Slides from our webinar on upcoming changes to India's Goods and Services tax, with Yujin Weng, Charles Maniace, and our guest speaker Mark Houtzager.

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1Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Taxware is now a Sovos Compliance Company. Learn more at sovos.com
India’s GST Tax Reform
What Businesses Need to Know
Yujin Weng – Sovos Compliance
Mark Houtzager – US VAT, Inc.
Host: Charles Maniace – Sovos Compliance
April 11, 2017

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2Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
Your Presenters
Yujin Weng is a Tax Research General Counsel at Sovos Compliance, where her legal
research focuses on indirect taxes and levies in Canada, Asia Pacific Region, the
European Union, and California (U.S.). She has been on the Tax Research Team at Sovos
Compliance since 2008.
Yujin is a member of the Massachusetts and New York Bars, has a J.D. cum laude from
Boston University School of Law, an M.A. from Syracuse University, and a B.A. from
Nanjing University (China). She is also fluent in Chinese.
Yujin Weng
Mark Houtzager
Mark Houtzager is a New York City-based consultant and thought leader on Value-Added Tax
and similar transaction taxes. Mark has 20 years of hands-on experience in supporting U.S.
companies with the transaction tax impact of their non-U.S. operations. Mark is originally from
the Netherlands, and worked in Europe and Asia for a Big 4 accounting firms before settling in
the U.S. in 2001. In 2010 he started his own consulting firm: US VAT, Inc.
Many companies use Mark’s “Value-Added Tax” blog as their daily source of global VAT news
and analysis. In addition, Mark is a sought-after speaker and trainer on VAT, and is often
featured on webcasts from Bloomberg BNA and Stafford.

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3Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
Agenda
1. A Quick Note on VAT
2. Indirect Tax in India Today
3. Taxation Under the new GST
4. Solutioning for New Rules Using Native ERP
5. Solutioning for New Rules Using a Calculation Engine
6. Path Ahead for Sovos Clients
Slide 3

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A Quick Note on VAT

5. A simple supply chain

6. VAT/GST vs. U.S. sales taxes
• Scope - in VAT / GST all transactions are taxable (only a few
exemptions)
• “Input” tax and “output” tax; VAT / GST is collected throughout
the supply chain
• Businesses reclaim all VAT / GST incurred on any cost
• Retail prices are generally tax inclusive
• The importance of the invoice
• High rates force 100% compliance

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7Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
Tax in India Today

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Tax in India Today
Federal
• Service Tax (14%)
• Swachh Bharat Cess (0.5%) – November 15, 2015
• Krishi Kalyan Cess (0.5%) – June 1, 2016
State
• Intra-state: VAT on supply of goods
• Inter-state: CST on supply of goods
 No uniform rates
 Tax at origin
 Imports/Exports out of scope
Slide 8

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The New GST

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10Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST
Legislative Proceeding
• December 19, 2014: Constitutional (122’nd Amendment) Bill 2014 introduced and tabled in Lower
House
• May 6, 2015: Passed Lower House
• August 2016: Passed Upper House + State Ratification
• September 8, 2016: Presidential Assent
• March 29, 2017: Lower House passed four GST Bills
 Central GST (CGST) Bill
 Integrated GST (IGST) Bill
 Union Territory GST (UTGST) Bill
 Compensation Cess Bill
• March 31, 2017: Eight draft GST Rules and Revisions
• April 6, 2017: The Taxation Laws (Amendment) Bill, 2017 passed Lower House. Aligns customs and
excise tax with GST
July 1, 2017: Projected Implementation All GST documents: http://www.cbec.gov.in/htdocs-cbec/gst
Slide 10

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The New GST
Federal and state taxes to be replaced:
• Country Level Service Tax
• Individual State VATs
 Varying State VAT rates to be uniformed
• Inter-State Central Sales Tax (CST)
• Central Excise Duty
• Import Levies other than Basic Customs Duty (BCD)
 Countervailing Duty (CVD)
 Special Additional Duty of Customs (SAD)
 Education Cess
• Entry Taxes
• Luxury Tax
• Other Federal and State Surcharges and Cesses
The GST is a single unified tax on goods and services!
Slide 11

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12Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST
Tax Structure - Concurrent Federal (Centre) and State Jurisdictions
• Uniform tax principles
• Revenue sharing
Intra-State Transactions
• SGST / UTGST
• CGST
Inter-State Transactions and Imports
• IGST
 Single Combined Rate
 Also applying to Import
Similar to Canada GST, HST, and QST!
Slide 12

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The New GST
Compensation Cess
• Select “Luxury” Goods & Aerated Drinks
• Up to 15%, on top of the GST
• Applies for five years
Compensates states for loss of revenue arising from implementation of GST.

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The New GST
Rate Structure
• Four Rates
 28% - Luxury goods
 18% - Standard goods
 12% - Standard goods
 5% - Common household items
• Zero-Rating
 Export
 Special Economic Zone
• Exemption
GST Council will assign rates to specific goods and services.
Essential commodities (e.g., rice, wheat) might be zero-rated.

