CMA A. B. Nawal

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No sooner political hurdles were out and consensus amongst the political party reach in the Rajya Sabha, 122nd Constitutional Amendment Bill,16 states have immediately ratified 122nd Constitutional Amendment Bill and thereafter subsequent steps and actions, which has been taken by the Central Govt. really shows the seriousness and commitments to implement GST on the committed day, which can be seen from the following sequence of events:

  • Assent by Hon. President of India
  • Constitution (101st) Amendment Act, 2016 (incorporating provisions of 122nd Constitution amendment Bill) already notified on 8th September 2016
  • GST Council already notified w.e.f. 12th September 2016
  • Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19 and 20 of the Constitution (101st) Amendment Act, 2016 has come into the force w.e.f. 16.09.2016
  • First meeting of GST Council on 21st & 22nd Sept 2016, wherein threshold limit & issues of dual control has been finalised
  • Second Meeting scheduled on 30th September 2016 and subsequent meeting is scheduled on 16th & 17th October 2016.
  • Draft Rules for registration, invoicing, payment, refund and Returns put on public domain
  • Draft provisions for Tax Return Preparer put on the public domain

The sequence is on the legal framework and Central Govt., Department of Revenue and Empowered Committee of Finance Ministers have already completed their rounds of their discussions with all the stake holders from 16th August to 30th Sept. 2016 and all states are also following the same foot-steps. Further Department of Revenue have trained 350 master trainers and such 350 master trainers are continuously giving the training to Central Govt. and State Govt. officers.

diwali-special-wirc-e-billetion-on-gst

As far as infrastructure is concerned, there is a continuous monitoring from Hon. Finance Minister Arun Jaitely and PMO for creating the infrastructure through GSTN and Infosys. Further, Hon. Minister Nitin Gadkari have already announced to invest Rs. 4000/- Cr for revamping the check post for installation of scanners to avoid the transit delay and checking.

The commitment and schedule given by GSTN is as follows:

” Development of GST Frontend and Backend for 17 States by GSTN: End December 2016

” CBEC’s Backend systems: End November 2016

” Backend systems of 14 States: End November 2016

” Backend systems of Pr. CCA, Banks, RBI & State accounting authorities: End November 2016

” Testing and integration of GST Front end and backend of all stakeholders : Jan – March 2017

In other words, as far as preparedness in concerned from the Central Govt. and State Govt., they are committed to implement GST w.e.f. 1st April 2017. Now,time has come to introspect whether Trade and Industries are getting ready / prepared to implement most awaited Tax reforms after freedom.However, it seems that now trade & industries will have to make up the speed and get prepared for welcoming new tax reform, which is called as “Game Changer”.

Why “Game Changer”?

  • Single Tax with the same provisions as against Multiple Acts & Compliances and Returns
  • Different Valuation basis
  • Different Adjudications
  • No ambiguity under GST as against prevailing Service Tax & VAT in case of

✔ Restaurant Services
✔ Works Contract
✔ Right to use of Movable goods
✔ Software
o IPR

  • No ambiguity under GST as against prevailing Excise& Service tax for

✔ Drawings and Designs
✔ Software
✔ Commissioning & Installation

  • Change in Taxable Event in case of Excise:Taxable Event is Manufacture/ Deemed Manufacture now will be
    “SUPPLY”
  • Different Valuation Mechanism:Production Capacity/ Transaction Value/ MRP in Excise and now same Valuation for CGST & SGST or IGST
  • Same Exemptions for CGST & SGST or IGST as against different exemptions in Absolute &Conditional in VAT
    and Excise
  • No Duty Exemption Zone – Uttaranchal/ Himachal Pradesh / J&K/ N&E
  • Change in definition of services, place of supply, time of supply and valuation
  • One Nation, One Tax.

In the GST regime, there will be no tax on tax or cascading effect and hence following taxes were part of the cost of production and cost of services and thereby there was increase in pricing level, whereas prices will go down in the GST regime for the following reasons:

Cascading effect of taxes:

  • Tax on Tax
  • SAD to Service Provider
  • VAT Credit to Service Provider
  • VAT Retention for Stock Transfer and less credit for capital goods
  • Cenvat Credit on Input Services to Trader
  • Central Sales Tax
  • Entry Tax
  • Purchase Tax

In view of the above, the prices will come down and there will be less inflation provided all the stake holders pass the benefits which will reach to the ultimate consumer and that will be a real contribution for the nation building.

Steps to Implement GST by Trade and Industries:

A. Understanding of Business Transactions in the changed scenario to find out the impact of GST:

B. Classification of the transactions into specified w.r.t. Goods & Service & Place of provisions.

C. Understanding of Flow Chart for enabling the change in business strategies with GST perspective:

i. Organization

ii. Material Movement – Prior manufacturing

iii. Material Movement – During manufacturing or for other purpose.

iv. Distribution Pattern – Post manufacturing

D. Understanding functions of each Department at Macro & Micro level to assess the GST impact on their transactions and mapping them with existing Business Model.

E. Understanding of warehousing & logistic model including depot, branches, stock level thereof for GST impact and restructuring thereof with the perspective of GST.

F. Understanding distribution patterns till ultimate sale to consumer for GST impact and restructuring thereof.

G. Understanding of suppliers – nature of goods, place of supply & present contractual terms for GST impact and restructuring thereof and benchmark the new rates in GST.

H. Understanding service providers including contractors & contractual terms and place of supply for GST impact and restructuring there of and benchmark the new rates in GST.

I. Understanding of sales policy including schemes, discounts, return of goods for GST impact and restructuring thereof for changing the sales promotion and marketing strategies.

J. Crafting Business Strategies

i. Analyzing function wise GST leakages & liabilities form the existing business strategy.

ii. Finalizing new business strategies and continuous consultation with GST Core Group of the company (multifunction team).

K. Contract Review

i. Finalizingrevised terms & conditions in GST regime

ii. Finalizingamendment to the present POs during transition period

iii. Probable reduction in purchase price: A-Class vendors

L. Transaction Restructuring w.r.t. existing ERP & proposed ERP with interface through GSTN

M. Developing SOPs in each function of the Department including GST compliance

i. Finalizing Accounting Control for Tax Compliance and Tax Management.

ii. Mapping Transactions to ERP System.

N. Preparedness for Transitional Period so as to avail transitional credit and not to lose any ITC (Cenvat Credit)z

O. Continuous Training at all levels.

i. Senior Level Team for decision making

ii. Middle Management for implementation

iii. Lower Management & Operating Team for documentation and compliances.

It is advisable to do all activities as mentioned above then only it can be stated Trade and Industry is also prepared not only to implement GST but reap the benefits of GST, which will enhance 1.5% growth of GDP and contribute to the nation building.

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cma-harshad-deshpandeWe would like to thank CMA Harshad Deshpande, who is also the Chief Editor of WIRC Bulletin, ICAI, for his effort to make the content on GST available to larger section of people and for dissemination of knowledge on the topic , which is of prime importance  not only for the taxpayers but also for common man of the Country.

Article been published with permission from CMA Harshad Deshpande given on behalf of Western India Regional Council of India of The Institute of Cost Accountants of India.

Source- WIRC Bulletin Diwali Special Edition on GST

New GST Rate on Goods

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