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Contents Preparation for GST and Re- engineering Business Processes Evolution of tax structure in India Benefits of GST Impact on operations Four fold approach Integrated supply chain Pricing, Tax management Accounting and IT system Action plan
High
Simplicity
Moderate
Prior to 2005
2005
2010
Compliance
Low Moderate High
Benefits of GST
Government:
Consolidation of multiple Centre & State taxes Increased tax collection on wider tax base Effective administration
Business:
Reduction in cascading effect of tax on tax Reduction in effective tax rate on goods & services Ease of compliance Economies of scale
Consumer:
Reduction in incidence of tax on goods / services Benefits of scale & tax to manufacturers/service providers pass on
Sourcing
Manufacturing
Distribution
Sales
Thus GST Presents Both Pricing Accounting / ERP to be Challenges andBIA Opportunities System to be GST Efficient GST compatible To Re-Engineer Business Processes & Operations transfers Alignment within business Stock
Training to all stake holders Extract all eligible ITCs Fiscal compliance
Challenges
- Greater Transprancy for mutual advantage - Global benchmarking - Develop & levrage local suplliers
Opportunities
- Capture all elegible ITC - Skin out credit from supplier price - Align and interface document flow PCP/PO/Inv.. - Capture Source and Destination at PO stage - Sourcing from registered suppliers only Sourcing - Correction of purchases transactions thru issue of back to back Debit / Credit note - Purchase details with state cut directly from ERP - with Optisuite enabler - Re-look at works contract / conversion contracts - Document flow - Stock holding points and stk levels - Star Vendors - Standardize distribution for all Imports - Process aligned Master Data Base
Concept of manufacture will be irrelevant New challenges from single point to multi point taxation. All goods would attract GST at every value addition point Evaluate forces which impact supply chain - Some intrinsic to the organisation [value addition] Some market specific Some fiscal in nature Influence of differential tax based on geographical locations will continue for some time (fiscal incentives) Transition from origin based to a destination based tax regime. [ Tax on Consumption ]
Challenges
Economies of Scale v/s Refund Central mfg > interstate trf > higher refund etc Capturing tax liability at the point of every transaction / interstate movement Exemptions to be phased out; business to explore new avenues for cost savings STO = STI -
Opportunities
New challenges arising from single point tax to multiple point Import of FG v/s mfg inhouse In house manufacturing v/s contract / Job work manufacturing w/c & admin cost , documentation
Manufacturing -
Challenges
Opportunities
Distribution
- Hub & Spoke arrangement to be reviewed in - Avoid multiple stocking points; consolidate line with GST distribution centres - Infrastructure at depots and stocking points Re-look at Frt negotiations and agreements : need revamp. - Large transport operaters v/s local players - Valuation of goods for movement of FG on - APO model to be modified to consider " Stock transfer. Service From Any where"
(Advance Planning Optimizer)
Challenges
Sales Stock transfer - Impact on WC Compress Distribution network Re-look Depot / RS documentation and agreements GT/MT/CSD to analyse and work on merits of individual channel Challenges wrt Price Inc / Drop & transitional issues. Evaluate Business impact on all categories and businesses: action plans to address them. Appropriate pricing decision
Opportunities
- Reginal deposts in place of state depots - Challenge to consolidate various RS points - Leverage Direct Dispatch across the states - Set off of GST on distributions, sales & marketing spends.
Product Mix
Can change based on result of above two factors and market demand
Fiscal compliance
Full compliance to be driven through collective responsibility Build in-house competencies and expertise
- Statutory reporting
- Build enablers to facilitate reporting and compliance - Reconciliation of monthly and annual returns with financial ledger - Statewise accounting and trading account
Challenges
Opportunities
- All operations need to be integrated into ERP - Statutory reporting from ERP - Work with SAP to develop specifc req for - Single data base for financial & statutory capturing and reporting of purchase and sale returns; system to generate returns data. - Tracking and settlement of credit in inter-state - Fiscal compliance to be made easy; to be a movement - a challenge collective responsibility. - CGST & SGST on each transaction to be - Masters (Product/Price/A/c to be aligned in accounted separately with linkage to state of line with all India basis origin &state of destination/consumption - System to consolidate tax / set-off & determine of tax liability - Enhance payment tool ( Ariba ) capability to handle complexity
Accounting
- Reconciliation of monthly and annual returns - Full setoff on entity basis: a big opportunity with financial ledger - Automation & interlocks in ITC
Discuss with SAP Discussion internally with IT and functional team, Discussed with industry to get insight to the Basic Structure changes required to align existing ERP to GST scenario
eg Changes required to ERP Architecture to capture Dual Tax Capture , Source Destination information State wise ledger Simultaneous run of GST & current system
Develop wrt transaction system e.g. on Sourcing Model, Sales Pricing, Current Excise, capture SGST & CGST separately etc.
Develop Obtisuite ( new application SAP supported) to collate and report SGST/CGST data, state trading account to be developed. ( Its SAP R3 enabled application and recognized by SAP)
Preparation of Accounting SOP
Action Plan
People
Core team of cross functions in place to drive GST implementation Cascade learnings to operation groups and stake holders
Systems
Engagement with SAP team for smooth changeover Build industry consensus on acceptable format & escalate the same to the policy makers Identify areas/processes requiring change; support operating groups for implementation Prepare for complications arising out of partial implementation of GST in the country
Engagement with Govt. to ensure concessional GST rates on foods portfolio Redressal of issues arising out of GST (e.g. GST on inter-state stock transfers)
Business
Examine touch points for various business functions to leverage on GST Examine financial impact on the company, top-down exercise considering different business scenarios awaiting announcement of GST rules and final structure
Thank you !