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©2016 Reina Consulting LLP. All Rights Reserved
GST IMPACT REPORT
©2016 Reina Consulting LLP. All Rights Reserved 1
ABC
30-03-2017
©2016 Reina Consulting LLP. All Rights Reserved
CONTENTS
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GST Impact - An Overview
Overview of Proposed GST in India
GST Impact on your sector
Credits Flow under current tax and GST Regime
GST Impact on Your Business
Our Understanding of your Business
Financial Impact of GST on Your Business
Factors Causing Positive/ Negative Impact
Anti-Profiteering Measures
GST Impact on Your Working Capital
Guidance for Migration to GST
Admissibility of Existing Unutilised Credit
Changes in IT & Accounting System
Discussion Points with Vendors
Impact on Existing Contracts
Supply Chain and Distribution Strategy
Key Compliances
Registration
Mandatory Returns/ Statements
Invoicing Requirements
GST Payments
Scope Limitations
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GST IMPACT ON YOURBUSINESS
3
This section highlights the financial impact of GST on your business along
with the underlying reasons. The analysis helps you determine how your
net profit will change in GST regime or how you can adjust revenues to
earn the existing net profit. Additionally, this section explains how GST will
impact your working capital requirements and also how you can comply
with anti-profiteering measures
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OUR UNDERSTANDING OFYOUR BUSINESS
4
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OUR UNDERSTANDING OF YOUR BUSINESS
Nature of Business :
Manufacturer
Number of States of Operations :
3
Data Period :
01-04-2015 to 31-03-2016
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Note: Please click on the table above to download the excel version
CURRENT TAX REGIME
Profit & Loss Account
for the period 01-04-2015 to 31-03-2016
Particulars Assam Delhi Haryana Common Total Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR INR INR INR INR INR
Opening Stock - - - 1,00,000 1,00,000 Sales 1,80,000 80,000 5,00,000 - 7,60,000
Purchase - Goods 1,50,758 72,727 4,01,515 - 6,25,000 Closing Stock - - - 2,00,000 2,00,000
Purchase - Services - - - 2,40,000 2,40,000 Other income - - - 7,500 7,500
Non-creditable taxes 12,042 0 45,652 6,000 63,695 Net loss 66,195
Other expense - - - 5,000 5,000
Net profit -
Total 10,33,695 Total 10,33,695
Indirect Tax Statement
as on 31-03-2016
Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR
Input tax credit
- Excise Duty/SAD/CVD 8,000 9,545 - - 17,545
- VAT/Entry Tax 11,600 4,000 48,770 - 64,370
Input tax credit - Service tax - - - 30,000 30,000
Total 19,600 13,545 48,770 30,000 1,11,915
Output tax liability
- Excise duty 15,500 - - - 15,500
- VAT/CST 18,460 4,000 65,625 - 88,085
Total 33,960 4,000 65,625 - 1,03,585
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FINANCIAL IMPACT OF GSTON YOUR BUSINESS
6
₹
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KNOW THE FINANCIAL IMPACT OF GST ON YOURBUSINESS (COMPARATIVE VIEW)
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Particulars Current
GST -
Revenue
Constant
GST - Profit
constant
Sales 7,60,000 7,60,000 7,12,853
Purchase 8,65,000 8,65,000 8,65,000
Non-creditable Taxes 63,695 16,548 16,548
Net Profit (66,195) (19,048) (66,195)
Particulars Current
GST -
Revenue
Constant
