Goods and Service tax (GST) Navigator

EY proprietary tool with state-of-the-art technology to assess and simulate tax impact in the GST environment

Goods and Services Tax (GST) has been identified as one of most important tax reforms post-Independence. It is a tax trigger that will lead to business transformation for the industry and, thus, requires proactive and advance planning to be compliant in the new regime.

With its proposed implementation imminent, it is critical for companies with business operations in India to understand the broad contours and framework of the proposed GST law. An understanding of its potential impact on their business and the way forward in addressing implementation challenges is the need of the hour.

What GST brings with it?

GST is expected to be a destination-based tax that should replace the current Central taxes, i.e., excise duty, service tax, additional customs duty (CVD), Special Additional Duty of Customs (SAD), central charges and cesses, and local State taxes, i.e., value added tax (VAT), Central Sales Tax (CST), octroi and entry tax, purchase tax, luxury tax, taxes on lottery, betting and gambling, state cesses, and surcharges and entertainment tax (other than the tax levied by the local bodies).

It will be a dual levy, with States imposing State GST (SGST) and the Center imposing Central GST (CGST). Also, inter–state supplies would attract an Integrated GST, which would be the sum total of CGST and SGST. The Lok Sabha has passed the Constitutional (122nd Amendment) Bill, 2014 on 6 May 2015 with a proposal for an additional tax of up to 1% on the supply of the goods. Petroleum products such as crude, high-speed diesel, motor spirit, aviation turbine fuel, natural gas and alcohol for human consumption, are proposed to be outside the ambit of GST.

The key features of EY’s GST Navigator tool are:

• Offers a state-of-the-art technology platform

• Provides accurate assessment and simulation of business impact in the GST environment

• Focuses on taxes payable, credits, pricing and margin impact, and cash flow considerations

• Provides strategic tax inputs to aid key business decisions on operating model changes required to optimize tax outcomes

GSTNavigator

An EY proprietary tool

Need for GST Navigator

GST will bring with it the need for in-depth assessment of indirect tax impact on your current business model and multiple future scenarios.

• Significant changes in taxes would need to be understood, measured and acted upon for change management.

• Complex supply chain structures, with multiple transactions connecting each one of them, augur the need for a systematic and clinical approach to study the impact of GST implementation well in advance, to enable timely deployment of an appropriate optimization strategy.

• Parameters in relation to some of the areas are established, while others are getting formulated.

• The tool can simulate tax payments within the current and simulated GST regime to understand the impact through various scenarios including:

• Multiple bases and points of levy

• Possible rates of tax and characterization of transactions

• Alternate place of supply rules

• Framework for allowing input credits

• Changes in supply chain network

• Cash flow related aspects

EY approach… blend technology with expertise

Inputs (Data Tier) Automation (Logical Tier) Reports and User Interface

Rates Place of origin Place of supply

Tax CodesBusiness Information (Locations, States)

(with embedded tax engine)

GSTNavigator

Extensive tax configuration and tax determination

Sales Data Procurement Data

Stock transfers Entry tax, Cenvat reversals, Retentions

Profit center-wise reportsView filters

As - is assessment

AnalyticsWorking papers

“To be” scenario

GST Navigator: Analytics presented

Tax analysis for business simulations

Change to effective tax rate and tax cost analysis

Drill-down reports

Current regime GST regime (as-is) (simulated business) GST regime

Product/ division wise

analysis

Location wise

analysis

Monthlyanalysis

Products and pricing Customer segmentsProcurement patternsBusiness location consideration

Why should you consider the GST Navigator?

Working papers

Data files authenticity

Change in law can be easily addressed

Easy refresh

Standardmethodology

Drill down capabilities

AdvantagesProvide accurate assessment and

enable better decision making

Excel Limitation

Complex formulas with no review mechanismData size limitationsErrors- cannot be identified Data security

Ability to provide reports for every business unit, node, market, product SKU, vendor, custom-er, etc.

Specialized dashboard solution deployed

Reports can be easily filtered and sorted for specific requirements

Methodology with inputs from senior EY leadershipConsistent practices for assessmentBetter delivery standards

Transactionanalysis

Detailed Study

Identification of extraordinary transactions Support to better decision-making

Using masters enables better understanding of the variables employed Assumptions can be verified and changed

On-going compliance The GST Navigator engine has the capability of becoming a starting point to build utilities for ongoing GST compliances.

CustomizationClient-specific customization of reports is possible. The scope of customization can be agreed in advance.

GST engine The GST Navigator works on the GST engine, which uses a combination of tax codes and conditional processing of data.

Benefits to users

• Early assessment of tax impact of the change, with ease of future refresh as the regulations evolve

• Reports offer multiple drill-downs, providing high quality analytics

• Clients are using the output of the GST Navigator for:

Advocacy - Determine what is adversely impacting at a policy level that can be then represented to the Government; companies are able to identify, validate and back up their claims of impact

Pricing (profit & loss and cash flow impact) - Understand the internal impact of GST from a product pricing stand point, credit flows, lost credits, higher/ lower taxes, impact on distribution supply chain, and on secondary sales (distributors and retailers)

Strategic - Understand opportunities or threats likely to be posed by GST, the potential impact on supply chain, the potential impact on vendors, and change in impact on alternate supply chain scenarios to optimize the impact of GST

Profile of the companies who should adopt it

• Manufacturers with supply chains in multiple States

• Large scale importers and traders

• Service providers with presence or client base across multiple States

• Mixed supply providers (developers/project owners and works contractors)

Not

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