Post on 05-Apr-2018
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
1/18
22nd January, 2010Dilip Save
Preparation for GST andRe-engineering BusinessProcesses
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
2/18
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
3/18
Evolution of TAX structure in India
Compliance
Simplicity
Prior to 2005 2005 2010
Low Moderate High
Low
Moderate
High
Legacy Tax structure
Introduction of VAT
Introduction ofGST
Complex to administer&
Relatively Low compliance
Moderate Complexity to administer&
Relatively High Compliance
Simple to administer&High Compliance
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
4/18
Benefits of GST
Government:
Consolidation of multiple Centre & State taxes Increased tax collection on wider tax base
Effective administration
Business:
Reduction in cascading effect of tax on tax Reduction in effective tax rate on goods & services
Ease of compliance
Economies of scale
Consumer:
Reduction in incidence of tax on goods / services
Benefits of scale & tax to manufacturers/service providers pass on
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
5/18
GST : Impact on Operations
GST will impact every aspect of Business Operation.
Manufacturing Distribution SalesSourcing
ERP - Base Line operating system
ServiceProviders & IT Support
Business Impact Analysis
GST
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
6/18
GST: Transition, 4 fold approach
BIA
Pricingto be
GST Efficient
Re EngineeringTax Management
Business
Drivers
will define
Supply Chain
Accounting / ERP
System to be
GST compatible
Mfg location
Sourcing strategyManufacturing strategyDistribution strategy
Stock transfersInter-state salesDirect despatchesStocking pointsGST efficient pricing
Alignment within businessTraining to all stake holdersExtract all eligible ITCsFiscal compliance
Transition / CutoffsERP to be GST compliantAutomation & interlocksStatutory reporting from ERPKPIs to monitor compliance &benefits
Thus GST Presents
BothChallenges and Opportunities
ToRe-Engineer Business
Processes & Operations
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
7/18
Challenges Opportunities
- Greater Transprancy for mutual advantage - Capture all elegible ITC- Global benchmarking - Skin out credit from supplier price
- Develop & levrage local suplliers - Align and interface document flow -
PCP/PO/Inv..
- Capture Source and Destination at PO stage - Sourcing from registered suppliers only
- Correction of purchases transactions thru - Stock holding points and stk levelsissue of back to back Debit / Credit note
- Purchase details with state cut directly from
ERP - with Optisuite enabler
- Star Vendors
- Re-look at works contract / conversion
contracts
- Standardize distribution for all Imports
- Document flow - Process aligned Master Data Base
Sourcing
Business drivers will define Supply ChainSourcing
Sourcing strategy Negotiations
Documentation Alignment Payments
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
8/18
Challenges Opportunities
- Economies of Scale v/s Refund
Central mfg > interstate trf > higher refund etc
- New challenges arising from single point tax
to multiple point
- Import of FG v/s mfg inhouse
- Capturing tax liability at the point of everytransaction / interstate movement
- In house manufacturing v/s contract / Jobwork manufacturing
w/c & admin cost , documentation
- Exemptions to be phased out; business to
explore new avenues for cost savings
- Leverage on Depot delivered cost v/s ex fty
cost
- STO = STI
Manufacturing
Business drivers will define Supply ChainManufacturing
Concept of manufacture will be irrelevant
New challenges from single point to multi point taxation.
All goods would attract GST at every value addition point
Evaluate forces which impact supply chain
- Some intrinsic to the organisation [value addition] Some market specific Some fiscal in nature
Influence of differential tax based on geographical locations will continue for some time (fiscal incentives)
Transition from origin based to a destination based tax regime. [ Tax on Consumption ]
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
9/18
Challenges Opportunities
- Hub & Spoke arrangement to be reviewed in
line with GST
- Avoid multiple stocking points; consolidate
distribution centres
-Re-look at Frt negotiations and agreements
- Infrastructure at depots and stocking points
: need revamp.
- Large transport operaters v/s local players
- Valuation of goods for movement of FG on
Stock transfer.
- APO model to be modified to consider "
Service From Any where"(Advance Planning Optimizer)
Distribution
Business drivers will define Supply ChainDistribution
Avoid multiple stocking pointOpportunity to compress supply chain and derive cost advantage
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
10/18
Challenges Opportunities
- Stock transfer - Impact on WC - Reginal deposts in place of state depots- Compress Distribution network
- Re-look Depot / RS documentation and
agreements
- Challenge to consolidate various RS points
- GT/MT/CSD to analyse and work on merits of
individual channel
- Leverage Direct Dispatch across the states
- Challenges wrt Price Inc / Drop &transitional issues.
- Set off of GST on distributions, sales &marketing spends.
- Evaluate Business impact on all categories
and businesses: action plans to address
them.
