proposal for gst readiness needhelp private...

PROPOSAL FOR GST READINESS NEEDHELP PRIVATE LIMITED

XYZ & CO CHARTERED ACCOUNTANTS

The Case Study of Need Help Limited

Need Help Limited is a Rs 25 Crore manufacturing Company with presence in three states in India. It is owned and managed by a team of three dynamic entrepreneurs who understand technology and marketing but know little about taxes. Their Finance function is headed by a senior gentleman who manages the accounting and compliance. He is not well versed in GST and is not confident enough to manage the transition.

The entity is keen on ensuring complete compliance with the new law and to ensure that they do not incur any losses on account of GST

They need your help. Advise …

You are presenting to the owners of the Company on how you can enable the entity to be GST Ready

You have a one hour time slot to explain and win the engagement

Overview

GST – A NEW LAW

FRAMEWORK

GST IMPACT AREAS

PROPOSAL

ABOUT XYZ

GST – THE NEW LAW

Goods and Services Tax

Consumption - Destination based tax

Tax levied on “Supply”

Decentralized registration

Monthly returns for each registration

Dual GST comprising

CGST + SGST for local supplies

IGST for Interstate Supplies

Exports zero rated;

Imports subject to IGST

Rate Structure finalized IG

ST

Set

Off IGST

CGST

SGST

CG

ST

Set O

ff

CGST

IGST

SG

ST

Set O

ff

SGST

IGST

May 2017

Industry

• Reduction in multiplicity of taxes

• Mitigation of cascading/ double taxation

• Development of common national market

• Liberal credit regime and continuity of credit chain

• Simpler tax regime • Fewer rates and exemptions • Conceptual clarity

(Goods vs. Services)

Government

• Simpler tax systems

• Broadening of tax base

• Improved compliance & revenue collections

• Corruption to decline

• Efficient use of resources

Objective & Benefits of GST

Majority of goods of Consumer Price

Index. This may include fruits,

vegetables, food grains, essential

medicines etc

Essential items of mass consumption used by common

people

Rate of Tax for Goods and

Services

Rate of tax for Goods and

Services

Higher rate for luxury, demerit and sin goods.

0% 5% 12% 18% 28%

RATES

Registrations

• State wise registrations and Compliances

Returns

• Returns to be filed for reach registration

Supply

• Concept of Supply is introduced

• Both goods and services are covered under Time of Supply

• Related Party supplies

Transition

• Cenvat Credit on transition defined

• Pending litigation

Threshold

• Rs 20 lakhs for registration ( Rs 10 lakhs NE States )

• Rs 50 lakhs for composition dealers

Taxes Outside GST

•Basic Customs duty•Stamp duty•Taxes and duties on electricity

•Taxes and duties on alcohol for human consumption

•Taxes and duties on petroleum products may be included within GST from a notified date

Central taxes subsumed

• Additional Duty of Customs

• Special Additional Duty of Customs

• Central Excise• Service Tax • Central Sales Tax• Central Surcharges and

Cesses related to supply of goods and services

State Taxes subsumed

• State VAT • Other state levies

such as Luxury tax, Entry tax, Purchase Tax Entertainment tax, etc

• State Surcharges and Cesses related to supply of goods and services

GST FRAMEWORK

May 2017

Levy

• Dual Tax regime of Central and State Government

• CGST + SGST on intra-state supplies

• IGST on inter-state supplies

Rate of Tax

• Slab rates proposed –Nil, 5%, 12%, 18% and 28%. Cess proposed on luxury items

• Basic Customs Duty on Imports shall continue

Exclusions

• Petroleum products, Natural Gas

• Alcohol

• Electricity

• Stamp Duty

Credits

• Cross-utilization permitted inter segoods and services

• No cross-utilization between CGST and SGST

• Input Credit has to be availed /maintained State-wise

Valuation

• Transaction value based mechanism

• No MRP valuation

• Separate rules for related party valuation

Place of Supply

• PoS Rules to determine levy/ jurisdiction

• Location of service provider/ recipient

Time of Supply

• Goods – Earlier of date of removal/ invoice/ payment

• Services – Earlier of invoice or payment

• GST payable immediately on receipt of advances

Vendor Management

• Likely tax on purchase from unregistered vendors

• Payment of taxes & filing of returns by vendors is mandatory for the Company to avail credit

