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We T a sfo o po ate values th ough E a li g Capa ilities
Setting GST Concern
HIGHLIGHTS /IMPACT/APPROACH
Setting GST Concern 1
 Our Background
 Our Presence
 Services Offered
 GST Highlights
 GST Advantages
 Way Forward to GST
 How STAN can help
Contents
Vision: “Transform corporate values through Enabling Capabilities”
2
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
View of Our Head office Located at Mohali
Leading Assurance & Consulting organization well positioned to assist you in India, access to
over team of 400 persons, 75 professionals with substantial industry background and
experience. Our firm is having adequate client base spanning from multinationals, domestic
public and private sector.
We are available at 14 locations to provide PAN India access to our clients.
Detailed business profile on each business segments & activities can be shared on demand.
Our Background
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
3Setting GST Concern
Our Presence in India
Branches
Chandigarh
Bengaluru
Delhi
Ludhiana
Jammu
Allrightsreserved/Preliminary&Tentative
S.No Virtual Offices
1 Ahmedabad
2 Cochin
3 Hyderabad
4 Jaipur
5 Kolkata
6 Lucknow
7 Pune
8 Chennai
9 Mumbai
10 Indore
Vision: “Transform corporate values through Enabling Capabilities”
4Setting GST Concern
S. Tandon & Associates – Leading Chartered Accountants firm in India
Competent Synergies Pvt. Ltd.(15th Largest ITES company in India)
Competent Finman Pvt. Ltd -.37th Largest member of BSE, NSE)
Integrated Risk Insurance Brokers Ltd. (IRDA approved)
Stan Professionals Pvt Ltd – Leading Consulting Company in India
About our Group
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
5Setting GST Concern
Our Team
• We have Tax and Advisory professionals, STAN has the team working on GST across all key
sectors.
• Our Policy Advisory Group comprises a specialized team of Multi-disciplinary team of
professionals Constituting Chartered Accountants ,CFA, MBAs & Cost Accountants.
• STAN subject matter professionals in goods and service tax, accounting, supply chain,
project management, and IT with deep sector knowledge, provide an integrated service
offering to our clients.
Vision: “Transform corporate values through Enabling Capabilities”
6
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
Our Assurance Services
Management & Operational (Process review) Audit
Supply Chain Management (SCM) Process Audits
HR Risk containment Audit
Information Security (IS)/ITGS Audits
Forex Management Audit
Energy Audit
Project Capitalization Audits
Legal and Secretarial Audits
Costing systems Review/Audits
Revenue Assurance Audits
Vision: “Transform corporate values through Enabling Capabilities”
7
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
GST
HIGHLIGHTS
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
8Setting GST Concern
• GST introduced in 1991 by replacing federal Sales Tax.
Levy of GST ranging from 13% to 15% in case of
provinces and other at rate of 5%.
• Tax to GDP ratio first increased and then decreased
when rates we raised and then steady up down
• Vat has not been money machine for Canada.
• GST introduced in 1985 Peak rate of tax is 15%
• GST increased the tax to GDP ration,
• GST introduced as Constitutional bill in 2014.
• Rate of Taxes Concessional 12%,standard rate 17-18%,
Luxury rate 40%.
GST Global Outlook
31%
36%
New Zealand
34%
31%
CANADA
Australia
• GST introduced in 1999 Peak rate of tax is 10%.
• Tax to GDP ration in Australia increased after
implementing GDP.
29%
30%
11%
9%
• GST as VAT introduced in 1992 Initial rate of tax is 7%.
• Tax to GDP ration in increased after implementing GDP.
THAILAND
31+%
31 -%
Vision: “Transform corporate values through Enabling Capabilities”
9Setting GST Concern
Allrightsreserved/Preliminary&Tentative
GST is a consumption tax that is collected on sale of manufactured goods and services. Since it is
a consumption tax it is passed on until the last stage, wherein the customer bears the tax, just like excise duty
is imposed currently.
Broking firm Nomura estimates that the GST would drive up headline CPI inflation by 20-70 basis points in
the first year due to higher prices of electricity, clothing & footwear, health/medicine, and education after
accounting for input taxes and potential asymmetric pricing behavior,
However in the long term, lower tax and logistic costs, productivity gains and higher investments under
the GST should structurally reduce inflation.
As tax cascading disappears, the industry will move to the lagging regions because of lower costs and thus
bring these into the growth dynamics.
Stock market analysts are already zeroing in on stocks and sectors that will be positively impacted by the
implementation of this key tax reform.
As per estimates from the National Council of Applied Economic Research (NCAER), growth could increase
by 0.9% to 1.7%.