-Appropriate pricing decision
Sales
State-wise depot may be irrelevant;Regional depotsdirect dispatchWorking capital impact,
Pricing to be GST efficientSales
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
11/18
Pricing to be GST efficient
GST Efficient pricing
- Examine precise impact for timely pricing decisions to protect margins- Strategic planning for products / services adversely affected- Strike a right balance between tax incidence and price
Operating cost /COGM
Low Low High High
Tax Incidence High Low High Low
Price Maintain
or
Product Mix Can change based on result of above twofactors and market demand
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
12/18
ReEngineering Tax Management
Alignment within business
- Examine touch points for various business functions- Study financial impact; top down exercise with different scenarios- Business continuity plan to address specific concerns- Align business processes to be GST complaint
Training to all stake holders
- Awareness and training to business teams and operating people- Support to external stake holders : suppliers, distributors, etc.
Extract all eligible ITC- Tracking and settlement of credits in inter-state movements / sale- Set off / refunds of ITC in full and on time
Fiscal compliance- Full compliance to be driven through collective responsibility- Build in-house competencies and expertise
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
13/18
ERP to be GST complaint- Engagement with SAP team- Build industry consensus on acceptable format; escalate to policy makers- Identify areas/processes requiring change; support operating groups in implementation- Prepare for complications arising out of partial implementation of GST in the country- Integrate all operations into ERP system
Automation and interlocks- Minimal human intervention- Ensure correctness and completeness
Transition / cut offs- Certification of stk on cut off dt
- Statutory reporting- Build enablers to facilitate reporting and compliance- Reconciliation of monthly and annual returns with financial ledger- Statewise accounting and trading account
Accounting / ERP system to be GST compatible
-
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
14/18
Challenges Opportunities
- All operations need to be integrated into ERP - Statutory reporting from ERP
- Work with SAP to develop specifc req for
capturing and reporting of purchase and sale
data.
- Single data base for financial & statutory
returns; system to generate returns
- Tracking and settlement of credit in inter-state
movement - a challenge
- Fiscal compliance to be made easy; to be a
collective responsibility.
- CGST & SGST on each transaction to be
accounted separately with linkage to state of
origin &state of destination/consumption
- Masters (Product/Price/A/c to be aligned in
line with all India basis
- System to consolidate tax / set-off &
determine of tax liability
- Enhance payment tool ( Ariba ) capability to
handle complexity
- Reconciliation of monthly and annual returns
with financial ledger
- Full setoff on entity basis: a big opportunity
- Automation & interlocks in ITC
Accounting
Accounting / ERP system to be GST compatible
-
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
15/18
Key Deliverables -Accounting
All operations need to be integrated into SAP system
State-wise accounting of all transactions a must to facilitate preparation of state-wise tradingaccount.
CGST & SGST on each transaction to be accounted separately with linkage to state of origin andstate of destination / consumption
Corrections to purchase and sale transactions thru issue of Debit / Credit notes
System to consolidate tax / set-off and determine of tax liability
Reconciliation of monthly / annual returns with financial ledger
Management of fiscal documents and records
Tracking and settlement of credit in inter-state movement a challenge
Ensure full refund of input tax credit on taxable goods and services
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
16/18
Basic changes to - IT SystemsSAP or any other ERP
Discuss with SAP
Discussion internally with IT and functional team,
Discussed with industry to get insight to the BasicStructure changes required to align existing ERP to GSTscenario
Develop wrt transaction system e.g. on Sourcing Model,Sales Pricing, Current Excise, capture SGST & CGST
separately etc. Develop Obtisuite ( new application SAP supported) to
collate and report SGST/CGST data, state tradingaccount to be developed. ( Its SAP R3 enabledapplication and recognized by SAP)
Preparation of Accounting SOP
eg Changes required to ERPArchitecture to capture Dual TaxCapture , Source Destination informationState wise ledgerSimultaneous run of GST & current system
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
17/18
Action Plan
People
Core team of cross functions in place to drive GST implementation
Cascade learnings to operation groups and stake holders
Systems
Engagement with SAP team for smooth changeover
Build industry consensus on acceptable format & escalate the same to the policy makers
Identify areas/processes requiring change; support operating groups for implementation
Prepare for complications arising out of partial implementation of GST in the country
Govt liaison etc
Engagement with Govt. to ensure concessional GST rates on foods portfolio
Redressal of issues arising out of GST (e.g. GST on inter-state stock transfers)
Business
Examine touch points for various business functions to leverage on GST
Examine financial impact on the company, top-down exercise considering different business scenariosawaiting announcement of GST rules and final structure
7/31/2019 GST - Re-Engineering Business Process 22-1-10-Dilip Save
18/18
Thank you !