Goods and Service Tax

GST
May 2017

1
Contents
 Introduction to GST :
• Taxes subsumed/ not subsumed under GST
• Basic Structure, coverage
• Rates
• Input Tax Credit
• ASP, GSTN, GSP

 Impact on Distributor

 Impact on Retailer

 Impact on Modern Trade

 Miscellaneous

 FAQs
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 Introduction to

GST
GST

3
Taxes subsumed under GST

Entry Tax, VAT

CVD, SAD Excise Duty Octroi, LBT

Surcharges &
Cesses

GST CST

Taxes on
lottery, Entertainment
betting & Tax (not by specified Luxury Tax Service Tax
gambling bodies) 4
Taxes not subsumed under GST

Stamp Duties,
Taxes on lands
and buildings,
electricity
Toll tax,

GST
Taxes on carriage
Basic Customs by rail/ waterways/
Duty, road
Export Duties

R&D Cess Taxes on professions,

trade, employments 5
Basic Structure of GST
 Comprehensive value added tax on SUPPLY of goods and
services

 Consumption based tax … departure from earlier origin

based taxation

Model of GST

Intra state Inter state

supplies supplies

CGST SGST IGST

(Centre) (State) (Integrated)
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What will be taxed?

Goods Services Imports Exports

(Except the exclusions)

Movable Anything other Exempted

property than goods with zero
other than Includes conversion rate
money and from one currency to
securities another 7
GST Rates

Zero 28% +
5% 12% 18% 28%
rated add cess

Essential Mass Standard Goods currently Demerit

items consumption Rates on all taxed at goods
including goods goods 30-31% Tobacco, aerated
drinks, pan
food
masala, luxury
car

Services might be taxed under 3 rate structure – luxury, basic

and standard
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Input Tax Credit
Input credit means at the time of paying tax on output, you can
reduce the tax you have already paid on inputs

Goods/
Services
Essential are Not
conditions for received listed as
claiming Input ineligible
Credit : for
Receipt credits
of Tax
Payment invoice
Payment
to made
of Tax by
within
Supplier
180 days Supplier
uploads
details in
GSTR1
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ASP, GSTN, GSP

Application GSTN Suvidha GST Network

Service Provider Provider (GSTN)
(ASP) (GSP)
 Accounting, Invoicing  Bridge between ASP/  Not for profit private co.
and other software's business and GSTN Shareholding of GOI, Govt of
States, UTs, Fin Institutions
… enable businesses
to comply with GST  File GST returns
 Mandate … Manage
 Fees depend on  Match sales and infrastructure for GST
market forces purchase invoices to implementation
settle tax credits

 34 GSPs notified

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Need for ASP
Validate,
summarise
Sales data
Preparing for Sign Upload
and filing off signed off
data in
monthly
GSTR-1
GSTR-3 Download
format on
return GSTR-2A
GSTN
(Sales data
uploaded by
Send suppliers) Reconcile
GSTR-2 to from GSTN purchase
GSP for data from
uploading Add non-auto co. with
populated GSTR-2A
on GSTN transactions
(imports,
reverse
charge, etc.)
to GSTR-2A

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Impact on Marico to
Distributors

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Impact on Marico to Distributors
Invoice
Marico GST no.
• All distributors must register under
Distributor GST no. GST
• GST no. of distributor missing … Input
tax credit not available to him

HSN Code • Required on invoice

Claims … except those • Currently debit/ credit note issued

linked to volumes/ target • Under GST, distributor to raise service
achievement invoice, along with GST
• Upload service invoice in GSTR 2
• Eg. : Ad-hoc visibility, ROI, van subsidy, etc.

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 Claims

Type Credit Debit Distributor to Tax

Note Note raise service reimbursement
issued issued invoice on Marico
with GST
GST -
charged/ No Yes Yes Yes
reversed?

