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Analyse How will GST Impact

your Business?

Analyse How will GST


Impact Your Business?
Introduction
Every organization is very eager to know the impact on
his business on account of levy of GST. The impact can be
Analyse
will GST Impact
divided into two
partsHow
namely
Financial

your Business? Analyse How will GST


Impact
your Business?

Procedural
Financial Impact of GST the financial impact arises on
account ofsubsuming of tax into GSTand the availability of
credit on some of the taxes which was not available earlier.
The credit of Octroi, Entry Tax, Luxury Tax was not available.
All these taxes will subsume in GST.

Analyse How will GST


Impact Your Business?
GST Tax

Analyse How will GST Impact


your Business? Analyse How will GST
Impact
your Business?

Analyse How will GST


Impact Your Business?
The factors which will have bearing on
financial impact, are:
Saving arising from non-payment of Octroi, Entry Tax,
Luxury Tax, etc.
Analyse How will GST Impact
Non-availability
of creditAnalyse
of Central
Tax (CST) (credit
your Business?
HowSales
will GST
Impact
on IGST will
be available).
your Business?

Non-reversal of credit under Rule6of the Cenvat Credit


Rules, 2004 on trading activities.
Carrying out process which does not amount to
manufacture.
Payment of tax on margin of wholesalers and retailers.

Analyse How will GST


Impact Your Business?
The factors which will have bearing on
financial impact, are:
Refund of accumulated credit on account of inverted
duty structure
How
GSTavailable
Impact
Credit of Analyse
VAT paid
on will
inputs
to service
your Business? Analyse How will GST
providers)
Impact
your Business?

Non-levy of entertainment tax


Tax on Profit by wholesalers and retailers
Increase in rate for service sector.
Pruning of exemption list.

Analyse How will GST


Impact Your Business?
Saving arising from non-payment of Octroi, Entry
Tax, Luxury Tax, etc.
The local bodies like Gram Panchayat, Municipal
Corporation, Municipal Committee, etc.
Analyse How?

normally enact the law for levy of octroi duty/local body


Analyse
How will
tax for goods
entering
inGST
the Impact
specified area.
your Business?

Many States have abolished octroi/local body tax and


imposed entry tax.
These taxes increase the cost of bringing the materials
inside the specified area.
The said octroi payment made on goods is not available as
a credit also.

Analyse How will GST


Impact Your Business?
Saving arising from non-payment of Octroi, Entry
Tax, Luxury Tax, etc.
The indirect effect of such levy is that:

a. Most of the godowns are constructed outside octroi limit


Analyse How?

b. The vehicles
have
to will
wait
at Impact
Octroi Naka for hours together
Analyse
How
GST
your of
Business?
for payment
octroi.
.The octroi will be abolished from the appointed date i.e. from
01/04/2017.
.Therefore, the cost of procuring the material will reduce.
.It will heavily benefit the transporters, as the turn-around of
vehicles will considerably increase, as vehicles will not have
to wait at Naka.

Analyse How will GST


Impact Your Business?
Non-Availability of Credit of Central Sales Tax
(CST) and Availability of Credit on IGST
The Central Sales Tax is levied under the CST Act.
Analyse How?

When the movement of goods in pursuance of a contract is


Analyse How will GST Impact
Inter-State.
your Business?

The CST is a cost to the Company as the credit of CST is not


available.

Analyse How will GST


Impact Your Business?
Non-Availability of Credit of Central Sales Tax
(CST) and Availability of Credit on IGST

The indirect impact of the levy of CST was:


a. Every
State
Analyse
How?have created a check post at the border
Analyse How will GST Impact
b. The Companies
have opened depots in each State.
your Business?

Sometimes distance between the two depots are hardly


25-30 kilometres. For example, there are many Companies
who have depots in Delhi, Faridabad (Haryana) and
Ghaziabad (UP)
These depots are opened basically to save CST.
The CST now will be abolished and every Inter-State
transfer of goods will attract IGST.

