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1Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Taxware is now a Sovos Compliance Company. Learn more at sovos.com

India’s GST Tax ReformWhat Businesses Need to Know

Yujin Weng – Sovos ComplianceMark Houtzager – US VAT, Inc.Host: Charles Maniace – Sovos Compliance

April 11, 2017

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2Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Your PresentersYujin Weng is a Tax Research General Counsel at Sovos Compliance, where her legal research focuses on indirect taxes and levies in Canada, Asia Pacific Region, the European Union, and California (U.S.). She has been on the Tax Research Team at Sovos Compliance since 2008.

Yujin is a member of the Massachusetts and New York Bars, has a J.D. cum laude from Boston University School of Law, an M.A. from Syracuse University, and a B.A. from Nanjing University (China). She is also fluent in Chinese.Yujin Weng

Mark Houtzager

Mark Houtzager is a New York City-based consultant and thought leader on Value-Added Tax and similar transaction taxes. Mark has 20 years of hands-on experience in supporting U.S. companies with the transaction tax impact of their non-U.S. operations. Mark is originally from the Netherlands, and worked in Europe and Asia for a Big 4 accounting firms before settling in the U.S. in 2001. In 2010 he started his own consulting firm: US VAT, Inc.

Many companies use Mark’s “Value-Added Tax” blog as their daily source of global VAT news and analysis. In addition, Mark is a sought-after speaker and trainer on VAT, and is often featured on webcasts from Bloomberg BNA and Stafford.

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3Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Agenda1. A Quick Note on VAT

2. Indirect Tax in India Today

3. Taxation Under the new GST

4. Solutioning for New Rules Using Native ERP

5. Solutioning for New Rules Using a Calculation Engine

6. Path Ahead for Sovos Clients

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4Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

A Quick Note on VAT

A simple supply chain

VAT/GST vs. U.S. sales taxes• Scope - in VAT / GST all transactions are taxable (only a few

exemptions)• “Input” tax and “output” tax; VAT / GST is collected throughout

the supply chain• Businesses reclaim all VAT / GST incurred on any cost• Retail prices are generally tax inclusive• The importance of the invoice• High rates force 100% compliance

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7Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Tax in India Today

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8Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Tax in India Today

Federal• Service Tax (14%)• Swachh Bharat Cess (0.5%) – November 15, 2015• Krishi Kalyan Cess (0.5%) – June 1, 2016

State• Intra-state: VAT on supply of goods• Inter-state: CST on supply of goods

No uniform rates Tax at origin Imports/Exports out of scope

Slide 8

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9Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GST

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10Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GST

Legislative Proceeding

• December 19, 2014: Constitutional (122’nd Amendment) Bill 2014 introduced and tabled in Lower House • May 6, 2015: Passed Lower House• August 2016: Passed Upper House + State Ratification• September 8, 2016: Presidential Assent • March 29, 2017: Lower House passed four GST Bills

Central GST (CGST) Bill Integrated GST (IGST) Bill Union Territory GST (UTGST) Bill Compensation Cess Bill

• March 31, 2017: Eight draft GST Rules and Revisions• April 6, 2017: The Taxation Laws (Amendment) Bill, 2017 passed Lower House. Aligns customs and excise

tax with GST

July 1, 2017: Projected Implementation All GST documents: http://www.cbec.gov.in/htdocs-cbec/gst

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11Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTFederal and state taxes to be replaced:

• Country Level Service Tax• Individual State VATs

Varying State VAT rates to be uniformed• Inter-State Central Sales Tax (CST)• Central Excise Duty• Import Levies other than Basic Customs Duty (BCD)

Countervailing Duty (CVD) Special Additional Duty of Customs (SAD) Education Cess

• Entry Taxes• Luxury Tax• Other Federal and State Surcharges and Cesses

The GST is a single unified tax on goods and services!

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12Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTTax Structure - Concurrent Federal (Centre) and State Jurisdictions

• Uniform tax principles• Revenue sharing

Intra-State Transactions• SGST / UTGST• CGST

Inter-State Transactions and Imports• IGST

Single Combined Rate Also applying to Import

Similar to Canada GST, HST, and QST!

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13Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTCompensation Cess

• Select “Luxury” Goods & Aerated Drinks• Up to 15%, on top of the GST• Applies for five years

Compensates states for loss of revenue arising from implementation of GST.

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14Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTRate Structure

• Four Rates 28% - Luxury goods 18% - Standard goods 12% - Standard goods 5% - Common household items

• Zero-Rating Export Special Economic Zone

• Exemption

GST Council will assign rates to specific goods and services.Essential commodities (e.g., rice, wheat) might be zero-rated.

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15Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTPlace of Supply

• Destination Principle• IGST Act

Place of Supply of Goods• “The place of supply of goods shall be the location of the goods at the time at which the

movement of goods terminates for delivery to the recipient” Section 10 of IGST Act Place of supply of goods delivered by the supplier to a person on the direction of a third

person:“It would be deemed that the third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.”

