Indian

Taxation is

COMPLEX

243
Hours per
year doing
taxes

30+
Number of
payments

158
Indias rank for
ease in tax
payment

Source : World Bank

The biggest tax

reform since 1947

GST

Subsume
indirect tax
levies
Integrate state
economies

Boost to GDP
Growth

Opportunity to reimagine
a SIMPLE and
Enterprise

One view on
compliance

Transparency

DIGITAL

Speed

Remove
Redundancy

Endless POSSIBILITIES
Revamp a cumbersome & distributed process
Purchase Order
Deliverables
Invoice

Buyer

Pay

Seller
Sellers
Calculate, Aggregate and
Remit taxes

Tax
Authority

Pre-requisites patch level for GST Implementation

Tax Procedure
TAXINN

Minimum Support Pack level

SAP Note no 1175384

GST Timelines
Milestones
Lok Sabha passes GST bill

Timeline

Rajya Sabha passes GST bill

Aug, 2015

Ratification by not less than 15 states

Dec, 2015

Formation of GST council

Jan, 2016

Enactment of GST laws

Mar Dec, 2016

What is Changing?
Overseas
vendor

Outside India

Overseas
service
provider

BCD,BCD,
CVD,IGST
ACD

Service tax
IGST

India
Vendor

Excise
duty, VAT
CGST
, SGST

Non-Creditable taxes
Creditable taxes
Customer

Excise
CGST

Manufacturer

State A
State B
Vendor

VAT
SGST

Institution

Service
tax
CGST
, SGST
SerIvGicSeTta
x

Service
Provider

Service
Provider

Customer

Input tax credit under GST

Illustrative list of Input tax credits currently not available (that might be
available under GST):

Credit on inter state purchases/supply of goods

Burnouts on stock transfers and negative list of goods under each state

Service tax credit on freight from the place of removal to the customer and
other service tax credits currently not available
Excise credits for all business purchase expenses viz. Sales promotion
items, gifts, etc
Luxury tax paid in Hotels
Service tax credits on trading of goods

CVD and SAD on imported goods procured for trading of goods/sales

promotion
Tax credits on purchase of hardware and software

Treatment of additional tax proposed on inter-state

transactions

States allowed to collect additional tax (not exceeding 1%) on supply of goods in
course of inter state trade

No clarity on availability of input tax credit as well as mechanism for this

additional tax
Honble Finance Minister in Lok Sabha has assured that 1% additional tax
levied in the course of interstate supply of goods shall have no cascading effect
Additional tax will have to be captured separately at each state level

Structure of GST
Dual GST Levy :

Within the state Supply of Goods & Services :

GST = CGST + S GST

Integrated GST ( I-GST on Imports & Interstate Supply of Goods & Services :
To be levied by the Central Govt. .

1. IGST = C GST + S GST

2. Paid in the state of Origin and passed on to Destination
State through Clearing House Mechanism .

1% Non Creditable Additional

tax would be levied on
interstate Supply of Goods
only

Levied, collected & Retained by the Origin state ,

for first two years only .
Adverse Impact on Purchase Costs & Selling
prices for first two years .

Input tax credit under GST

CGST:

SGST:

Central Excise Duty

VAT / Sales tax

Additional Excise Duties

Excise Duty levied under the Medicinal

and Toiletries Preparation Act
Service Tax

Entertainment tax (unless it is levied by

the local bodies).
Purchase tax

Luxury tax

Additional Customs Duty - (CVD)

Taxes on lottery, betting and gambling

Special Additional Duty of Customs - 4%

(SAD)
Surcharges and Cesses

Octroi and Entry Tax

State Cesses and Surcharges in so far as

they relate to supply of goods and
services

Centre would levy IGST which would be CGST plus SGST on all inter-State
transactions of supply of taxable goods and services