Analyse How will GST


Impact Your Business?
Non-Availability of Credit of Central Sales Tax
(CST) and Availability of Credit on IGST
The indirect impact of the levy of CST was:
Analyse
will GST
The
credit How
of IGST
will Impact
be available.
your Business?

Therefore, there may not be the need for so many


depots and also appointment of clearing &
forwarding agents, etc.
The Company may have to think of re-organizing
the depots.

Analyse How will GST


Impact Your Business?
Non-Reversal of Credit Under Rule 6 of the
Cenvat Credit Rules, 2004 on Trading Activities
Analyse How will GST Impact
As per the definition of exempted service given in Rule
Analyse How?

Payment of tax on margin of wholesalers and retailers of


the Cenvat Credit Rules
2004, the trading is considered as an exempted service.
Therefore, Rule 6 of the Cenvat Credit Rules, 2004 provides
for formula for quantifying
The amount of reversal of credit availed on inputs and input
services to the extent attributable to trading activities.?

Analyse How will GST


Impact Your Business?
Non-Reversal of Credit Under Rule 6 of the
Cenvat Credit Rules, 2004 on Trading Activities
The
trading
activities will now attract GST.
Analyse
How?
Analyse
willto
GST
Impact
The Company
willHow
have
pay
GST on the value of goods
your Business?
sold.

Therefore, there will be no reversal of credit on inputs and


input services attributable to trading activities.

Analyse How will GST


Impact Your Business?
Carrying Out Process Which does not Amount
to Manufacture
There are many companies who carry out the process which does
Analyseto
How?
not amount
the process of manufacture
Analyse How will GST Impact
As per sectionRefund
of accumulated credit on account of
your Business?

inverted duty structureof the Central Excise Act, 1944.

Therefore, they do not pay excise duty on the products cleared by


them.
Many companies carry out the process of assembly/knitting at the
depot.

Analyse How will GST


Impact Your Business?
Carrying Out Process Which does not
Amount to Manufacture
This process does not amount to the process of manufacture.
Analyse How?

No duty is payable
the
increased due to
Analyse on
How
willvalue
GST Impact
assembly/knitting
process.
your Business?
The incidence of GST is on supply.
Even if the process does not amount to the process of
manufacture, the GST will be payable on enhanced value.

Analyse How will GST


Impact Your Business?
Carrying Out Process Which does not
Amount to Manufacture
On value addition made on depot due to carrying out any
process,
the How?
GST will be payable.
Analyse
Analyse How will GST Impact
Many companies
may not be able to pass on the credit, as they
your Business?
supply the goods to companies engaged in transmission of
electricity.

If there is no GST payable on transmission of electricity, then


the credit on GST paid on inputs and input services to such
companies will not be available.

Analyse How will GST


Impact Your Business?
Payment of Tax on Margin of Wholesalers and
Retailers
The wholesalers and retailers resell the goods.

They are paying VAT liveable by the State Government on the


value at which goods are sold.
The VAT Act does not permit the credit of service tax paid on
input service.
The tax on input service is payable to Central Government.
This is levied as per the provisions contained in Chapter V of the
Finance Act, 1994.

Analyse How will GST


Impact Your Business?
Payment of Tax on Margin of Wholesalers and
Retailers
The supply of input services will now attract GST.
The wholesalers and retailers will now be entitled to the
credit of GST paid and therefore they will be benefited to this
extent.
The wholesaler and retailer will have to pay GST on margin
also.

Analyse How will GST


Impact Your Business?
Refund of Accumulated Credit on Account of
Inverted Duty Structure
In many cases, the duty payable on the finished goods is
Analyse
less
thanHow?
the credit available to the manufacturer.
For example, the duty payable on pharmaceutical
products is 6% where as the inputs like bulk drugs,
packing materials, etc. attract duty @ 12.5%.
Thus credit availed on inputs remains accumulated with
the manufacturer of the pharmaceutical products.