Eg. • Secondary • Secondary • DSR/PSR • Distributor VAT

discounts discounts incentives reimbursement
• Rate • P3 • Program, brand • Stockiest VAT
difference reconciliation visibility reimbursement
• P3 • L&D freight • Distributor to
reconciliation • P1 subsidies raise Service
• Share gain • ROI subsidy Invoice
• WMP 2.0 • SD freight,
repacking charges
• Urban ISR salary
• VD – VSR salary,
van subsidy 14
Price Cascade (Impact on Distributor)
Particulars Current under VAT Revised under GST
Marico to Distributor Marico to Distributor
Distributor to Retailer Distributor to Retailer
MRP
Retailer Margin (10%)
Primary Scheme
Secondary Scheme
Base for Computation of Distributor
Margin
Distributor Margin (5%)
No Impact on Distributor Earnings
Tax Rate (VAT 12.5%, GST 18%)
Net Realisation
a. Distributor Earnings (Diff in landings)
b. Tax reimbursement claim
c. Secondary claim
Total earnings (a+b+c)
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Impact on Distributors to
Retailers

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Impact on Distributors to Retailers
• Changes in Invoice format
Invoice • Standard format will be rolled out
Distributor GST no.
• Retailers who wish to avail input tax
Retailer GST no. credit … Register under GST
• Details to be updated in MIDAS
• GST no. of retailer missing … Input tax
credit not available to retailer

Invoice modification • All sales returns through MIDAS only

Payouts to retailers/ • Retailer/ wholesaler to raise service

wholesalers invoice, along with GST
• Upload service invoice in GSTR 2
• Eg. : Program payouts, ad-hoc visibility, etc

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Price Cascade (Impact on Retailer)
Particulars Current under VAT Revised under GST
Distributor to Retailer to Distributor to Retailer to
Retailer Consumer Retailer Consumer
MRP

Retailer Margin (10%)

Discounts
Base for Tax Computation
Tax Rate (VAT 12.5%, GST 18%)

Tax liability of Retailer

Purchase Price of Retailer

Net Profit for Retailer

[Selling Price – Purchase Price –
Incremental Tax Cost]

Assuming GST rates are higher than VAT

rates, Retailer profit will fall 18
 Composition Scheme

Businesses Annual No inter state

dealing turnover not supplies
only in exceeding Rs.
GOODS 50 lacs

Can opt for Composition Scheme

Benefits
 Limited tax liability … Nominal tax rate of 1%
 Limited Compliance … Quarterly return instead of monthly return
 Better Liquidity

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Price Cascade (Impact on Retailer)
Particulars Current under VAT Revised under GST
Distributor to Retailer to Distributor to Retailer to
Retailer Consumer Retailer Consumer
MRP

Retailer Margin (10%)

Discounts
Base for Tax Computation
%
Tax Rate (VAT 12.5%, GST 18%)

Tax liability of Retailer

Purchase Price of Retailer

Net Profit for Retailer

[Selling Price – Purchase Price –
Incremental Tax Cost]

Composite scheme results in reduction in

Retailer tax liability 20
 Impact on
Modern Trade

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 Impact on Modern Trade
Invoice
Marico GST no.
• All customers must register under GST
Customer GST no. • GST no. of customer missing … Input
tax credit not available

HSN Code • Required on invoice

• Chains to ensure same HSN code as
per Marico

• Currently debit/ credit note issued

Claims … except those • Under GST, customer to raise service
linked to volumes/ target invoice, along with GST
achievement • Upload service invoice in GSTR 2

Assuming GST rates are higher than VAT rates, overall Chain
profit to fall 22
Miscellaneous

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 Transitional issues – duty credits on closing stocks

Stocks lying with Distributor/ Retailers/ Wholesalers/

Stockiest

Brand Manufactured in Starch/ All other

NER/ Paldhi Bio Oil products
• Parachute
Advansed No impact on
• Hair & Care Distributor/Stockiest
• Nihar NHO
• Parachute Jasmine
Excise duty 40% of 40% of No
credit CGST CGST credit
available rate rate available