Input tax credit under GST

Transaction
Purchase of
Goods
Receipt of
Services
Imports

Intra State

Inter State

CGST+SGST

IGST

CGST+SGST

IGST

IGST

Separate accounts for each state need to be maintained for CGST,

SGST and IGST credits received

Input tax credit under GST

Credit of

Can be utilized against

Liability of

CGST

CGST and IGST

SGST

SGST and IGST

IGST

IGST,CGST and SGST

Cross utilization between SGST of one state and SGST of another state not
allowed
Credit of taxes paid on petroleum products not available (since it is not a part
of GST)

Refund/adjustment in case of exports, purchase of capital goods, inverted duty

structure on output tax to be completed in timely manner

Present Tax
Present Indirect Tax (Excise/VAT) System in India
Foreign
V1

Imports
Custom Duty +
CVD+ SAD

Export
0% ED/CST

Foreign
Customer

Transfer
ED+0% CST

Depot
B

Local
Sales
VAT

Interstate
Sales
2% CST
C Form

Dealer
B

Local
Sales
VAT

Local Sale
VAT

Dealer
A

Local
Sales
VAT

CST
V

VAT

Outside
V2

Inter-state
Sales
(ED + 2% CST
(Tax on Tax)

State
A
MFR
(Goods )
Taxation

CST
Local
V3

VAT

Local Sales
ED + VAT
(Tax on Tax)

Customer

Customer

Customer

Tax Register - Proposed Solution

Proposed Indirect Tax (GST) System in India (C-GST & S-GST)
Outside
India V1

Imports
Custom Duty +
( I GST)

I GST

GST

Outside
V2

Inter-state Supply
IGST (C+S-GST)

State
A
MFR.
On
Supply
of
Goods &
Services

Export
0% GST

Foreign
Customer

Inter-state
Supply of
goods
IGST

Depot
B

Local
Supply
CGST +
SGST

Customer
B

Dealer
B

Local
Supply
CGST +
IGST

Customer
B

Dealer
A

Local
Supply
CGST +
SGST

Customer
A

Non Creditable 1%
Additional Tax on
interstate Supplies

Interstate
supply

IGST
(CST+SGST
)

I GST

Local
V3

C&S
GST

Local Supply
(CGST + SGST)

Local
Supply
CGST +
SGST

How to take Credit

Seamless Flow of Credits in a Supply Chain
20% GST = 10% C GST + 10% S GST ( Within the state Supply ) , 20% I GST = 10% CGST +
10% S GST (Interstate Supply + Imports )

State A
Vendor

( IGST)

State
B

State
C

1% Addl.
Tax

150 + 30
IGST

( I GST)

Dealer
State
D

MFR - 2

MFR - 1
1%
Add
Tax

1OO + 20
IGST

( IGST)

Customer
State D
(GST)

Consuming
State

1% Addl
Tax

200 + 40 I
GST

Transfers of Credits to receiving states by Clearing House

1% Non creditable Additional Tax on Interstate Supply of Goods

220 + 44
GST

220 + 44

Finally , the
State D gets the S
GST Revenue

Exports

GST & Exports

Vendor 1

Vendor 2

Imports ( I GST)

Interstate Supply (I GST)

Exports

Exporter
0% GST

Vendor 3

Local Supply (GST)

Foreign
Customer
Outside
India

TAX Invoice
GST Tax Invoice
Invoice No. (Serially Numbered)

Date

01 04 2016

Name (Local Buyer) : Mahindra & Mahindra Ltd.

Address : Kandivli (East), Mumbai
GST TIN (Tax Payer Identification Number of both Seller & Buyer)

Sale of Goods ( Auto Parts )

Rs.

Net Supply Price.

Freight .
20% GST

100.00
05.00

Net Taxable T.O. ..

105.00

10% C GST

10.50

---------------------------------

10% S GST ---------------------------------

10.50

Total -------------

126.00

Specific Requirements as per the State C S GST Acts.