Analyse How will GST


Impact Your Business?
Refund of Accumulated Credit on Account of
Inverted Duty Structure
The
Analyse
How?
credit
cannot be used as credit on inputs and
input service is higher than duty paid on finished
goods.
The Section 38(2) of the GST Act specifically provide
for refund of such un-utilized credit of duty.
This will definitely reduce the cost of production of
such products.

Analyse How will GST


Impact Your Business?
Credit of VAT Paid on Inputs Available to Service
Provider
The current rate of tax payable on services provided is
fifteen per cent.
Analyse How?

In manyAnalyse
cases like
How construction,
will GST Impactabatements have
been granted
for determining the taxable value.
your Business?
The tax is payable on abated value.
The VAT is also payable on some of the inputs.

Analyse How will GST


Impact Your Business?
Credit of VAT Paid on Inputs Available to Service
Provider
Currently the credit on VAT paid is not available to the
service provider.
Analyse How?

Under the
GST How
the credit
ofImpact
SGST paid will be available to
Analyse
will GST
the service
your provider.
Business?

Analyse How will GST


Impact Your Business?

Non-Levy of Entertainment Tax


The entertainment tax is levied by the State Government
onAnalyse
variousHow?
entertainment events including exhibition of
films in theatres.
Analyse How will GST Impact
your Business?

In some of the States the rate of entertainment tax is as


high as 40%.
In GST the rate of tax is bound to come down and may be
in the range of 18% to 20%.
This will substantially benefit the entertainment industry.

Analyse How will GST


Impact Your Business?

ax on Profit by Wholesalers and Retailers


The wholesalers and retailers make profit on resale of
goods.
Analyse How?

They pay VAT on the sale price of the goods.


Analyse How will GST Impact
your Business?

They do not pay excise duty on the value addition that


is profit on sale of goods made by them.
As the process carried out by them does not amount to
the process of manufacture.

Analyse How will GST


Impact Your Business?

ax on Profit by Wholesalers and Retailers


In GST the incidence of tax will be on supply of goods.
Analyse How?

Therefore, GST will be payable of sales price of goods.

Analyse How will GST Impact


They will your
also Business?
be entitled to the credit of GST paid on the

inward supplies.
The record keeping by them will have to be substantially
modified in order to capture the availability of credit.

Analyse How will GST


Impact Your Business?

ncrease in Rate for Service Sectors


Currently service tax of 15% including Swachh Bharat Cess
(SBC) and Krishi Kalyan Cess (KKC) is levied.
Analyse How?

The expected rate in the GST may be 18%.


Analyse How will GST Impact
your Business?

Therefore, the incidence of tax for the person rendering


services are likely to increase.
The exact increase in the incidence of tax will be known
only after the rates are notified.
As against this, the service provider will also get the credit
of VAT paid on the inputs as mentioned in Para 19.8.

Analyse How will GST


Impact Your Business?
Pruning of Exemption List
Currently the notifications have been issued under the
Central Excise Act.
Analyse How?

1944 and
service
Analyse
Howtax
willexempting
GST Impact various goods and
services
from
payment of duty/tax.
your
Business?
Similarly, the exemptions have been granted to the
various products from payment of VAT.
There have been lot of discussion on pruning of the
exemption list.

Analyse How will GST


Impact Your Business?
Pruning of Exemption List
Now there will be uniform exemption under CGST and
SGST.
Analyse How?

Thus only one exemption list, exempting both from CGST


and SGST will be issued.
As per the various statements of the Ministry of Finance,
the list will be heavily reduced.
If any exemption is removed, the incidence of tax on the
said goods will increase the price of the goods.

Analyse How will GST


Impact Your Business?
Conclusion
The impact of the above factors on each of the
organizations
Analyse How?will vary. It is up to the organization to
determine the impact of each of the factors on their
Analyse How will GST Impact
finance and
yourre-arrange
Business? the business in order to
ensure that the adverse impact is minimized on GST
.