GST - Profit
constant
Total Output Tax Liability 1,03,585 1,45,000 1,36,315
Total Input Tax Credit
Available 1,11,915 1,61,497 1,61,497
Net Tax Liability (8,330) (16,497) (25,182)
Total positive/ (negative ) GST imapct 47,147
7,60,000 7,60,000
(66,195)(19,048)
(2,00,000)
(1,00,000)
-
1,00,000
2,00,000
3,00,000
4,00,000
5,00,000
6,00,000
7,00,000
8,00,000
9,00,000
Current GST - Revenue Constant
Revenue Constant
Sales Net Profit Linear (Sales) Linear (Sales)
7,60,000 7,12,853
(66,195) (66,195) (2,00,000)
-
2,00,000
4,00,000
6,00,000
8,00,000
10,00,000
Current GST - Profit constant
Net Profit Constant
Sales Net Profit Linear (Sales) Linear (Sales)
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HOW YOUR CURRENT FINANCIAL STATEMENTS WILL APPEARUNDER GST REGIME (IF REVENUE REMAINS CONSTANT)
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Note: Please click on the table above to download the excel version
GST REGIME ( REVENUE CONSTANT)
Profit & Loss Account
for the period 01-04-2015 to 31-03-2016
Particulars Assam Delhi Haryana Common Total Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR INR INR INR INR INR
Opening Stock - - - 1,00,000 1,00,000 Sales 1,80,000 80,000 5,00,000 - 7,60,000
Purchase - Goods 1,50,758 72,727 4,01,515 - 6,25,000 Closing Stock - - - 2,00,000 2,00,000
Purchase - Services - - - 2,40,000 2,40,000 Other income - - - 7,500 7,500
Indirect tax cost 4,499 - 5,667 6,382 16,548 Net loss 19,048
Other expense - - - 5,000 5,000
Net profit -
Total 9,86,548 Total 9,86,548
Indirect Tax Balances
as on 31-03-2016
Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR
Input tax credit
CGST/SGST 13,836 14,545 63,636 92,018
IGST 18,650 4,545 16,667 29,618 69,480
Total 32,486 19,091 80,303 29,618 1,61,497
Output tax liability
CGST/SGST 20,000 - 1,00,000 - 1,20,000
IGST 9,000 16,000 - - 25,000
Total 29,000 16,000 1,00,000 - 1,45,000
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HOW YOUR CURRENT FINANCIAL STATEMENTS WILL APPEARUNDER GST REGIME (IF PROFIT REMAINS CONSTANT)
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Note: Please click on the table above to download the excel version
GST REGIME ( PROFIT CONSTANT)
Profit & Loss Account
for the period 01-04-2015 to 31-03-2016
Particulars Assam Delhi Haryana Common Total Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR INR INR INR INR INR
Opening Stock - - - 1,00,000 1,00,000 Sales 1,68,834 75,037 4,68,982 - 7,12,853
Purchase - Goods 1,50,758 72,727 4,01,515 - 6,25,000 Closing Stock - - - 2,00,000 2,00,000
Purchase - Services - - - 2,40,000 2,40,000 Other income - - - 7,500 7,500
Indirect tax cost 4,499 - 5,667 6,382 16,548 Net loss 66,195
Other expense - - - 5,000 5,000
Net profit -
Total 9,86,548 Total 9,86,548
Indirect Tax Balances
as on 31-03-2016
Particulars Assam Delhi Haryana Common Total
INR INR INR INR INR
Input tax credit
CGST/SGST 13,836 14,545 63,636 - 92,018
IGST 18,650 4,545 16,667 29,618 69,480
Total 32,486 19,091 80,303 29,618 1,61,497
Output tax liability
CGST/SGST 18,759 - 93,796 - 1,12,556
IGST 8,752 15,007 - - 23,759
Total 27,511 15,007 93,796 - 1,36,315
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FACTORS CAUSING POSITIVE/NEGATIVE IMPACT
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UNDERSTAND THE FACTORS CAUSINGPOSITIVE/ NEGATIVE IMPACT
Credit with respect to
input services e.g. rent,
advertisement etc.