Like Certificate, Time of sale, Name & Address of Printer etc.
Authorized Signatory

Maximise Input Tax Credit Availment (under GST)

Identify the tax cost (with respect to taxes that are supposed to merged into GST)
in the profit and loss account and start capturing the same so as to enable the
business to understand the impact of GST

Identify the existing contracts/POs wherein contracts will have to be renegotiated

on account of availability of the input tax credit to the vendor as well as the
Company and include clauses for facilitation of renegotiating on implementation of
GST

Review the current operations/distribution models and evaluate the need for any
changes in the operation/distribution models on account of :
Availability of full credit under GST system; and
Impact of additional tax payable on the supply of goods in course of inter state trade

Input Tax Credit Utilization - Solution Approach

Configuration Approach

Each GSTN registration to be created as a Business

Place

Each Tax Component (CGST, SGST etc.) to be

configured as Transaction Key

GL accounts can configured for each GST Registration &

Tax Component
i.e. Business Place & Transaction
Key

Goals

Tax Credit can be accumulated

at each registration by tax
component

Utilization Transaction

New Transaction to perform utilization

Comparison of tax credits available vs. payables by GL

Account aggregation

To enable control &

transparency in utilization

GSTN Portal

Manufacturers/ Consumers
will download data from
the GSTN Portal.
Suppliers will upload their Sales Data
Mico
Lucas TVs
MRF Tyres

Mahindras
Tata Motors
Ashok Leyland

GSTN Portal

Suppliers will upload their Sales Data

which will contain the following
information

Sellers GSTIN - Buyers GSTIN

Suppliers will upload their Sales Data

Manufacturers/ Consumers
will download data from the
GSTN Portal

Sellers Invoice No:

Invoice Date:
Business Place:
Product Category: HSN/SAC Code
Gross Value :
GST Value:

GSTN Portal

Buyers will download the data from the

GSTN Portal
Match the same with the receipt data in
their systems.
Identify exceptions Invoice in GSTN not
in ERP
Goods in Transit
Value Mismatch
Material not Received

Suppliers will upload their Sales Data

Manufacturers/ Consumers
will download data from the
GSTN Portal

Identify exceptions Invoice in ERP not in

GSTN.
Material received not uploaded by
supplier.
Upload the exceptions on to the GSTN
Portal. (Unregistered Suppliers)

Features by SAP

Features by SAP
Discrepant Invoices Value Mismatch
Missing in GSTN
Missing in ERP
Facility to trigger an Email to the
supplier

Suppliers will upload their Sales Data

Manufacturers/ Consumers
will download data from the
PSTN Portal

Assumptions

Assumptions
GSTN Authorities will provide
Standard API will be provided for
upload download of data, between

ERP & GSTN Portal

System will be capable to manage the
humongous volumes
Suppliers will upload their Sales Data

Manufacturers/ Consumers
will download data from the
GSTN Portal

Compute power of Hana will ease

transactions at both ends.

GSTN Process - Registration

GST Registration Process
PAN based single
registration for CGST, SGST &
IGST
Per State registration Different verticals of one
business may obtain separate
registration
Existing Taxpayers Transition
system for migration
Registration for each premises
in a State not required
Addition of place of business
under each registration allowed
Transfer of credit to another
unit in a different State not
allowed

GSTN Common Portal

Common interface between
Taxpayers & Tax Authorities where
Taxpayers can fill up the online
GST Registration form
Upon submission of the GST
registration application online at
the portal, information would be
shared with the State & Central
Tax Authority for their approval
Once the registration application is
approved by both Registration
Certificate (GSTIN) will be
issued online at the GST
Common Portal

GSTN Process - Returns

GST Returns Process
Unified return form for all
States/ One Return for CGST,
SGST & IGST
All returns to be electronic
Return expected to be Monthly
(Quarterly for compounding
dealers)/ Annual
All details of sale (invoice wise)
to be submitted, purchase
details to be populated from
sales of counterparty dealers
State specific return as State
unit is an independent unit
IGST assessment by State where
return is filed

GSTN Common Portal

Interface for GST registered
taxpayers to upload their invoice
level sales details by a specified
cut-off date
Based on the sales details
uploaded by the supplier, GSTN
Common Portal would auto-draft
the purchase statement of the
counterparty purchaser on a near
real time basis

