India GST- Overview, Challenges, Opportunities

and Oracle Roadmap

Agenda
GST-Journey and Background

Current State of Taxes

GST as a concept-An Illustration

GST- Future State

GST-Impact areas

Oracle Approach and Roadmap

Opportunities

2
Current State of Indirect Taxes

3
Current State of Indirect Taxes -Pitfalls

While CENVAT (to some extent ) has resolved cascading

effect on taxes
Currently Credit of Input VAT is available against Output VAT
Currently Credit of Input excise/service tax is available for
setoff against output liability of excise and vice versa
Credit of VAT is not available against excise and vice versa
VAT is computed on a value which includes excise duty
CENVAT credit is allowed only for excise duty paid on inputs
and not on VAT paid on inputs raw material
Tax on Tax scenario is still prevalent

GST attempts to solve this issue in addition to

other issues

4
GST- The Journey so far

5
Understanding GST- What is GST
GST (Goods and services tax) is a value added tax, levied at all
points in the supply chain with credit allowed for any tax paid on
inputs acquired for use in making the supply. It would apply to
both goods and services in a comprehensive manner with
exemptions restricted to a minimum.

GST is a destination tax and not origin based (current state)

GST structure would follow destination principle
It is a dual model to be administered by Central and State
Governments
GST Concept

How GST works

GST that is charged by a business and paid by its customers is known as output GST (that is, GST on its output
supplies)
GST that is paid by a business to other businesses on the supplies that it receives is known as input GST (that is,
GST on its input supplies)
A business is generally able to recover input GST to the extent that the input GST is attributable to (that is, used
to make) its taxable outputs
Input GST is recovered by setting it against the output GST for which the business is required to account to the
government, or, if there is an excess, by claiming a repayment from the government
Exempted goods and Services Very few items with common list for CGST and SGST
Goods and Services outside the purview of GST
Alcohol for Human consumption - will continue with State Excise and VAT
Electricity will continue with Electricity Duty
Petroleum Products will continue with the current tax structure, likely to be brought under GST regime later
Tobacco products expected to be taxed under the GST regime along with Excise duty
Seamless input tax credit through out the value chain for B2B supplies
GST Illustration
GST is a
TRANSCTION TAX

Raw materials sold + Invoice for Finished Machine sold + Invoice for
$100 + $10 GST Manufacturer / $250 + $25 GST
Service Provider
e.g. Keysight

0 Pa
$11 ym
t - $15 GST remitted ($25 en
m en GST - $10 credit)
t-
$2
y
Pa 75

$25 GST remitted

Raw-material $10 GST remitted Total ($50 GST - $25 credit) Customer e.g.
supplier Government Sony Ericsson /
revenue Vodafone

Total GST collected as Govt. 5 50

t -$
revenue is $50. Whole of it is borne en
ym
by Final Consumer, but recovered Pa
from others in the supply chain

Final Consumers
GST- a type of e.g. Mobile Users Mobile phones & connections sold +
INDIRECT TAX Invoice for $500 + $50 GST
GST Vs Current Tax Laws
Proposed GST structure
Intra State Supply of
Goods and Services
Intra State Supply of Goods and
Services
CGST-Central Tax
In place of current Central Taxes and
levies
SGST State Tax
In place of current State Taxes
CGST and SGST at applicable rates
would be levied on the same Taxable
basis with no tax on tax computation
Inter State Supply of Goods
and Services (Including Inter
state Stock Transfers)
IGST-Central Tax
In place of current Central Taxes and State
Taxes (consuming state to get a share of
revenue from IGST)
Additional State Tax not exceeding 1% Non
recoverable tax for supply of Goods
revenue for the selling State
Import of Goods and Services
to India
No impact on Customs duties other than
CVD and SAD
IGST in place of CVD and SAD
Exports of Goods and Services from
India/Deemed Exports
IGST @ 0% with input tax credit
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Current State of Indirect Taxes and GST coverage

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Taxes expected to be subsumed under GST

Central

Central Excise Duty (Cenvat)
Service tax

Taxes


Additional duties of Excise
Excise duty levied under Medicinal & Toiletries preparation Act
Additional duties of Customs (CVD & SAD)

(CGST) Surcharges and Cesses

State


State VAT/Sales Tax
Entry tax (not in lieu of octroi)
Purchase tax

Taxes

Entertainment tax (not levied by Local bodies)
Luxury tax

(SGST)
Taxes on Lottery, betting & gambling
Surcharge and Cesses

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GST- Scenario 1-Sale within state

In the example illustrated below, goods are

moving from Mumbai to Pune.
Since it is a sale within a state, CGST and
SGST will be levied. The collection goes to
the Central Government and the State
Government as pointed out in the diagram.
Then the goods are resold from Pune to
Nagpur. This is again a sale within a state,
so CGST and SGST will be levied. Sale price
is increased so tax liability will also increase.
In the case of resale, the credit of input
CGST and input SGST (Rs. 8) is claimed as
shown; and the remaining taxes go to the
respective governments.
GST- Scenario 2-Sale within one state and Resale in another state
In this case, goods are moving from Indore to
Bhopal. Since it is a sale within a state, CGST and
SGST will be levied. The collection goes to the
Central Government and the State Government as
pointed out in the diagram. Later the goods are
resold from Bhopal to Lucknow (outside the state).
Therefore, IGST will be levied. Whole IGST goes to
the central government.