GST FRAMEWORK

GST IMPACT

What will change in GST – Almost Everything

GST

Supply Chain and

Contracts

IT System

Accounting System

Pricing

Compliances

Cash flow

Rate of tax

Nature of tax –Intra-State Vs. Inter-

State

Goods Vs. Services

Place of supply Credit availability

Threshold limit

Valuation

Time of SupplyLiability to deposit

tax

Availability of exemptions

Registration requirements

Compliances and documentation

What will change in GST – Almost Everything

Financial Impact

Tax structure on sales

Particulars Existing scenario GST scenario Impact

Exports • No Duty• Zero rated sales• No GST

Sale to domestic customers within the state

• VAT @ 5% • SGST + CGST

Sale to domestic customers outside the state

• CST @ 2% or peak rate (non issuance of C-FORM) as the case may be

• IGST – 18% or 12%

Sale to EOU • Exempt • GST would be applicable

Sale to SEZ• No duties would be

applicable

• Zero rates sales• No GST would be applicable• Refund / Rebate to be claimed

Stock transfer

• Input tax credit to be reversed for stock transfer under VAT law

• No tax on Stock Transfer

• Stock Transfer to be taxed.• No requirement for ITC

reversal. • Valuation to be adopted as per

the prescribed valuation rules under GST

Arrows denotes working capital changesThumbs up/down denotes tax cost/savings

Key Changes

Building Blocks – An illustration

Component Financial Impact Accounting

System

IT System Compliance Harmonise

Optimise

Revenue cycle Tax rates Chart of Accounts Master Data and

transaction

configuration

HSN, Invoice

format, Related

Party transactions

Depot operations ,

Procurement

Cycle

CST ; larger gamut

of credits

Clearing accounts,

scheme of entries

Auto matching to

be enabled

ITC reversals and

reconciliations

Transitional stock /

credits

Sources of supply

– eg. Composition

dealers,

Inventory and

Manufacturing

locations and

related movements

Stock transfers Stock valuation Plant locations to

be configured, no

more Memo

records

Increase in scope

of movements

subject to taxation

EOU

Special Aspects Employer –

Employee

transactions

Tax on advances,

interest, penalties

e way bill to be

configured

Returns formats

and matching

Goods in stock

with non excise

invoice but ED

suffered

Time, Place and Value of Supply

Structuring an Engagement

Scope of Services

Understanding the Business and Impact Assessment

Road Map for Implementation

Implementation Assistance

May 2017

Structuring an Engagement

One Day Training Program

The Project Team

Terms of reference

Methodology

Reporting

Time Lines

Fees

Client Business

Harmonise and Optimise

GST

May 2017

Terms of Reference

Financial Impact Assessment

Accounting System and IT System Changes

Supply Chain and Review of Key Contracts

Conceptual Changes

Procedural aspects

Transition enabling – Migration and opening credits

Status of assessments and pending litigation

Modular

End to End

Reviewer

PHASE 1UNDERSTANDING THE BUSINESS AND GST IMPACT

Client Business Understanding

Understanding the Client Business comprises the following actions

Phase 1 – Knowledge of Client Business

Nature of Clients Business

Activity Locations & registrations

Procure to pay and input tax credits

Order to cash and tax pay-outs

Manufacturing / Trading processes

Outsourcing , Job work

Concessionaires, if any

Tax compliances, records and returns

Contract reviews

Financial and MIS reports review

Knowledge of

Business

Current Tax Structure

GST Overlay

Report on Changes



Phase 2 – Current tax Structure

Products / Services and taxes charged

Input taxes , credits

Reverse Charge Mechanism

Tax Collections at Source

Net Tax liability and Understanding of taxes which are pure costs

Valuation procedure where relevant

Accumulation, Recording, Documentation and Accounting entries in relation to all indirect taxes

