Issues and Challanges of GST

BY:
K.PRANEETHA
RUNISHA.D.JAIN
 WHAT IS GST

 A tax charged on supply of Goods and Services or both for consideration.

 GST is a destination based consumption tax.
 GST is a value added tax to be levied on both goods and services, (except the exempted
goods and services).
 The tax will be levied on the value of the product or service supplied and not sold.

Seamless Credit
Multi Stage Tax across entire supply
Destination based
Value Added Tax chain
consumption tax
CONSTITUENTS OF GST

GST

Intra- State Inter- State

IGST
CGST SGST

Revenue will be ultimately received by the state in which goods are finally consumed
 Taxes to be subsumed under GST

Central Levies State Levies

Excise Duties including the additional

excise duties VAT/ Sales tax

Cesses in the nature of excise duty Entry tax not in lieu of octroi
/customs duty
Entertainment tax (unless levied by the local
Additional duties of customs (ie CVD and bodies)
ACD)
Subsumation of taxes Luxury tax
CST to be abolished
Taxes on lottery, betting and gambling
Service tax
Purchase tax to be
Cesses and surcharges levied by Union ie Cesses and surcharges levied by States,
subsumed
education cess etc related to supply of goods and services

• Municipal levies - likely to be out

Central GST State GST
• Stamp duty - likely to be out
4 | GST: IMPLEMENTATION CHALLENGES
Will it reduce the price of Products?
Will it reduce the cost of services?
Will it increase Government revenue?
Operational Areas to be impacted by GST- CMA’s to play significant role
Procurement
and Sourcing
Current &
Sales and
Future
marketing
investments

Human
Distribution
Resource

Accounting Logistics

Working
Product Pricing
Capital
Profitability
 Issues of GST

Problems for Small Unorganized Wholesalers

Shopkeepers Struggling with Creating Invoices and Filing Returns
How to File GST Return
Variety of Taxes Rates for Different Locations
Non-AC Restaurants Charging GST at 18% Rate
GST on Lo
Different cal (GST Exempted) Goods
Issues to be addressed with new regime
Valuation of stock transfers – market value or 110% of manufacturing cost and valuation of inter unit
Supplies

IGST on imports - to be computed on sum of transaction value & BCD (similar to computation of CVD) or
transaction value alone?

Scope & valuation provisions for transactions without consideration

Concessional Procurement rates for electricity generation

Remission of tax on supplies found deficient in quantity - reasons other than natural causes

Eligibility of credit on construction works contract for setting up business/factory/office

Scope of expression 'input tax charged to him' under definition of input tax

Clarity on timing of availment of Input tax credit

CGST Registration – whether single or State specific

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Likely challenges for tax payers
A new tax law – a whole lot of tax controversies

Transaction restructuring Transition Costing / Pricing of goods

 Transaction structuring to be  Transition of credits  Overall pricing of goods –
reviewed factoring of GST credits
 New registrations
 Procurement pattern and trading  Change in rate of taxes
models to be analysed – No  Change in contract clauses
significant difference between  Review of procurement costs
local and interstate under GST?
 Taxability of transactions
 Billing patterns, local vis-à-vis spread across regimes Compliance
inter state to be reviewed
 Treatment of tax paid  Tax computations
inventory
 New formats for invoices /
records/ returns/
Re-designing of the entire ERP declarations

Records/ Accounting  Validity of statutory form

 Current ERP is aligned as per (Form F/Form C)
 State-wise sales records
the current taxes  Manner of payment of taxes
 Credit availment and utilization
 Change in accounting  New compliance dates
records
 Re-defining the logics  Documentation for
 Updating masters movement of goods
Issues to be addressed with new regime

Determining
Determining
consumption
origin state
state

Taxing
Job-work / tolling jurisdiction in
arrangements case of chain
transactions

Taxability of Supply based Taxation of

inter-unit
taxation imports
transfers
 Admin and infrastructural preparedness

Personnel Systems Network

• Training • Alignment • Real time

needs with the coordination
new levy between
• Defining various
procedures • Proper stakeholders
and upkeep and
processes maintenance

11 | GST: IMPLEMENTATION CHALLENGES

Difference in SGST rates – likely challenges

Jurisdiction
disputes
Customer
state wise
Distortion of
SGST rates for
trade
billing
purposes
SGST rate

Tax driven
Multitude of
supply chain
audits,
planning to
investigations
continue
May impact
port of import
decisions
Likely challenges to enforcement agencies

Managing risk
of GST fraud

Role of customs
Training needs
authorities

Key
challenges

Taxation of Robust GSTN

services by and online
States compliances
Coordination
between state
& central
departments
Opportunities and challenges for CMA in GST

Opportunities
► Expansion of scope – increase in number of assesse
► Equal opportunity – evolving tax law
► Supporting business for cost effective business model
► Participation in development of Systems, process and controls
► Tax Credit reconciliations

Challenges
► Enhancement of Skills – Subject Knowledge / Presentation
► Gain visibility in organization - demonstrate passion / ownership of issue
► Build Reputation in Government - to get statutory recognition
“King must collect taxes like honey bee, it
should be enough to sustain but not too much
to destroy.”

Chanakya………
Impact Areas for Businesses

 Pricing, Costing, Margins

 Supply-chain management
 Change in IT systems
 Treatment of tax incentives
 Treatment of excluded sectors
 Transaction issues
 Tax compliance

CA. Atul Kumar Gupta 16

 Likely challenges for tax payers

A new tax law – a whole lot of tax controversies

Transaction restructuring Transition Costing / Pricing of goods

 Transaction structuring to be reviewed  Transition of credits  Overall pricing of goods – factoring of
 Procurement pattern and trading models to  New registrations GST credits
be analysed – No significant difference  Change in rate of taxes
between local and interstate under GST?  Change in contract clauses

 Billing patterns, local vis-à-vis inter state to be  Review of procurement costs

reviewed  Taxability of transactions spread across
regimes Compliance
 Treatment of tax paid inventory  Tax computations
 New formats for invoices / records/
returns/ declarations
Re-designing of the entire ERP  Validity of statutory form (Form F/Form
Records/ Accounting C)
 Current ERP is aligned as per the  Manner of payment of taxes
 State-wise sales records
current taxes
 Credit availment and utilization records  New compliance dates
 Change in accounting
 Documentation for movement of goods
 Re-defining the logics

13 | GST: IMPLEMENTATION CHALLENGES  Updating masters

 Transitional challenges

Phased transition
• Some products / sectors (petroleum, liquor) may be kept outside to begin with

Fate of investment linked incentives

• Whether the investment linked indirect tax benefits presently extended by several states would be continued under the proposed
GST regime?

Transition of opening credits

• Tax credits pertaining to the present indirect tax regime will require seamless transition

Additional tax
• Credit eligibility
• Applicability on imports

18 | GST: IMPLEMENTATION CHALLENGES

 Challenges in GST- Lesson from Present System

 Legacy issues which will use resources

 Non Harmonization of Tax rates
 Lack of automation
 Lack of Procedural Manuals
 Lack of Skilled officials
 Double Registration- Handling old Registration
 Poor Quality of tax Returns
 No System for 100% Scrutiny of Tax Returns and Tax Audit
 Lack of Cross Verifications with other tax administrations
 Lack of mechanism to control Evasion
 Impact on Prices

CA. Atul Kumar Gupta 19