Output tax - Current tax regime (H) 1,03,585 1,03,585

Output tax - GST regime (excluding Output tax on stock

transfer) (I) 1,45,000 1,36,315

Increase/(Decrease) in Output tax (J)=(I)-(H) 41,415 32,730

Period (in months) for which data is provided (K) 12 12

Increase/(Decrease) in Output tax per month (L)=(J)/(K) 3,404 2,690

Customer credit period (M) - -

Impact on Working Capital (N)=(L)*(M) - -

No Impact on Cash Flow due to change in output tax -

No Impact on Cash Flow due to change in output tax -



NET IMPACT OF GST ON YOUR WORKING CAPITAL – CONCLUSION AND ACTION POINTS


Notes/ Assumptions:

- Tax payments under current tax regime are assumed to be on monthly basis

- There is enough output tax liability to set off input tax credit available on account of GST levied on stock

transfer

Particulars Reference

Scenario -

Revenue

Constant

Scenario

- Profit

Constant

INR INR

No Impact on Cash Flow due to change in ITC (A) - -

No Impact on Cash Flow due to change in output tax (B) -

No Impact on Cash Flow due to change in output tax (B) -

No Impact on Cash Flow -

No Impact on Cash Flow -

ACTION POINTS

Not Applicable as there is no impact of GST on your working capital




TO SUMMARISE, HERE ARE 5 KEY STEPS FORYOU TO BE GST READY

Obtain relevant registrations/ get yourself enrolled on GSTN

Initiate discussions with IT vendor and in-house IT team to make appropriate changes in the

IT systems to align with GST requirement

Discussion with vendors and also revisit the distribution & supply chain

Assess and implement compliance requirements

Training of teams for transitioning to GST



For any other GST related assistance, please contact us:

GSTimpact.com

Address: 448A, Enkay Square, Udyog Vihar Phase 5,

National Highway – 8, Gurugram – 122016, Haryana, India

Landline: +91 124 4309061/62

E-mail : [email protected]

Website: www.gstimpact.com

THANK YOU!


WE WISH YOU MORE SUCCESS UNDER GST…

21

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