Preliminary results indicate that the growth in GDP can be between 2-2.5% with the implementation of a
well-designed GST. The increase in exports can be between 10-14%.
GST Impact on Indian Economy
Vision: “Transform corporate values through Enabling Capabilities”
10
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
Pre GST Tax Structure
IndirectTax
Central Tax
Excise
Service Tax
Custom
State Tax
VAT
Entry Tax, luxury tax,
Lottery Tax, etc.
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
11Setting GST Concern
Taxes Subsumed Under GST
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
12Setting GST Concern
Key Features of Ideal GST
Destination based Tax
Applies to all stages of the value chain
Zero rated Export of all goods and services
Seamless Credit
Minimum floor rates
No e ui e e t of C Fo
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
13Setting GST Concern
GST
Intra
State
CGST SGST
Inter
State
IGST
(CGST+SGST)
Credit Methodology Priority
CGST
CGST
IGST
SGST
SGST
IGST
IGST
IGST
CGST
SGST
Proposed GST Structure
Conceptual Framework
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
14Setting GST Concern
GST rates as per New Model GST Law
Allrightsreserved/Preliminary&Tentative
Intra
State
Taxable
Supply
Excise and
Service Tax will
be known as
CGST
Local VAT &
Other taxes will
be known as
SGST
Inter State
Taxable Supply
CST will be
replaced by
Integrated GST
(IGST)
Approx. Sum
Total of CGST
and SGST
Import From
Outside India
Custom Duty
In Place of CVD
and SAD, IGST
will be charged
14%+14
%=28%
14%
14%
14%
14%
Moreover, Sec 8 of GST(Compensation for loss of revenue )Bill, 2016 makes provision for cess leviable which would be non vatable.
Vision: “Transform corporate values through Enabling Capabilities”
15Setting GST Concern
GSTIN Code under GST
State PAN Entity Blank Check
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
State Codes
PAN
Entity Code for Business Verticals of entities with same
PAN in same State
Left blank for future use
Check Digit
Digit
1-2
Digit
3-12
Digit
13
Digit
14
Digit
15
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
16Setting GST Concern
The closing stock is held either in the form of raw materials, semi-finished goods, or finished goods,
and must be used or intended to be used for taxable supplies.
The benefit of such credit is passed on, by way of reduced prices, to the recipient. In current tax
regime, duty/tax is added as product cost since the Input Tax Credit is not allowed.
On transition to GST, ITC will be allowed, and this should naturally result in the reduction of base
cost, and subsequently reduced final price to customers.
In GST, you are eligible for Input Tax credit if you are a regular tax payer only. A taxable person
opting for composition levy under GST is not allowed to claim Input Tax credit.
You have invoices or any other prescribed duty/tax paying documents in respect of the closing stock
of inputs (including semi-finished goods and finished goods).
The date of invoices or any other prescribed duty / tax paying documents is within 12 months from
the date of transitioning to GST.
Eligibility conditions to avail Input Tax credit held in your closing stock
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
17Setting GST Concern
Special Provision ITC
Person newly applying for registration fails to apply for registration with 30 from the date which he becomes liable for registration
–ITC credit in respect of goods held in stock or contained in Finished 0r semi finished goods held in stock would not be available
Person liable to be registered as per Schedule V
• If “aggregate Turnover” exceeds Rs 20 Lacs
• In Special category States i.e. North Eastern States + Sikkim ,
J&K Himachal Pradesh & Uttarakhand if “Aggregate turnover”
exceeds Rs 10 Lacs
Every Supplier(Except)
• Supply of goods after completion of job work by registered job
worker be included in turnover of principal not job worker
Job Worker
Person registered under existing law shall be
required to be registered under GST Law
Every person liable for registration as per
schedule V -30 days from “Effective date”
Aggregate Turnover
Taxable +Non Taxable +
Exempt+ Export of
Goods & Services
Excl. GST Taxes
Incl. All supplies
whether own or behalf of
principal
Situation Effective date
Transfer /Succession Date of Transfer/
succession
Amalgamation/
demerger
ROC Certification
giving effect high Court
Order
Other Cases Date on which supply
exceeds threshold limit
Vision: “Transform corporate values through Enabling Capabilities”
18
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
Registration Under Schedule V
Registration
If Turnover Exceed
Mandatory
Irrespective Turnover
Person Making Inter State Supply
Casual Taxable Person
Reverse Charge
E-Commerce Operator
Non Resident
Persons required to deduct Tax @1%
Persons required to collect tax u/s 56
Person supplying goods on behalf of
other registered taxable persons
Input service Distributor
Person who supply goods & Services
other than branded services(through E
commerce Operator)
OIDAR Services
Notified Persons
Not Required
Person supplying
Exclusively goods/ services
which are not liable or
wholly exempt
Agriculturist
Vision: “Transform corporate values through Enabling Capabilities”
Allrightsreserved/Preliminary&Tentative
19Setting GST Concern
Decoding Impact of GST on Hotel Industry
from Model GST Law Perspective
• GST a good hope for
Hotel Industry
Impact
Allrightsreserved/Preliminary&Tentative
20Hotel Industry Impact
Current Scenario
Vision: “Transform corporate values through Enabling Capabilities”
Allrightsreserved/Preliminary&Tentative
21
Cascading Taxes
Diversified Taxes
F& B
•The hotel and tourism industry hit
various taxes across the channel by
value added tax (VAT) to Output service
tax
•Major taxes that can be clearly seen on
any receipt of hotel are VAT, luxury
taxes and service tax. The VAT
varies from state to state and lies
between 12-14.5%.
