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‘Facilitating Trade and Global Competitiveness: Express Delivery Sector in India’ India

Presentation on addressing State and local level issues and concerns

S. Madhavan August 26, 2009

Agenda • • • • Factors affecting supply chains Fiscal costs – Key determinant of supply chains Current State and local level issues and concerns Dual GST implementation opportunity for a single market taxation of inter-State supplies of goods tax compliance simplified • Way forward W f d .

Market Responsiveness p Changing Customer Preferences Fiscal Costs Competitive Intensities Cost Efficiencies .. some market specific and some fiscal in nature .Addressing State and local level Issues and Concerns Factors affecting supply chains g pp y Supply Chains are impacted by several forces.... some intrinsic to the organization.with fiscal costs forming the bane of most supply chains PricewaterhouseCoopers Slide 3 .

.Key determinant of supply chains Fiscal costs have remained a key determinant of supply chains in India with manufacturing bases and distribution networks engineered to harness fiscal benefits.Addressing State and local level Issues and Concerns Fiscal costs .. Investments in Tax Havens • Sales Tax / VAT Exemptions Manufacturing Units • Sales Tax / VAT Deferrals • Income Tax Exemptions Depot/Stock Points P i t Differential Tax Considerations • CST VAT tradeoff • Low /Negligible VAT Distributors Consumer Retailer • P ti l S t offs for Input VAT Partial Set ff f I t • Multiple tax costs for movement of goods PricewaterhouseCoopers Slide 4 .

Octroi.Addressing State and local level Issues and Concerns Current issues and concerns • • • Irrecoverable tax costs due to State barriers – CST Complex compliance requirements – Regulatory forms such as C. F etc. Cess adding to cost of doing business Increased cost of compliance with multiple taxes and multiple regulations PricewaterhouseCoopers Slide 5 . Entry barriers at State borders longer transportation time Increased compliance costs Hindrance to free inter-State movement of goods • • Local levies such as Entry tax.

2010 Manufacturer M f t • Phasing out of CST Suppliers Primary Distribution • Uniform Tax Rates Secondary Distribution • Modifications of Sales Tax based incentives Consumer • Merging of Multiple Taxes PricewaterhouseCoopers Slide 6 .Addressing State and local level Issues and Concerns Supply Chain and GST Implementation pp y p • Proposed introduction of dual GST by April.

also to be subsumed in the SGST Move from origin based taxation to destination based taxation Reduced indirect tax costs o o Common tax base to remove cascading Availability f input t credits across th value chain A il bilit of i t tax dit the l h i Slide 7 PricewaterhouseCoopers . Octroi. Cess etc.Addressing State and local level Issues and Concerns Dual GST – moving towards a single market • Dual GST to foster a single market Multiple taxes at the Central and State level to be subsumed into CGST and SGST respectively Local levies such as Entry tax.

Addressing State and local level Issues and Concerns Dual GST – taxation of inter-State supplies of goods • • • • The single market means – no barriers to inter-State trade Taxation of inter-State supplies of goods is thus critical in the dual GST model Alternate models exist but the idea is not to hamper inter-State trade Zero rating of State GST in the origin State and charging of State GST of g g g g consuming / destination State on inter-State supplies • No check posts / physical barriers PricewaterhouseCoopers Slide 8 .

Reduced compliance costs Slide 9 PricewaterhouseCoopers . F etc.Addressing State and local level Issues and Concerns Dual GST – tax compliance simplified • • Uniform compliance requirements across the States Uniform classification of goods and services across States Minimum number of exemptions Reduced tax disputes • Thrust on IT based tax compliance methodology E-filing of returns E-payment facility • Implementation of IT infrastructure in State Tax Administrations Verification of inter-State transactions through electronic means o o Dispensation of Statutory forms such as C.

Addressing State and local level Issues and Concerns Way forward • • • • Dual GST is an inflexion point It can potentially foster a common market for goods and services Issues and challenges in relation to taxation of inter-State transactions remain All stakeholders need to quickly arrive at a consensus on this issue We are all stakeholders in ensuring that an ‘express delivery’ friendly GST g p y y is in place by April 2010! PricewaterhouseCoopers Slide 10 .

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