• Import Location of the importer IGST in addition to basic customs duty at the border

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16Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTPlace of Supply

Services• General Rule – Location of the Recipient

Including OIDAR Services

• Exceptions Service on Immovable Property (location of the immovable property) Admissions (location where the event is held) Transportation of goods (B2B: location of recipient; B2C: point of departure) Transportation of passengers (B2B: location of recipient; B2C: point of embarkation)

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17Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTOIDAR Services

Online Information and Database Access or Retrieval Services:

“Services whose delivery is mediated by information technology over the internet oran electronic network and the nature of which renders their supply essentiallyautomated and involving minimal human intervention and impossible to ensure inthe absence of information technology and includes electronic services such as,––

(i) advertising on the internet;(ii) providing cloud services;(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks

or internet;(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a

computer network;(v) online supplies of digital content (movies, television shows, music and the like);(vi) digital data storage; and(vii) online gaming”

Section 2 (15) of IGST Act

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18Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTInput Tax CreditsITC: A Key Advantage of GST

Uniform place of supply rule and rates across country

How ITC Works:

Hierarchy of applying IGST credit: in the order of IGST, CGST, and SGST liabilities.

Slide 18

Liability Input Tax CreditCGST CGST, IGST

SGST SGST, IGST

IGST IGST, CSST, SGST

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19Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GST

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20Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GST

http://pib.nic.in/newsite/PrintRelease.aspx?relid=148240

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21Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTRegistration Requirements

Mandatory Registration Regardless of Threshold Limit* – including but not limited to:

Persons engaged in inter-state taxable supplies Non-resident taxable persons Casual taxable persons Persons required to pay tax under reverse charge E-commerce operator Foreign supplier of B2C OIDAR services

* aggregate turnover in a financial year > twenty lakh rupees (approx. 31,000 USD)

Source: Frequently Asked Questions (FAQ) on GST (2nd Edition. March 31, 2017) http://www.cbec.gov.in/resources//htdocs-cbec/gst/faq-on-gst-second-edition.pdf

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22Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTForeign Supplier of B2C OIDAR Services

“On supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.” Section 14 of IGST Act

B2B: Reverse Charge Recipient is liable for tax on taxable supply by an unregistered supplier to a registered

recipient.

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23Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTReporting

Required Return for All Registered Taxable Persons• GSTR - 3 (monthly return)• GSTR - 1 (details of outward supplies [sale])• GSTR - 2 (details of inward supplies [purchase])

Additional Forms• Non-resident taxable person:

GSTR - 5

State Code of the Recipient Required for Inter-State Transactions• GSTR - 1 and GSTR - 2: Additional state information if place of supply (POS) differs from the state of recipient.

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24Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The New GSTReporting

Uniform Online GST Portal (the GSTN System Project)

• Registration, returns, payments, taxpayer management (e.g., e-ledgers of Cash & ITC; tax liability register), tax authority account and ledger management, etc.

• Invoice matching required for ITC B2B: Required fields of all invoices must be uploaded B2C: Required fields of all inter-state invoices of value more than Rs.2.5 lacs must be

uploaded

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25Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Solutions in Native ERP

B2V Reform

The role of the accounting system / ERP - 1Recording transactions

• Accounts Payable• Accounts Receivable• Inter-company, intra-company (warehouse movements)• Outside the GL: travel expenses (Concur), e-

procurement, POS systemsReporting

• Authorities• Self-billing• Management, stakeholders

The role of the accounting system / ERP - 2Auditing

• Reconciliations of filings prior to submissions• Internal; auditing• External audits incl. tax audits

Forecasting, • Identify trends, cash requirements

Data management• Big data• Regulatory issues

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28Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Solutions with Calculation Engines

B2V Reform

Tax calculations• Bill-from, bill-to (sell-from and sell-to)• Ship-from, ship-to• Customer status, VAT / GST identification number• Place of supply determines tax treatment• Rates• Also: invoicing requirements

Tax calculations within an accounting system

Maintenance of rates and requirements• Rate changes, and changes in the list of supplies subject to

reduced or luxury rates• Changes in law, practices, regulations that affect the place of

supply• VAT / GST identification numbers must be correct and updated

Tax calculations with a “bolt-on”• It is not about the calculation itself!• Ease of maintenance

• Rates, laws etc.• Extended reporting capabilities

• ”Dashboard functionality”, daily/weekly or live error reporting (thresholds!)

• Let the bolt-on guide you, but make sure to understand the bolt-on’s capabilities and applications

How to prep for India GST - 1Most important: Map all relevant transactions

• Domestic, including inter-State• Imports• Exports• Services!• Transitional transactions, think on-going sales, signed but

not executed contracts etc.You will be UNABLE to go live if you don’t have a detailed overview

How to prep for India GST - 2• “Lift-and-shift” does not work – each transaction type needs to

be individually reviewed and labeled for GST• Invoicing• Reporting• Feeder systems, like e-procurement• Vendor / customer tax number verification• Training

• Finance / accounting, incl. AP and AR clerks• Business development, invoicing• Procurement

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34Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

The Path Ahead for Sovos Clients

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The Path Ahead for Sovos Clients

Early System Testing for Clients

• Standard content changes in Taxware Enterprise (TWE) to support the GST will be initiated in early May to allow for advance testing Changes will be date sensitive

• Further content changes to closely follow release of further details by the GST Council e.g., specific product rates

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36Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.

Questions?