•Similarly, Luxury taxes depends on
the proportion of room tariff and
usually scales between 0-12 percent.
•Service taxes are the once that
fluctuates, it depends on the type of
service that has been rendered or
ordered. It is usually valued at 8.7%
of the total room tariff.
•Food rates vary from place to place
and so does it bill/tax.
•For food & beverage, 40% of the bill
attracts the service tax and it comes to
5.8 percent when considered on total
bill.
For booking in hotels for occasions like
marriages, ceremonies and meetings, an
abatement of 30% is given and the
effective service tax works out to 10.15% on
the total charges.
Bookings
Hotel Industry Impact
Proposed Scenario
Vision: “Transform corporate values through Enabling Capabilities”
Allrightsreserved/Preliminary&Tentative
22
Four tier structure of 5, 12, 18 and 28 per cent of which the service sector will
be taxed at 18 per cent.
The 5 per cent tax slab on food was proposed, which is a positive outcome of
subsumed taxes for hotels and restaurants.
However, the 18 per cent levy on services or room revenue in our case, compared
to our neighbouring countries which charge a Tourism tax between 4 to 7 per cent, rules
out fair competition.
Hotel Industry Impact
•
Vision: “Transform corporate values through Enabling Capabilities”
Allrightsreserved/Preliminary&Tentative
23
Federation Demands regarding Taxes
The Federation of Associations in Indian Tourism and Hospitality has pointed
out amendments to the draft Goods and Services Tax law that supports exception for
tourism and hospitality businesses, and put them under 6-8 per cent tax slab
just similar to other countries.
The federations has been in talks with the finance ministry and governments of
various states on the GST Law.
In addition to the proposed VAT and Luxury tax which currently have a set off in the
draft law, the federation’s other demands include a GST set-off which subsumes
inter state levies on transportation, state electricity cesses and liquor tax, and
making an exception for the sector in the classification of export services.
It has highlighted that most nations recognise tourism as a critical economic
driver and follow a Tourism Rate (TR) which is lower than 50% of the
Standard Rate (SR) on other sectors.
Hotel Industry Impact
Other Financial Impact
24
The hotel and tourism industry spend a lot of money on construction
and renovation. They have to move with the times in order to remain
competitive and attract customers. The money paid as taxes on the
construction activities cannot be used as input credit to set off the
taxes paid on the services offered by the hotels, restaurants, and
tourism industry.
The R&D cess which is applicable on technical know-how fees
and franchise agreements in the industry is likely to become a part
and parcel of GST. Thus simplify the taxation procedure for the hotel
and tourism industry.
The hotel Industry is hopeful that implementation of Goods &
Servies Taxes (GST) will impact it positively, but there is concern
about the possible high rate of GST for the industry. The industry is
awaiting clarity on the GST rate. The actual impact of GST on the
hotel industry will depend on the GST rate applicable to the
industry.
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
Hotel Industry Impact
Benefits
25Hotel Industry Impact
Under GST, the single largest advantage would be uniformity of tax rates and applicability of single rate, better utilization of
input credit and benefits to end user in terms of lower price thereby attracting more tourists and increase in GDP Numbers.
•5 per cent tax slab on food, which is a positive welcome outcome of subsumed taxes for hotels and restaurants.
•However, the 18 per cent levy on services or room revenue in our case, compared to our neighbouring countries which
charge a Tourism tax between 4 to 7 per cent, rules out fair competition
Excise, VAT and other taxes amount to upwards of 20% for the luxury sector. "If GST is estimated to be around 18%, it will be
positive for the sector .