Against IGST, both the input taxes are taken as

credit. But we see that SGST never went to the
central government, still the credit is claimed. This
is the crux of GST. Since this amounts to a loss to
the Central Government, the state government
compensates the central government by
transferring the credit to the central government.
GST- Scenario 3-Sale outside the state and Resale within state
In this case, goods are moving from Delhi to Jaipur.
Since it is an interstate sale, IGST will be levied.
The collection goes to the Central Government.
Later the goods are resold from Jaipur to Jodhpur
(within the state). Therefore, CGST and SGST will be
levied.

Against CGST and SGST, 50% of the IGST, that is

Rs. 8 is taken as a credit. But we see that IGST
never went to the state government, still the credit
is claimed against SGST. Since this amounts to a
loss to the State Government, the Central
government compensates the State government
by transferring the credit to the State government.
GST- Bodies
Goods and service tax council (GSTC)
Responsible for recommendations on
GST rates, Band of GST rates, GST Law
and procedure, GST exemptions and
thresholds, modalities for dispute
resolution etc
Goods and Service Tax Network (GSTN)
GSTN is responsible for building and maintaining the IT
systems required for GST administration by building a
common portal, act as the national agency responsible
for delivering integrated tax related services
Functions includes processing the applications for GST
registrations, facilitating e-payments and filing of
returns, input tax credit, Tax settlement, manage back
end modules to enable tax authorities to perform tax
assessment, refunds, audits etc.

Multiple Statutes
One for Central Government and one for Every State
Government
Model GST Law consists of Rules and Procedures to
be recommended by the GST Council
Model law is expected to be available in the public
domain soon
Some of the State administered GST requirements are
Tax Registration and
expected to be common between statutes where as Jurisdiction
some requirements could vary from state to state to
allow flexibility to the Center and State Governments
Common law across India for Central GST (CGST and
IGST)
Place of supply Rules to determine whether the
supply is intra state or inter state
Initial draft of the Place of supply Rules published
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India GST expectations-Input Tax Credit
Input Tax Credit on IGST allowed for payment of IGST, CGST and SGST in that order

Input Tax Credit on CGST allowed for payment of CGST and IGST in that order

Input Tax Credit on SGST allowed for payment of SGST and IGST in that order

No cross utilization of input tax credit between CGST and SGST

No input tax credit for Additional tax

Input tax credit will be allowed only based on supplier invoices uploaded to GSTN for

the supply

Electronic Upload of invoices/relevant supply documents will be mandatory under GST

Data download, verification and validation and upload of input tax credit data for

effective management of input tax credit

Recovery management procedure spans to multiple periods 17

India GST expectations-Tax Settlement Reporting and Expectations
Recommends 8 reports GSTR1 GSTR8; makes their recommendations on reporting process and reporting time to be

managed by GSTN through the common GST portal

GSTN to validate accurate tax settlement and utilization of input tax credit

One Tax settlement for all business units sharing the same GST registration

Tax liability under different categories to be computed separately as different line items in one Challan (Payment

document)

Option for payment through internet banking or conventional payment at specified banks

GSTN will track the receipt of payment and issues acknowledgement

Infrastructure for Electronic Data exchange

Issue of supply of goods and services for a tax period (Outward) : Mandatory

Electronic reporting of all transactions relevant under GST including debit/credit notes, supplementary invoices etc

Electronic data exchange/reporting infrastructure for verification and validation of input tax credit

Includes download of purchase records from GSTN, Matching and confirmation, and submission of omissions if any

Tax reporting through Electronic Media

Periodic tax returns through electronic reporting with a defined process for reporting and reporting timelines
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GST Transtiton- Impact
Business and IT

Impact areas- Business Impact areas- IT

GST Jurisdiction and Organization Structure
Master Data Management- Vendor and sites
Supply Chain Vendor HSN Codes
Model Management- EDI/Electronic Data Interchange
Categories and Invoice Uploads to GST Portal /GSTN
Network Design Capabilities Tax configuration and Tax Transactions
Matching, Settlement and Reporting
Reconciliation
Manufacturing- Register and Current Reports
Impact on
Subcontracting and Impact areas- Business
Extended Processes
Manufacturing
Q2C P2P IC
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Oracle Solution Approach and Readiness (Oracle financials for
India based)
Re-engineered the EBS Oracle Financials for India (India Localization) solution
Major changes on system configuration making the solution much more scalable to address
complex tax requirements
Unified procedure for Regime to Rate Configuration
Option for user to configure Tax type, Tax behavior, Taxable event and Tax document sequencing
Option for defining tax jurisdiction based on the registration number
Improved features for input tax credit management (multi phase recovery process) and tax
settlement/Tax offsets
Unified Tax repository with traceability to every tax transaction
Improved user experience
The new solution scalable to map the basic solution infrastructure for GST as well as the existing
tax regimes; any gaps to enable compliance on Proposed GST regime will be built only on top of
the new solution. E.g. Infrastructure for Electronic data exchange. The new solution will be
released as a part of GST release on all supported versions under Premier Support.
With the improved solution infrastructure OFI development team is well equipped to release
solutions to enable compliance to GST quickly once Government notifies the requirements and
based on final go live mandate
The new solution under advanced stage of Development
Evaluating the feasibility of EAP engagement prior to final release with customers which will
provide insights to customers on the new architecture
Release plans depended on Government finalizing the GST go live plans
To be decided and communicated later
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Configuration process flow

21
Opportunities
GST
Road Customer
map base
having
s manufactur
ing/service
with
and applicable
scenarios
Advi under GST
in India Netw
sory ork
* desig
Understand n and
the
Financials mode
in India
Localisatio
n
l
proce
Build sses
Capabili
ties and
around Developme
tools
Configu nt of
ration, custom
solutions
Process for
reporting/s
es and ettlement
overall
GST
process
es

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Thank You

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