GST – Impact on Supply Chain Management Acharjee.pdf · PricewaterhouseCoopers 1 MRITYUNJAY ACHARJEE Visiting Faculty IIM-C GST – Impact on Supply Chain Management

PricewaterhouseCoopers 1

MRITYUNJAY ACHARJEE

Visiting Faculty IIM-C

GST – Impact on Supply Chain Management


Fiscal considerations are considered as key determinant of supply chain structuring in India with manufacturing bases and distribution network are engineered primarily to harness Fiscal Benefits.

Availability of tax exemptions / benefits and the prevalence of differential taxes based on geographical locations have influenced the structuring of Supply Chain, procurement Patterns and Distribution network.

Decisions are based on Tax Efficiency rather operating efficiency Dual GST would significantly impact supply chain

GST in India

Fiscal considerations– key determinant for structuring Supply Chain


Why to Choose

1. To understand the Tax Concerns before effecting any change in the Supply Chain

2. Tax issues are extremely important to Cost effective Supply Chan Management

3. Crafted Supply Chain may cut across many tax and regulatory environments

4. Shape the Supply Chain to meet total business objectives.

5. Reduce Duty Cost and improve Cross Border Movements

6. Identify opportunities & incentive packages under different fiscal statues.

7. Assess the benefits and facilitate Planning, analysis and implementation of shared services


Supply chain managers balance total logistics cost factors against customer service factors


Supply Chain is impacted by Several forces :

1. Intrinsic to the Organisation2. Market Specific Forces3. Fiscal in nature

GST in India

GST – Key Challenges regarding Supply Chain


Whether Stock Transfer / Branch Transfer is chargeable to Sales

Tax / VAT ?

Whether Freight charges is levible with Sales Tax / VAT

Whether Operating Lease of Equipment / Containers are

chargeable with VAT as well as Service Tax ?

Is Inter State sale against form C is always Concessional

Whether developing any customer specific software based on

original off the rack basic programme (IBM make) would be

chargeable with VAT or Service Tax or Both

Whether VAT and Excise Duty both applicable simultaneously

Impact of Negative List concept / Reverse Charge

Few Question before we proceed

GST in India


Sale of Consumables within a state – How to minimise tax

liability.

How to procure Raw Materials, Packing Material, Consumables in

a most tax effective manner to reduce Landed Cost

How to maximise Post Tax Return

How to maximise Value Addition in Supply Chain

Driving Factors of Supply Chain

GST in India


Need for a comprehensive Tax Reform in India.

GST - Concept Analysis

GST – Applicability in Inter State Transactions

GST Structure & Constitutional Amendments

GST Rates & Impact Analysis / GST on Services

Highlights of Discussion Paper of EC

Mapping & Realignment the Supply Chain

Opportunities, Challenges and Road map ahead

Case Study

AGENDA

GST in India


Increased International Competition.

Larger Revenue required for physical & social infrastructure.

Accelerated Economic Growth is possible only in Conducive Tax

Environment.

Tax Reforms Imperative for competitiveness & growth

• Present complex multiple tax structure not

conducive for growth and competitiveness.

GST in India


Tax Effective Supply Chain

It is the integration of tax planning into business and value chain restructurings that may involve the relocation of assets, functions and risks across jurisdictions.

Increased profit after tax and therefore shareholder return above the line Improved supply chain management accessed through the creation of centrally controlled strategic and tactical operations.

An ability to leverage procurement scale

Improved tax risk management


Objectives of Tax based SCMIncreased profit after tax and therefore shareholder return above the line Improved supply chain management accessed through the creation of centrally controlled strategic and tactical operations

An ability to leverage procurement scale

Improved tax risk management

Aligning Tax and Business considerations across the supply chain.

To enable the companies to evalute, design and implement changes to their Supply Chain that integrates Tax with Business Objects.

To ensure Tax enhanced operational benefits and to reduce overall risk profile.