•Entertainment, luxury and other service taxes in hospitality amount to more than 22%, compared with the proposed
18% under the GST regime. So GST should be positive for the sector
When the VAT, service tax, and luxury tax are combined the total impact goes up and lies between 20 to 27 per cent.
With the GST implementation, the multiple taxes would be replaced by one single tax, the rate of which is likely to be between 17
to 19 per cent. The hotel and tourism industry would benefit in the form of a lower tax rate which should help in attracting more
tourists to India. However, the luxury tax is not applicable on all transactions and the GST rate may be at par or higher in such cases.
The hotel industry would definitely prefer a lower GST rate between 10 to 15 percent.
Allrightsreserved/Preliminary&Tentative
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
26Setting GST Concern
CreatingAwareness
•Awareness
programs to
reach
stakeholders
•Stakeholders
to be kept
informed
about plan &
progress
implementatio
n.
ChangeAssistance
•Its Critical for
business
process
owners to
manage
attributed
change in GST
implementatio
n in daily
activities.
IntegrateProcesses
•Multiple
systems and
modules at
various stages
to be ready for
GST
•Systems/
applications to
be identified,
developed and
tested
thoroughly.
Key Considerations for EntityImplementationofGST
TimelyReadiness
•Organization
to ensure
timely
readiness for
GST
Implementatio
n
•Any delays
attracts
potential
reputational
risks.
•Critical to
remove
roadblocks
UnitingStakeholders
•Different
Stakeholders
different
interest.
•Common
grounds to be
identified
together
under
common
clause.
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
27Setting GST Concern
Increase in
the rate for
service sector
Non
availability of
CST
Credit(Credit
of IGST will be
Available)
Input service
Credit to
wholesalers
and retailers
Pruning of
Exemption
List
Availability of
credit on
opening stock
Credit on VAT
paid goods
available to
Service
provider
Saving on Non
payment of
Octroi, Entry
Tax, Luxury
Tax, etc.
Financial Impact
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
28Setting GST Concern
WiderImplicationofGST
Suppliers
Customers
Fin &
Admin
Human
Capital
Training
Legal
Sales
Strategies
Information
Systems
Compliance
• Sourcing from
Appropriate Vendors
• Maximizing tax credit
from best practices
• Appropriate Pricing
• Structuring of financing
• Identification of
Correct GST
Liability
• Cash flow Impact
• GST Compliances
• Other
Administrative
Tasks
• Trainingincl. workshopson
rolesand responsibilities
• Facilitating business
readiness
• GST impacts on
contracts
• GSTregistrations
• Taxcredittransitions
• Returnreporting
• Other statutory
compliances
• Impact on current
inventory
• Pricing Strategies
• Effect on Demand
• System Design changes
for GST compliance
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
29Setting GST Concern
Compliances
Reporting
of
accumulate
d credits
New
formats of
invoices,
waybills,
returns/cha
llans etc.
Rate
change
to be
implement
ed
Classificati
on of
goods and
services
Manner of
computatio
n and
payment
Periodical
Returns
Redesign
IT
Systems
Statutory
forms
–likely to be
discontinued
Migration of
registrations
- PAN based
GST Compliance Framework
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
30Setting GST Concern
 With diverse clientele, our diverse
experience across multiple
segments of industryIndustry Focus
STAN Difference
Project Management
Capabilities
Technical Skills
 Strong working relationship
and access with government
Departments
 Have blend of Highly Qualified
team of professionals
 Holistic suite of offering to
ensure smooth GST transition
 Success fully concluded GST
impact assessment for clients
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
31Setting GST Concern
How STAN can Help in GST?