Knowledge of

Business


GST Overlay

Report on Changes



Phase 3 – GST Overlay

Extrapolating GST to present business data

Financial Impact assessment

Business Model

Margin analysis, Cash flow planning

GST Conceptual Changes

Concept of Supply, Time of Supply , Place of Supply, Value of Supply

Compliance Aspects

Registrations , Returns , Formats of documents, payment of taxes

IT Systems

Master data, Transaction data , Incorporating formats, matching of credits

Contracts

Recommend Renegotiations and Changes

Knowledge of

Business


GST Overlay

Report on Changes



Phase 4 – Report on Changes needed

A review of the client business vis a vis the GST law will enable us to present a comprehensive overview of the following

GST impact on current business

Key Changes needed in terms of GST at a conceptual and compliance level

Knowledge of

Business


GST Overlay

Report on Changes

PHASE 2 ROAD MAP FOR IMPLEMENTATION

ACTION TRACKER – ROAD MAP

After identifying and explaining the key aspects requiring transition under the GST, XYZ will work closely with stakeholders to enable the client to harmonise and optimise taxes under GST in the most efficient and effective manner

Discussions with all department heads to explain the impact of GST and the changes that will be necessitated

Detailed tracker of all actionable items ( IT as well as non IT ) along with

Description of item

GST Champion

Process owner / operator

Nature of change

Build date

UAT date

Final go live date

Meetings with business heads, supply chain team, IT team to present results of study and to

collaborate to enable most ideal scenarios for Company’s

operations/ business divisions

PHASE 3 IMPLEMENTATION SUPPORT

IMPLEMENTATION SUPPORT

XYZ will provide hands on support to

assist in implementing necessary

systems, processes and structures to

enable GST readiness for aspects

identified and agreed in Phase II

Operational Support

IT System Implementation

Contract Modifications

Credit Optimisation

Go Live

OPERATIONAL SUPPORT

Our trained team will help in completing all relevant tasks to enable efficient and timely implementation

Standard Operating Procedure documents for GST related actions in the entire transaction life cycle

Vendor / Customer help desks to assist in queries

Identify Location, Time and Place of Supply and enable relevant tax configurations

Assistance in determining Value of Supply as needed

Assistance in transition stock / unutilised input credit balance reporting and certification

Master Data Mapping

Accounting GL mapping

Tax Code mapping

Check accuracy of tax rates configured

Assistance in registrations

Configuring report formats

CONTRACT MODIFICATIONS

Contract Reviews are necessary to ensure that no unnecessary tax obligations are carried by the entity during migration and to ensure that all taxes are optimised

Suggest deposits / penal clauses based on vendor track record / financial capabilities

Inclusion of ISD related Clause in contracts to enable distribution of credits in case of supplies to users in multiple registrations

Review of existing contracts with vendors and customers

Drafting of suitable tax clauses

Identify opportunities for renegotiation

CREDIT OPTIMISATION

XYZ will assist the client in developing systems and procedures to ensure that all credits are tracked properly and all eligible input credits are properly availed on a timely basis

Record all credits at source

Avail all eligible credits

Credit matching

Transition Credits

Movement of credits

Robust ISD system

Vendor help desk

IT SYSTEM RELATED SUPPORT

System migration is a key focus area in GST implementation. XYZ can support in defining the specifications, drafting BBP’s , and data migrations

Define all critical IT touch points

Processes for obtaining data

Accuracy and completeness of masters

Integrity of transactions processed

Reporting formats

Interfaces with Return filing utilities

GO LIVE FOR GST

The Go live phase will involve continuous monitoring and audit of systems to ensure that all deficiencies are identified and systematically rectified

User Acceptance Testing

Post implementation reviews and audits

Rectification of errors and deficiencies

Department level training initiatives to explain the new systems and processes

Enterprise wide SOP’s and revisions

Name :

Indirect tax lead

Name

Name :

Name

THE GST TEAM – S P R & CO

ABOUT US

About the Firm with focus on indirect tax capabilities

The team that will handle the engagement

CONTACT US

Address and Contact Details

proposal for gst readiness needhelp private...

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