Pwc the india

According to the GST, goods and services are finalised to be divided into four tax
slabs wiz. 5%, 12%, 18%, and 28%.
Pwc in view coa
The first level of differentiation will come in depending on whether the industry deals with
manufacturing, distributing and retailing or is providing a service.
Pwc the gst force

Benefits of gst

GST has been envisaged as a more efficient tax system, neutral

in its application and attractive in distribution. The advantages of
GST are:
 Wider tax base, necessary for lowering the tax rates
and eliminating classification disputes
 Elimination of multiplicity of taxes and their cascading
effects
 Rationalization of tax structure and simplification of
compliance procedures
 Harmonization of center and State tax administrations,
which would reduce duplication and compliance costs
 Automation of compliance procedures to reduce errors
and increase efficiency
 Ease of doing business removes cascading effect (double taxation), reduces the tax
burden on new businesses, improved logistics and faster delivery of services are some of the
positive points of the newly implemented of Goods and Services Tax (GST)
Negative impacts of GST:
 GST Rate Is Higher Than VAT: New proposed GST rates are
higher than the previous VAT rates on the goods. The price of some
goods and services will be increased after implementation of GST.

 Dual Control system: In this new GST system, the dual control
system is introduced. According to this system, the GST is divided into
two categories that were controlled by the state and central
governments.

 Some Sectors Will have Negative Impact: Some of the sectors

are having benefits of excise duty fee and no tax additions. After GST,
such sectors will face negative impacts and will face the loss as GST
tax amount.

Conclusion
The proposed GST regime is a half-hearted attempt to rationalize indirect tax structure. More than
150 countries have implemented GST. The government of India should study the GST regime set up
by various countries and also their fallouts before implementing it. At the same time, the government
should make an attempt to insulate the vast poor population of India against the likely inflation due to
implementation of GST. No doubt, GST will simplify existing indirect tax system and will help to
remove inefficiencies created by the existing current heterogeneous taxation system only if there is a
clear consensus over issues of threshold limit, revenue rate, and inclusion of petroleum products,
electricity, liquor and real estate. Until the consensus is reached, the government should resist from
implementing such regime.

On the other hand, GST will also significantly impact the

evaluation processes, since service tax was assessed by
the regulating authorities in the state where the company’s
branch was registered.

Without any doubt, GST will open up a can of worms

which will be having great impact on the small scale
businesses across various fields. It is natural for a
pervasive and a country-wide reform, as GST is given
mixed reviews. It will have acceptance that will be
varying from state to state. GST, in short have its effect
on the entire Indian economy. There is no doubt that
GST is aimed to increase the base of taxpayer, mainly in
small business into its scope and will put the burden of
rules and regulations and cost on them. Indian small
scale enterprises will be able to complete with foreign
companies.

GST transition is not only about a tax change but a complete business, finance,
accounting and reporting overhaul. As management teams start assessing
these changes, they will also need to factor in changes in financial reporting
and indirect tax accounting. In spite of initial transition challenges, GST will bring in
clarity in many areas of business including accounting and bookkeeping.
One of the biggest advantages a trader will have is that he can set off his input tax on
service with his output tax on the sale.
 Following are some key areas where companies will need to focus from
financial accounting and reporting perspective on transition to GST.

 Presentation of GST in financial statements

 Currently, accounting treatment of various indirect taxes varies

based on their nature and point of levy. Under IND AS, excise duty is
included in revenue, since it is a production-based tax. Sales tax and
VAT is not included in revenue, since it is levied at the time of sales. GST
is a destination-based tax, which is levied at the point of supply. Hence,
it is likely that revenue will not be presented including GST. This is
likely to bring significant volatility in the reported revenue number of
various companies even though from an economic perspective no
significant change in operations has happened. Companies should
consider a need for non-GAAP reporting to better explain their
performance from a revenue perspective to all their stakeholders.

 Impact of tax credit GST is likely to bring significant benefits to

organizations by way of tax credit. Currently, organizations do not get
tax credit for indirect taxes such as luxury tax, Octroi, Entry tax, CST.
On transition to GST, majority of these levies are likely to subsume in
GST and will be eligible for tax credit. It is a well-established accounting
principle that refundable taxes are not considered as part of cost of
acquisition of asset/expense and are accounted as an asset. Transition to
GST will require companies to reconfigure their inventory valuation or
asset capitalization or expense recording rules in their accounting
system to ensure tax credits are accounted appropriately in the GST
regime.