Feasibility
Studies
• GST Impact Analysis
on Business
• Advisor on additional
issued by authorities
IT & Systems
• Advising on
Accounting, billing
and invoicing systems
• Assisting IT
manual around
solutions wherever
required
Migration &
Compliance
• Migration of VAT to
GST
• Identifying
Additional Compliance
responsibilities
• Handling Legal
Compliances i.e returns
filing for you
• Assisting with
Registration across
country
Advisory
• Advising Implications
on various Provisions
• Delivering
comprehensive
approach towards
valuation of
bundles consisting of
services & Goods
• Providing VAT
implication guidance
for contractual
terms in future
Agreements
Allrightsreserved/Preliminary&Tentative
Allrightsreserved/Preliminary&Tentative
Vision: “Transform corporate values through Enabling Capabilities”
32Setting GST Concern
Our Major Credentials
Vision: “Transform corporate values through Enabling Capabilities”
33
Allrightsreserved/Preliminary&Tentative
Setting GST Concern
Allrightsreserved/Preliminary&Tentative
Let’s talk
For a deeper discussion of how this issue might affect your business,
please contact:
Tax & Regulatory Services – Indirect Taxes
Madan Chauhan Kapil Vohra Sambhav Jain
0172-5098288, Ext. 107 0172-5098288, Ext. 117 0172-5098288, Ext. 102
madan.chauhan@staindia.org Kapil.Vohra@staindia.org Sambhav.jain@stan.in
Vision: “Transform corporate values through Enabling Capabilities”
34
Allrightsreserved/Preliminary&Tentative
Setting GST Concern

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GST on Hotel industry

  • 1. We T a sfo o po ate values th ough E a li g Capa ilities Setting GST Concern HIGHLIGHTS /IMPACT/APPROACH Setting GST Concern 1
  • 2.  Our Background  Our Presence  Services Offered  GST Highlights  GST Advantages  Way Forward to GST  How STAN can help Contents Vision: “Transform corporate values through Enabling Capabilities” 2 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 3. View of Our Head office Located at Mohali Leading Assurance & Consulting organization well positioned to assist you in India, access to over team of 400 persons, 75 professionals with substantial industry background and experience. Our firm is having adequate client base spanning from multinationals, domestic public and private sector. We are available at 14 locations to provide PAN India access to our clients. Detailed business profile on each business segments & activities can be shared on demand. Our Background Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 3Setting GST Concern
  • 4. Our Presence in India Branches Chandigarh Bengaluru Delhi Ludhiana Jammu Allrightsreserved/Preliminary&Tentative S.No Virtual Offices 1 Ahmedabad 2 Cochin 3 Hyderabad 4 Jaipur 5 Kolkata 6 Lucknow 7 Pune 8 Chennai 9 Mumbai 10 Indore Vision: “Transform corporate values through Enabling Capabilities” 4Setting GST Concern
  • 5. S. Tandon & Associates – Leading Chartered Accountants firm in India Competent Synergies Pvt. Ltd.(15th Largest ITES company in India) Competent Finman Pvt. Ltd -.37th Largest member of BSE, NSE) Integrated Risk Insurance Brokers Ltd. (IRDA approved) Stan Professionals Pvt Ltd – Leading Consulting Company in India About our Group Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 5Setting GST Concern
  • 6. Our Team • We have Tax and Advisory professionals, STAN has the team working on GST across all key sectors. • Our Policy Advisory Group comprises a specialized team of Multi-disciplinary team of professionals Constituting Chartered Accountants ,CFA, MBAs & Cost Accountants. • STAN subject matter professionals in goods and service tax, accounting, supply chain, project management, and IT with deep sector knowledge, provide an integrated service offering to our clients. Vision: “Transform corporate values through Enabling Capabilities” 6 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 7. Our Assurance Services Management & Operational (Process review) Audit Supply Chain Management (SCM) Process Audits HR Risk containment Audit Information Security (IS)/ITGS Audits Forex Management Audit Energy Audit Project Capitalization Audits Legal and Secretarial Audits Costing systems Review/Audits Revenue Assurance Audits Vision: “Transform corporate values through Enabling Capabilities” 7 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 8. GST HIGHLIGHTS Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 8Setting GST Concern
  • 9. • GST introduced in 1991 by replacing federal Sales Tax. Levy of GST ranging from 13% to 15% in case of provinces and other at rate of 5%. • Tax to GDP ratio first increased and then decreased when rates we raised and then steady up down • Vat has not been money machine for Canada. • GST introduced in 1985 Peak rate of tax is 15% • GST increased the tax to GDP ration, • GST introduced as Constitutional bill in 2014. • Rate of Taxes Concessional 12%,standard rate 17-18%, Luxury rate 40%. GST Global Outlook 31% 36% New Zealand 34% 31% CANADA Australia • GST introduced in 1999 Peak rate of tax is 10%. • Tax to GDP ration in Australia increased after implementing GDP. 29% 30% 11% 9% • GST as VAT introduced in 1992 Initial rate of tax is 7%. • Tax to GDP ration in increased after implementing GDP. THAILAND 31+% 31 -% Vision: “Transform corporate values through Enabling Capabilities” 9Setting GST Concern Allrightsreserved/Preliminary&Tentative