VAT Input tax Credit … VAT paid on purchases would be available as Input Tax credit 24
Actionable for Distributors

Self-
registration
Filing of
return for
opening stock
Actionables Credit within
Selection 60 days of
transition date
of
ASP/GSP
for Raising of
Generation compliance service
of E-way Bill
invoices
for all
Updation under
movements
of Retailer GST
master
with GST
no. of
retailer 25
Actionable for Sales Team
Drive
registration
• Distributor
• Wholesaler
• Stockiest
• Retailer
Actionables under GST
Learning on
GST – Basic
& FAQ’s
Remove
ambiguity in
minds of
wholesaler/
retailer :
fear of unknown

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Potential Challenges and Business Risks
Education,
awareness
of
Distributor,
Distributor and
opting for managing VAT
Composition Associations reimbursem
Tax may lead ent on
to higher cost Reduction in opening
of business to stock
absolute
Marico
retailer
earnings due
Opening
Stock
to higher Wholesalers
GST rate Compliance
reconciliation
increasing,
with
leading to
distributor
higher cost of
(excise De- business
benefit)
stocking
before
GO-LIVE
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FAQs

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FAQs … Distributor
Q. Is registration mandatory?
A. Registration is mandatory in following conditions:
 Annual turnover exceeds INR 20 lacs
 Inter State Sales

Q. Can I Sell to unregistered retailer?

A. Yes. Same needs to be captured as sales to unregistered party. Party wise
summary needs to be uploaded in GSTR1 at month end

Q. Can person registered under Composition Scheme raise service invoice?

A. No. Composition scheme is not applicable for person rendering services or
are dealing with inter state sale

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FAQs … Distributor
Q. What happens to the stock lying on the date of transition?
A. Following credit is available
 VAT credit as per return will be carried forward under GST. Hence no loss
 Excise duty @ 40% of CGST rate is allowed as credit (except for exempted
goods)

Q. On Sale of Trade offer/Consumer offer, what will happen under GST?

A. No impact

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FAQs … Distributor
Q. Can I do bill modification post supply?
A. No bill modification is allowed under GST. Any subsequent changes must be
carried out through sales return module

Q. Can selling price be lower than purchase price?

A. Under GST, there is no restriction on selling price. It can be lower than
purchase price

Q. Will there be a change in Invoice format if I am selling to unregistered

person?
A. No

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FAQs … Distributor
Q. If I am registered under Composition scheme, will invoice format be
different?
A. Yes, tax cannot be displayed on invoice. Tax cost @ 1% will become additional
costs. Further, since there are services being rendered, hence composition
scheme will not apply

Q. Is it mandatory to have GSP and ASP?

A. GSP is mandatory for your size of business. ASP is your decision. However, it
would be advisable to have ASP for initial 6 months to facilitate smooth
transition

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FAQs … Distributor
Q. What are the changes in MIDAS?
A. There are various changes in MIDAS. Highlighting the same as under:
 Invoice format will change
 Debit note for services will get converted to Service invoice
 VAT report will be changed to GST report.
We will provide separate training session on MIDAS

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FAQs … Wholesaler/ Retailer
Q. Will the Company reimburse the loss incurred due to higher GST rate on
opening stock?
A. Government has provided credit on opening stock for VAT and Excise. We do
understand that same would not entirely compensate for the difference.
Historically, such cost have always been subsumed in the margins which
company provides

Q. If I opt for Composition scheme, will the Company increase my Margin?

A. We believe that margins which are currently paid are adequate to ensure
reasonable ROI. Currently under VAT regime also, composition scheme is
available. Hence the same should not be considered as additional costs.

Q. In case I have multiple firms with multiple registration, will the Company
register them separately?
A. There is no restriction on registration of multiple retail/wholesale outlets.

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Thank You!

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