Draft return of a taxpayer to be

generated at the Common Portal
after sales-purchase details are
captured

GSTN Process - Payments

GST Payments Process
Standardized single challan
for CGST, SGST and IGST
Different accounting codes
for various types of transactions
Mode of payment of tax can be
online or offline (OTC)
Tax to be paid prior to filing
GST return
Tax to be paid wherever supply
takes place
SGST to go automatically to the
State of taxpayer as per
registration
Frequency of tax payment as
per return

GSTN Common Portal

Taxpayers would be able to
calculate their tax liability and
make online payments
Based on draft return, taxpayer
can prepare challan at the common
portal, pay due tax online through
banking system before filing the
GST return
Electronic challan generation
at the portal mandatory in case
of manual payments (OTC) as well
All Banks authorized by RBI to
be available on GSTN Common
Portal

GSTN Process - ITC Mechanism & IGST Settlement

GST Cross Credit Utilization
CGST/ SGST/ IGST credit can
be utilized for offsetting
liability against same heads
in that order
CGST/ SGST credit available
after offsetting respective
liability to offset IGST liability
Credit of CGST cannot be used
to offset SGST liability viceversa
Credit of IGST available after
offsetting IGST liability to offset
CGST/ SGST liability (in order)
IGST on Imports: as per
return (not like customs duty)

GSTN Common Portal

To provide Dealer Ledger to
view consolidated summary of
their tax liability, payment history,
ITC entitlement and utilization (set
off against tax liability), refunds
anytime on any device

Invoice matching &

communication on discrepancy
Credit Reversal of unmatched
transactions in the next return
Calculation of IGST Settlement
amount based on cross-utilization
of credit by dealers
Intimation of successful
settlement to tax authorities

GSTN Ecosystem
Integration of existing IT systems with GSTN
GSTN IT
System

Tax Authority

Centre/
State
Tax
System

Interface File/ API

CTD
Officer

Centre/
State Tax
Database
Accounting
Agencies &
Treasuries

Interface File/ API

Taxpayer

GSTN
Common

Portal

Interface File/ API

GSTN
Database
Network
of Banks
& RBI

Rate of GST- Across the Globe

Rates of GST in other countries are:

FM has assure that the rate of GST will be less

than the speculated rate of 27%

Comment:
The present indirect tax levy
on goods is: 12.5% (Excise
Duty) + 14% (VAT)

Rate of GST Concessions/incentives

What would happen to current incentives:
State incentives:
- Area based exemptions

- VAT deferment schemes

Central incentives:
- Product specific concessions
- Area based incentives

Place of supply rules and credit

Distribution of accumulated credit at
corporate office?
Head office would incur standard costs and
accumulate input credit
HO might have Nil or marginal output tax
liability
Credit utilization dependent on seller
declaration?
Auto-drafting of purchase statement of a dealer
from the invoice based sales details uploaded by
the counterparty dealers
Credit on Businesses indirect spends by
employees?

Transition provisions
Refund, not credit Accumulated credit at the
cut off date cannot be carried forward
- Input and input services - CENAVT
- Capital goods CENVAT and VAT
- VAT credit
Defer capital expenditure/purchases
Treatment of Way-Bill/ C-Form/
Checkposts
Treatment of Existing Area based
Exemptions/ Benefits under State
Industrial Policy

Dual Assessment for the Taxpayer?

GST: Areas of Impact in SAP System

Tax Registration

Define GST Registration levels

Master Data Maintenance

Business Partner Tax Data, GST Accounts

Tax Configuration & Computation

Configure Tax and Pricing procedures; Tax computation

Document Numbering

Outgoing Invoice Numbering

Business Process Localization

Extend Support to currently localized Business Processes

GST Tax Postings

GST Input and Output Tax postings

Utilization

Input tax credit utilization against payable for GST Taxes

Reporting

Tax Register

Tax Registration

GSTIN GST Identification number

Single registration for CGST, SGST and IGST
Individual registration to be obtained in each
state of business establishment
PAN based registration number Up to 15
characters in length