  • 10. GST is a consumption tax that is collected on sale of manufactured goods and services. Since it is a consumption tax it is passed on until the last stage, wherein the customer bears the tax, just like excise duty is imposed currently. Broking firm Nomura estimates that the GST would drive up headline CPI inflation by 20-70 basis points in the first year due to higher prices of electricity, clothing & footwear, health/medicine, and education after accounting for input taxes and potential asymmetric pricing behavior, However in the long term, lower tax and logistic costs, productivity gains and higher investments under the GST should structurally reduce inflation. As tax cascading disappears, the industry will move to the lagging regions because of lower costs and thus bring these into the growth dynamics. Stock market analysts are already zeroing in on stocks and sectors that will be positively impacted by the implementation of this key tax reform. As per estimates from the National Council of Applied Economic Research (NCAER), growth could increase by 0.9% to 1.7%. Preliminary results indicate that the growth in GDP can be between 2-2.5% with the implementation of a well-designed GST. The increase in exports can be between 10-14%. GST Impact on Indian Economy Vision: “Transform corporate values through Enabling Capabilities” 10 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 11. Pre GST Tax Structure IndirectTax Central Tax Excise Service Tax Custom State Tax VAT Entry Tax, luxury tax, Lottery Tax, etc. Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 11Setting GST Concern
  • 12. Taxes Subsumed Under GST Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 12Setting GST Concern
  • 13. Key Features of Ideal GST Destination based Tax Applies to all stages of the value chain Zero rated Export of all goods and services Seamless Credit Minimum floor rates No e ui e e t of C Fo Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 13Setting GST Concern
  • 14. GST Intra State CGST SGST Inter State IGST (CGST+SGST) Credit Methodology Priority CGST CGST IGST SGST SGST IGST IGST IGST CGST SGST Proposed GST Structure Conceptual Framework Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 14Setting GST Concern
  • 15. GST rates as per New Model GST Law Allrightsreserved/Preliminary&Tentative Intra State Taxable Supply Excise and Service Tax will be known as CGST Local VAT & Other taxes will be known as SGST Inter State Taxable Supply CST will be replaced by Integrated GST (IGST) Approx. Sum Total of CGST and SGST Import From Outside India Custom Duty In Place of CVD and SAD, IGST will be charged 14%+14 %=28% 14% 14% 14% 14% Moreover, Sec 8 of GST(Compensation for loss of revenue )Bill, 2016 makes provision for cess leviable which would be non vatable. Vision: “Transform corporate values through Enabling Capabilities” 15Setting GST Concern
  • 16. GSTIN Code under GST State PAN Entity Blank Check 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 State Codes PAN Entity Code for Business Verticals of entities with same PAN in same State Left blank for future use Check Digit Digit 1-2 Digit 3-12 Digit 13 Digit 14 Digit 15 Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 16Setting GST Concern
  • 17. The closing stock is held either in the form of raw materials, semi-finished goods, or finished goods, and must be used or intended to be used for taxable supplies. The benefit of such credit is passed on, by way of reduced prices, to the recipient. In current tax regime, duty/tax is added as product cost since the Input Tax Credit is not allowed. On transition to GST, ITC will be allowed, and this should naturally result in the reduction of base cost, and subsequently reduced final price to customers. In GST, you are eligible for Input Tax credit if you are a regular tax payer only. A taxable person opting for composition levy under GST is not allowed to claim Input Tax credit. You have invoices or any other prescribed duty/tax paying documents in respect of the closing stock of inputs (including semi-finished goods and finished goods). The date of invoices or any other prescribed duty / tax paying documents is within 12 months from the date of transitioning to GST. Eligibility conditions to avail Input Tax credit held in your closing stock Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 17Setting GST Concern
  • 18. Special Provision ITC Person newly applying for registration fails to apply for registration with 30 from the date which he becomes liable for registration –ITC credit in respect of goods held in stock or contained in Finished 0r semi finished goods held in stock would not be available Person liable to be registered as per Schedule V • If “aggregate Turnover” exceeds Rs 20 Lacs • In Special category States i.e. North Eastern States + Sikkim , J&K Himachal Pradesh & Uttarakhand if “Aggregate turnover” exceeds Rs 10 Lacs Every Supplier(Except) • Supply of goods after completion of job work by registered job worker be included in turnover of principal not job worker Job Worker Person registered under existing law shall be required to be registered under GST Law Every person liable for registration as per schedule V -30 days from “Effective date” Aggregate Turnover Taxable +Non Taxable + Exempt+ Export of Goods & Services Excl. GST Taxes Incl. All supplies whether own or behalf of principal Situation Effective date Transfer /Succession Date of Transfer/ succession Amalgamation/ demerger ROC Certification giving effect high Court Order Other Cases Date on which supply exceeds