Why to Choose

Corporate Tax Rates 15% - Hong Kong, Singapore20% - -25% Taiwan, Chaina, South Korea30% - India, Malyasia, Indonesia, New Zealand

GDP rate - Singapore 16%, China 8%, India 5%

Applicability of the Double Tax Avoidance Agreement in structuring the most Tax efficient Supply Chain Structure


Factors Influencing

Business Performance Issues Tax Consideration

•Global Sourcing Asset Disposition•Contract Manufacturing Transfer Pricing•Shared Services Profit Repartition•Process efficiencies Customs & Trade Zone•Cost Optimisation Location of Taxable events•Capacity Management Indirect Taxes•Distribution Network Permanent Establishment issues•Freight & logistics Local Tax issue / Entry tax etc•Sales & distribution Incentives (corporate / individual)


Integration of Taxes into GST

Central Taxes

- Excise duty- Service tax- CVD- CST- Various Cess- Addl Customs Duty

State Taxes

- State VAT- State Excise- Luxury tax- Entertainment tax- Entry tax

GST in India


TAXATION OF SERVICES

Both the Centre and the States will have concurrent power to levy tax on all services.

Basis for taxation on services is destination based

The principles for taxation of inter-state and intra-state supply of services has been formulated.

An innovative model of Integrated GST(IGST) will be adopted for inter-State transactions of goods and services.

GST in India


TAXATION OF SERVICES

Greater Challenges to levy Tax on Interstate Services

Methods & Mechanism

GST in India


GST Challenges & Expectations

GST Challenges&

Expectations

GST in India


GST; Challenges & Issues• The ideal model for Indian scene• Constitutional changes• The optimum RNR• Shifting form originating to destination based / Consumption

based tax model• Revenue deficit of poor states / producing states with low

consumption-• Place of supply / Service Rules• Place of Supply Rules for telecom, broadcasting, IT, BPO,

Transport services etc.

GST in India


GST IMPACT ANALYSIS

FISCAL IMPACTSUPPLY

CHAIN

CASH FLOW I T SYSTEM

G S T

ACCOUNTING


FISCAL IMPACT

• PRODUCT PRICING• SEAMLESS FLOW OF CREDIT• BENEFIT OF EXCISE EMEMPT

ZONES• CUSTOMS DUTY TOO WOULD

NOT BE A COST EXCEPT BCD


CASH FLOW IMPACT

• WITHDRAWL OF EXEMPTIONS• CONVERSION OF EXEMPTION

TO REFUND• GST ON STOCK TRANSFER &

IMPORTS• IMPACT ANALYSIS


SUPPLY CHAIN IMPACT

• SOURCING FROM LOCAL / INTERSTATE / SEZ

• VENDOR PRICE NEGOTIATION• WAREHOUSE LOCATIONS• MANUFACTURING LOCATIONS• DISTRIBUTION CHAINS (DIRECT SALE

/ WAREHOUSE)• SPOKE & HUB - REDEFINE


ACCOUNTING & IT IMPACT

• POSSIBLE DIFFERENCE BETWEEN GST LEVY DATE & DATE OF REVENUE RECOGNITION (SUPPLY POINT)

• SUPPLY vs. SALE• ITEMS OF BALANCE SHEET & P/L ACCOUNT• RECONCILIATION OF GST ON STOCK TRANSFER WITH

ACCOUNTING RECORDS• IT SYSTEM NEEDS MODIFICATIONS• REVISION IN MIS REPORTING


Supply Chain Planning Decisions

OPERATIONAL

TACTICAL

STRATEGIC

Procurement DistributionManufacturing LogisticsGST in India


• SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :

− PROCESSES

− STRUCTURE

− TECHNOLOGY

− FISCAL CONSIDERATIONS

GST in India


• CHALLENGES AHEAD :

− CREDIT DETERMINATION ON INVENTORY

− NO CROSS BORDER TAX DISTANCE

− SUBSUMING OCTROI & ENTRY TAX

− CREDIT IN RESPECT OF SERVICE TAX ONLOGISTICS SERVICES

GST in India





GST is a Win Win solution for all stakeholders.

It is a key enabler for increased prosperity.

CONCLUSION


Thank You

GST – Impact on Supply Chain Management Acharjee.pdf · PricewaterhouseCoopers 1 MRITYUNJAY ACHARJEE Visiting Faculty IIM-C GST – Impact on Supply Chain Management

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