GST impact on financials

Profit & Loss Account

Reduction in raw material cost and other expenses

GST allows seamless input credits for intrastate and interstate purchases of goods. This
will mean reduction in cost of raw materials as input GST can be setoff against the
output GST payable on sales. Also GST paid on many services like legal consultation,
audit fees, engineering consultation etc. can be setoff against output GST. Previously,
input credit of service tax paid could not be adjusted against output excise/VAT.
All this will effectively bring down the expenses.
***Impact on sales may vary depending on the industry and the GST rates.
Balance Sheet
Effective cost of fixed assets will come down as input credit will be available on both capital
goods and services related to such goods like installation, inspection etc.
Tax payable and credit receivable will face changes too. There will be only three accounts under
each of them- SGST, CGST, IGST instead of maintaining current excise payable, CENVAT
credit, VAT payable, VAT credit, Service tax accounts.

The combining of Central (CGST) and state (SGST) taxes in the new tax regime, enterprises who annual
turnover of Rs 20 lakh or above (10 lakhs in some specific states) will have to follow all the GST
provisions. The new GST rule will adversely influence the SMEs working capital. Under the previous tax
regime, the exemption limit for SMEs was Rs. 5 lakhs, whereas in the new tax regime the exemption
limit is enhanced to Rs. 20 lakhs ( 10 lakhs in some specific states) which have a positive impact.

"Treatment of GST on the sale of goods is in sharp contrast to that of the excise duty. Under Ind As, the
excise duty was considered a tax on manufacture/production and was therefore treated as part of revenue
and the cost of manufactured goods, adding that when a company sells a product or service under the GST,
the tax amount collected from the customer would be excluded from the reported revenue as they are
remitted to the government in full.
..

 According to a recent research, Indians companies saw their revenues jump by about 7% after
moving to the Ind AS system. But under GST, they will again see a reduction in their top line, as GST
replaces the existing excise-duty tax based on production and will be reported net of revenues. "Although
the net income won't be affected, it surely impacts comparability including deciphering various performance
ratios such as gross and EBIT margins,"

 India moved to new standards — Ind-AS — based on global accounting system IFRS in April 2016.

Experts also point out that the compensation paid by companies to its dealers under GST will also be
treated differently now. Some companies may agree to pay compensation to its dealers on transition to GST
mainly to reimburse them for additional tax burden arising from the higher GST rate vis-à-vis VAT rate, on
unsold inventory lying with the dealers as on June 30, 2017.

Impact of GST on NBFCs in India

During the previous indirect tax regime, lending services
facilitated by NBFCs were largely exempted from the
purview of indirect taxes. There were only a few services
on which a centralised service tax was levied, irrespective
of where in India the services were rendered from. This
has changed with the implementation of the GST regime
since NBFCs are required to register their business in each
state where they offer these taxable services. Some of the
changes that NBFCs have seen with GST include:

 Under the previous regime, NBFCs were liable to pay

15 percent tax on certain services rendered, which
following the implementation of GST has risen to 18
percent.

 Before GST, NBFCs could register their business

centrally. However, with GST, they need to register in each
state where they are present.

 If NBFCs engage in the inter-state supply of services

between same entity branches, they will attract IGST.

 The number of GST returns to be filed are 37 for each

state, and 61 returns in case of ISD and TDS provision are
applicable.
Further, the implementation of GST has also increased the
billing and compliance requirements, and now
necessitates additional documentary evidence as well as
monthly compliances for multiple locations, as compared
to the indirect tax regime. However, with the GST
governance framework incorporating information
technology (IT) systems for compliance and filing returns,
NBFCs can ensure smoother workflows and quicker
reporting by automating the filing process.

On the other hand, GST will also significantly impact the

evaluation processes, since service tax was assessed by
the regulating authorities in the state where the company’s
branch was registered. Additionally, each registered
branch of the NBFC had to validate its position for the
charge-ability in the respective state and provide a reason
for utilising the input tax credit in various states.