threshold limit Vision: “Transform corporate values through Enabling Capabilities” 18 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 19. Registration Under Schedule V Registration If Turnover Exceed Mandatory Irrespective Turnover Person Making Inter State Supply Casual Taxable Person Reverse Charge E-Commerce Operator Non Resident Persons required to deduct Tax @1% Persons required to collect tax u/s 56 Person supplying goods on behalf of other registered taxable persons Input service Distributor Person who supply goods & Services other than branded services(through E commerce Operator) OIDAR Services Notified Persons Not Required Person supplying Exclusively goods/ services which are not liable or wholly exempt Agriculturist Vision: “Transform corporate values through Enabling Capabilities” Allrightsreserved/Preliminary&Tentative 19Setting GST Concern
  • 20. Decoding Impact of GST on Hotel Industry from Model GST Law Perspective • GST a good hope for Hotel Industry Impact Allrightsreserved/Preliminary&Tentative 20Hotel Industry Impact
  • 21. Current Scenario Vision: “Transform corporate values through Enabling Capabilities” Allrightsreserved/Preliminary&Tentative 21 Cascading Taxes Diversified Taxes F& B •The hotel and tourism industry hit various taxes across the channel by value added tax (VAT) to Output service tax •Major taxes that can be clearly seen on any receipt of hotel are VAT, luxury taxes and service tax. The VAT varies from state to state and lies between 12-14.5%. •Similarly, Luxury taxes depends on the proportion of room tariff and usually scales between 0-12 percent. •Service taxes are the once that fluctuates, it depends on the type of service that has been rendered or ordered. It is usually valued at 8.7% of the total room tariff. •Food rates vary from place to place and so does it bill/tax. •For food & beverage, 40% of the bill attracts the service tax and it comes to 5.8 percent when considered on total bill. For booking in hotels for occasions like marriages, ceremonies and meetings, an abatement of 30% is given and the effective service tax works out to 10.15% on the total charges. Bookings Hotel Industry Impact
  • 22. Proposed Scenario Vision: “Transform corporate values through Enabling Capabilities” Allrightsreserved/Preliminary&Tentative 22 Four tier structure of 5, 12, 18 and 28 per cent of which the service sector will be taxed at 18 per cent. The 5 per cent tax slab on food was proposed, which is a positive outcome of subsumed taxes for hotels and restaurants. However, the 18 per cent levy on services or room revenue in our case, compared to our neighbouring countries which charge a Tourism tax between 4 to 7 per cent, rules out fair competition. Hotel Industry Impact
  • 23. • Vision: “Transform corporate values through Enabling Capabilities” Allrightsreserved/Preliminary&Tentative 23 Federation Demands regarding Taxes The Federation of Associations in Indian Tourism and Hospitality has pointed out amendments to the draft Goods and Services Tax law that supports exception for tourism and hospitality businesses, and put them under 6-8 per cent tax slab just similar to other countries. The federations has been in talks with the finance ministry and governments of various states on the GST Law. In addition to the proposed VAT and Luxury tax which currently have a set off in the draft law, the federation’s other demands include a GST set-off which subsumes inter state levies on transportation, state electricity cesses and liquor tax, and making an exception for the sector in the classification of export services. It has highlighted that most nations recognise tourism as a critical economic driver and follow a Tourism Rate (TR) which is lower than 50% of the Standard Rate (SR) on other sectors. Hotel Industry Impact
  • 24. Other Financial Impact 24 The hotel and tourism industry spend a lot of money on construction and renovation. They have to move with the times in order to remain competitive and attract customers. The money paid as taxes on the construction activities cannot be used as input credit to set off the taxes paid on the services offered by the hotels, restaurants, and tourism industry. The R&D cess which is applicable on technical know-how fees and franchise agreements in the industry is likely to become a part and parcel of GST. Thus simplify the taxation procedure for the hotel and tourism industry. The hotel Industry is hopeful that implementation of Goods & Servies Taxes (GST) will impact it positively, but there is concern about the possible high rate of GST for the industry. The industry is awaiting clarity on the GST rate. The actual impact of GST on the hotel industry will depend on the GST rate applicable to the industry. Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” Hotel Industry Impact