Tax Registration - Proposed Solution

Capture GST registration at Business Place level

Master Data Maintenance

Business Partner Tax Data
GST reg. no. to be captured for each Registered
Customer and Vendor

GST Tax Accounts

Separate tax A/P and A/R accumulation might be
required at GST registration level
To be defined for CGST, SGST and IGST
separately

Vendor GST Registration- Proposed Solution

Customer GST Registration- Proposed Solution

Tax Account - Proposed Solution

Business Place based G/L account determination Both for MM and SD

Tax Configuration and Computation

Intra-state transactions
CGST and SGST applicable
Inter-state/Import transactions
IGST applicable
Export Transactions
Zero rated
Region level rate variations may exist
New condition types/access sequences and
account determination

Tax Configuration and Computation- Proposed Solution

Tax Procedure New Condition Types

Tax Configuration and Computation- Proposed Solution

SD Pricing Procedure New Condition Types

Tax Configuration and Computation- Proposed Solution

SD Access Sequence

Tax Configuration and Computation- Proposed Solution

MM Access Sequence

Document Numbering
Unique sequential numbering for outgoing GST invoices
Criteria for legal numbering may be specified by govt.
It could be for example:
Registration level
Document type (Invoice / Credit Memo)
A combination of above

Document Numbering- Proposed Solution

Maintain Document Class

Document Numbering- Proposed Solution

Assign Document class to Document Types

Document Numbering- Proposed Solution

Assign Number Range to Business Place

Business Process Localization

Sales Processes
Procurement Processes
Stock Transfers
Subcontracting
Others

Sales - Proposed Solution

Sales Order

Sales - Proposed Solution

Billing Document (A/R)

Procurement - Proposed Solution

Purchase Order

Procurement - Proposed Solution

Vendor Invoice (A/P)

Stock Transfers - Proposed Solution

Purchase Order

Stock Transfers - Proposed Solution

Replenishment Delivery from sending plant

Stock Transfers - Proposed Solution

Outgoing GST Invoice
Consideration Value for tax calculation.
Will it be a pure tax Document? Example:

OR, Will it be a GST Invoice with an account receivable? Example:

Stock Transfers - Proposed Solution

Goods Receipt at receiving plant

Stock Transfers - Proposed Solution

Incoming GST Invoice
Consideration Value for tax calculation.
Will it be a pure tax Document? Example:

OR, Will it be a GST Invoice with an account receivable? Example:

Subcontracting - Proposed Solution

Purchase Order

Subcontracting - Proposed Solution

Purchase Order - Components

Subcontracting - Proposed Solution

Purchase Order - Taxes

Subcontracting - Proposed Solution

Transfer Posting

Subcontracting - Proposed Solution

Outgoing GST Invoice
Consideration Value for tax calculation.
Will it be a pure tax Document? Example:

OR, Will it be a GST Invoice with an account receivable? Example:

Subcontracting - Proposed Solution

Goods Receipt

Subcontracting - Proposed Solution

Incoming GST Invoice
Consideration Value for tax calculation.
Will it be a pure tax Document? Example:

OR, Will it be a GST invoice with an account payable? Example:

GST Tax Postings

Separate accumulation of credit and payables for
CGST
SGST
IGST
Separate accumulation at Registration level
Automatic Tax posting to respective accounts from
business processes

GST Tax Postings - Proposed Solution

Billing (A/R) Accounting Document

GST Tax Postings - Proposed Solution

Vendor Invoice (A/P) Accounting Document

Utilization
Utilization of Input tax credit would be as under
Input CGST to be utilized against output CGST
and IGST
Input SGST to be utilized against output SGST
and IGST
Input IGST to be utilized against output IGST,
CGST and SGST in the order of IGST, CGST and
SGST

Input

Output

Utilization - Proposed Solution

New Utilization program to handle GST credit utilization

Utilization - Proposed Solution

Cross Utilization as per GST rules

Reporting

Tax register
CGST
SGST
IGST

Registration level segregation

Tax Register - Proposed Solution

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