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15Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST
Place of Supply
• Destination Principle
• IGST Act
Place of Supply of Goods
• “The place of supply of goods shall be the location of the goods at the time at which the
movement of goods terminates for delivery to the recipient” Section 10 of IGST Act
 Place of supply of goods delivered by the supplier to a person on the direction of a third
person:
“It would be deemed that the third person has received the goods and the place of supply
of such goods shall be the principal place of business of such person.”
• Import
 Location of the importer
 IGST in addition to basic customs duty at the border

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16Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST
Place of Supply
Services
• General Rule – Location of the Recipient
 Including OIDAR Services
• Exceptions
 Service on Immovable Property (location of the immovable property)
 Admissions (location where the event is held)
 Transportation of goods (B2B: location of recipient; B2C: point of departure)
 Transportation of passengers (B2B: location of recipient; B2C: point of embarkation)

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17Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST
OIDAR Services
Online Information and Database Access or Retrieval Services:
“Services whose delivery is mediated by information technology over the internet or
an electronic network and the nature of which renders their supply essentially
automated and involving minimal human intervention and impossible to ensure in
the absence of information technology and includes electronic services such as,––
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangibles through
telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic
form through a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming”
Section 2 (15) of IGST Act

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The New GST
Input Tax Credits
ITC: A Key Advantage of GST
Uniform place of supply rule and rates across country
How ITC Works:
Hierarchy of applying IGST credit: in the order of IGST, CGST, and SGST liabilities.
Slide 18
Liability Input Tax Credit
CGST CGST, IGST
SGST SGST, IGST
IGST IGST, CSST, SGST

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19Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.Proprietary and Confidential—the information and materials in this document are not for use or disclosure outside of Taxware and Sovos Compliance except under express written consent.
The New GST

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The New GST
http://pib.nic.in/newsite/PrintR
elease.aspx?relid=148240

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The New GST
Registration Requirements
Mandatory Registration Regardless of Threshold Limit* – including but not limited to:
 Persons engaged in inter-state taxable supplies
 Non-resident taxable persons
 Casual taxable persons
 Persons required to pay tax under reverse charge
 E-commerce operator
 Foreign supplier of B2C OIDAR services
* aggregate turnover in a financial year > twenty lakh rupees (approx. 31,000 USD)
Source: Frequently Asked Questions (FAQ) on GST (2nd Edition. March 31, 2017)
http://www.cbec.gov.in/resources//htdocs-cbec/gst/faq-on-gst-second-edition.pdf

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The New GST
Foreign Supplier of B2C OIDAR Services
“On supply of online information and database access or retrieval
services by any person located in a non-taxable territory and received
by a non-taxable online recipient, the supplier of services located in a
non-taxable territory shall be the person liable for paying integrated
tax on such supply of services.” Section 14 of IGST Act
B2B: Reverse Charge
 Recipient is liable for tax on taxable supply by an unregistered supplier to a registered
recipient.

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The New GST
Reporting
Required Return for All Registered Taxable Persons
• GSTR - 3 (monthly return)
• GSTR - 1 (details of outward supplies [sale])
• GSTR - 2 (details of inward supplies [purchase])
Additional Forms
• Non-resident taxable person:
GSTR - 5
State Code of the Recipient Required for Inter-State Transactions
• GSTR - 1 and GSTR - 2: Additional state information if place of supply (POS) differs from the state of recipient.

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The New GST
Reporting
Uniform Online GST Portal (the GSTN System Project)
• Registration, returns, payments, taxpayer management (e.g., e-ledgers of Cash & ITC; tax
liability register), tax authority account and ledger management, etc.
• Invoice matching required for ITC
 B2B: Required fields of all invoices must be uploaded
 B2C: Required fields of all inter-state invoices of value more than Rs.2.5 lacs must be
uploaded

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Solutions in Native ERP
B2V Reform

26. The role of the accounting system / ERP - 1
Recording transactions
• Accounts Payable
• Accounts Receivable
• Inter-company, intra-company (warehouse movements)
• Outside the GL: travel expenses (Concur), e-
procurement, POS systems
Reporting
• Authorities
• Self-billing
• Management, stakeholders

27. The role of the accounting system / ERP - 2
Auditing
• Reconciliations of filings prior to submissions
• Internal; auditing
• External audits incl. tax audits
Forecasting,
• Identify trends, cash requirements
Data management
• Big data
• Regulatory issues

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Solutions with Calculation Engines
B2V Reform

29. Tax calculations
• Bill-from, bill-to (sell-from and sell-to)
• Ship-from, ship-to
• Customer status, VAT / GST identification number
• Place of supply determines tax treatment
• Rates
• Also: invoicing requirements

30. Tax calculations within an accounting system
Maintenance of rates and requirements
• Rate changes, and changes in the list of supplies subject to
reduced or luxury rates
• Changes in law, practices, regulations that affect the place of
supply
• VAT / GST identification numbers must be correct and updated

31. Tax calculations with a “bolt-on”
• It is not about the calculation itself!
• Ease of maintenance
• Rates, laws etc.
• Extended reporting capabilities
• ”Dashboard functionality”, daily/weekly or live error
reporting (thresholds!)
• Let the bolt-on guide you, but make sure to understand the
bolt-on’s capabilities and applications

32. How to prep for India GST - 1
Most important: Map all relevant transactions
• Domestic, including inter-State
• Imports
• Exports
• Services!
• Transitional transactions, think on-going sales, signed but
not executed contracts etc.
You will be UNABLE to go live if you don’t have a detailed overview

33. How to prep for India GST - 2
• “Lift-and-shift” does not work – each transaction type needs to
be individually reviewed and labeled for GST
• Invoicing
• Reporting
• Feeder systems, like e-procurement
• Vendor / customer tax number verification
• Training
• Finance / accounting, incl. AP and AR clerks
• Business development, invoicing
• Procurement

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The Path Ahead for Sovos Clients

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The Path Ahead for Sovos Clients
Early System Testing for Clients
• Standard content changes in Taxware Enterprise (TWE) to support the GST will be initiated in
early May to allow for advance testing
 Changes will be date sensitive
• Further content changes to closely follow release of further details by the GST Council
 e.g., specific product rates

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Questions?