  • 25. Benefits 25Hotel Industry Impact Under GST, the single largest advantage would be uniformity of tax rates and applicability of single rate, better utilization of input credit and benefits to end user in terms of lower price thereby attracting more tourists and increase in GDP Numbers. •5 per cent tax slab on food, which is a positive welcome outcome of subsumed taxes for hotels and restaurants. •However, the 18 per cent levy on services or room revenue in our case, compared to our neighbouring countries which charge a Tourism tax between 4 to 7 per cent, rules out fair competition Excise, VAT and other taxes amount to upwards of 20% for the luxury sector. "If GST is estimated to be around 18%, it will be positive for the sector . •Entertainment, luxury and other service taxes in hospitality amount to more than 22%, compared with the proposed 18% under the GST regime. So GST should be positive for the sector When the VAT, service tax, and luxury tax are combined the total impact goes up and lies between 20 to 27 per cent. With the GST implementation, the multiple taxes would be replaced by one single tax, the rate of which is likely to be between 17 to 19 per cent. The hotel and tourism industry would benefit in the form of a lower tax rate which should help in attracting more tourists to India. However, the luxury tax is not applicable on all transactions and the GST rate may be at par or higher in such cases. The hotel industry would definitely prefer a lower GST rate between 10 to 15 percent. Allrightsreserved/Preliminary&Tentative
  • 26. Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 26Setting GST Concern
  • 27. CreatingAwareness •Awareness programs to reach stakeholders •Stakeholders to be kept informed about plan & progress implementatio n. ChangeAssistance •Its Critical for business process owners to manage attributed change in GST implementatio n in daily activities. IntegrateProcesses •Multiple systems and modules at various stages to be ready for GST •Systems/ applications to be identified, developed and tested thoroughly. Key Considerations for EntityImplementationofGST TimelyReadiness •Organization to ensure timely readiness for GST Implementatio n •Any delays attracts potential reputational risks. •Critical to remove roadblocks UnitingStakeholders •Different Stakeholders different interest. •Common grounds to be identified together under common clause. Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 27Setting GST Concern
  • 28. Increase in the rate for service sector Non availability of CST Credit(Credit of IGST will be Available) Input service Credit to wholesalers and retailers Pruning of Exemption List Availability of credit on opening stock Credit on VAT paid goods available to Service provider Saving on Non payment of Octroi, Entry Tax, Luxury Tax, etc. Financial Impact Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 28Setting GST Concern
  • 29. WiderImplicationofGST Suppliers Customers Fin & Admin Human Capital Training Legal Sales Strategies Information Systems Compliance • Sourcing from Appropriate Vendors • Maximizing tax credit from best practices • Appropriate Pricing • Structuring of financing • Identification of Correct GST Liability • Cash flow Impact • GST Compliances • Other Administrative Tasks • Trainingincl. workshopson rolesand responsibilities • Facilitating business readiness • GST impacts on contracts • GSTregistrations • Taxcredittransitions • Returnreporting • Other statutory compliances • Impact on current inventory • Pricing Strategies • Effect on Demand • System Design changes for GST compliance Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 29Setting GST Concern
  • 30. Compliances Reporting of accumulate d credits New formats of invoices, waybills, returns/cha llans etc. Rate change to be implement ed Classificati on of goods and services Manner of computatio n and payment Periodical Returns Redesign IT Systems Statutory forms –likely to be discontinued Migration of registrations - PAN based GST Compliance Framework Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 30Setting GST Concern
  • 31.  With diverse clientele, our diverse experience across multiple segments of industryIndustry Focus STAN Difference Project Management Capabilities Technical Skills  Strong working relationship and access with government Departments  Have blend of Highly Qualified team of professionals  Holistic suite of offering to ensure smooth GST transition  Success fully concluded GST impact assessment for clients Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 31Setting GST Concern
  • 32. How STAN can Help in GST? Feasibility Studies • GST Impact Analysis on Business • Advisor on additional issued by authorities IT & Systems • Advising on Accounting, billing and invoicing systems • Assisting IT manual around solutions wherever required Migration & Compliance • Migration of VAT to GST • Identifying Additional Compliance responsibilities • Handling Legal Compliances i.e returns filing for you • Assisting with Registration across country Advisory • Advising Implications on various Provisions • Delivering comprehensive approach towards valuation of bundles consisting of services & Goods • Providing VAT implication guidance for contractual terms in future Agreements Allrightsreserved/Preliminary&Tentative Allrightsreserved/Preliminary&Tentative Vision: “Transform corporate values through Enabling Capabilities” 32Setting GST Concern
  • 33. Our Major Credentials Vision: “Transform corporate values through Enabling Capabilities” 33 Allrightsreserved/Preliminary&Tentative Setting GST Concern
  • 34. Allrightsreserved/Preliminary&Tentative Let’s talk For a deeper discussion of how this issue might affect your business, please contact: Tax & Regulatory Services – Indirect Taxes Madan Chauhan Kapil Vohra Sambhav Jain 0172-5098288, Ext. 107 0172-5098288, Ext. 117 0172-5098288, Ext. 102 madan.chauhan@staindia.org Kapil.Vohra@staindia.org Sambhav.jain@stan.in Vision: “Transform corporate values through Enabling Capabilities” 34 Allrightsreserved/Preliminary&Tentative Setting GST Concern