-1%
Total Positive/ (Negative) GST Impact
on your business : 47,147 INR
This is on account of the following increase in Input tax credits i.e.
credit not available in current tax regime but available in GST regime
92
2%
Credit with respect to inter-
state procurements
0%
Credit with respect to imports
(except BCD)
99%
Credit with respect
to Excise Duty
Service Tax CST Customs Excise
Note: The non-creditable taxes will further reduce to the extent input tax credit is passed to the customer in case of a first/ second stage dealer
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ANTI-PROFITEERINGMEASURES
12
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ANTI-PROFITEERING MEASURES IN GST LAWTHAT YOU MUST KNOW
GST Law mandates reduction in prices of goods/services supplied in
case of
Reduce
Prices to
Pass
Benefit
Increased
CreditsReduced tax
rates
increased tax credits reduced tax rates|
13
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THIS IS HOW YOU CAN COMPLY WITHANTI-PROFITEERING MEASURES
Basis the data shared, if you continue to earn the same profit under GST regime as is being earned the
current tax regime, sale price/ revenue may be adjusted as per the table below:
Note: The above analysis is basis the entity level details shared. It is advisable to undertake the product level analysis to identify the required price reduction in each product
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Particulars Current
GST -
Profit
constant
Net Profit (66,195) (66,195)
Purchase 8,65,000 8,65,000
Non-creditable Taxes 63,695 16,548
Sales 7,60,000 7,12,853
Particulars Current
GST -
Profit
constant
Total Output Tax Liability 1,03,585 1,36,315
Total Input Tax Credit Available 1,11,915 1,61,497
Net Tax Liability (8,330) (25,182)
Overall Price Reduction Possible in GST to Earn the Same Profit 47,147
7,60,000 7,12,853
(66,195) (66,195) (2,00,000)
(1,00,000)
-
1,00,000
2,00,000
3,00,000
4,00,000
5,00,000
6,00,000
7,00,000
8,00,000
9,00,000
Current GST - Profit constant
Net Profit Constant
Sales Net Profit
Linear (Sales) Linear (Sales)
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GST IMPACT ON WORKING CAPITAL
15
This section highlights the impact of GST on your working capital on
account of change in ITC and output tax liability under GST regime along
with the suggested action points where additional funds are required or
there is blockage of funds on account of GST
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PREPARE IN ADVANCE FOR YOUR WORKING CAPITALREQUIREMENTS UNDER GST
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• Favourable change in rate of tax vis-à-vis current tax rate
• Free flow of input tax creditsFactors Causing Positive Impact
• Unfavourable change in rate of tax vis-à-vis current tax rate
• IGST on stock transfer which are currently exempt
• Discontinuation of exemptions
Factors Causing Negative Impact
• It is critical to understand the impact of GST on your working capital so that a plan can be chalked out in
advance to fund the additional working capital requirement (if any) or release the additional funds available (if
any)
• Before analyzing the specific impact on your business’s cash flow, let’s understand the various factors
causing impact on working capital
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(A) THIS IS HOW CHANGE IN INPUT TAX CREDITS (ITC) UNDER GST WILL IMPACT YOUR WORKING CAPITAL
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Particulars Reference INR
ITC - Current tax regime (A) 1,11,915
ITC - GST regime (excluding ITC on stock transfer) (B) 1,61,497
Increase in ITC (C)=(B)-(A) 49,582
Period (in months) for which data is provided (D) 12
Increase in ITC per month (E)=(C)/(D) 4,075
Vendor credit period (F) -
Impact on Working Capital (G)=(E)*(F) -
No Impact on Cash Flow due to change in ITC -
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(B) THIS IS HOW CHANGE IN OUTPUT TAXES UNDER GST WILL IMPACT YOUR WORKING CAPITAL
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Particulars Reference
Scenario -
Revenue
Constant
Scenario
- Profit
Constant
INR INR
Output tax - Current tax regime (H) 1,03,585 1,03,585
Output tax - GST regime (excluding Output tax on stock
transfer) (I) 1,45,000 1,36,315
Increase/(Decrease) in Output tax (J)=(I)-(H) 41,415 32,730
Period (in months) for which data is provided (K) 12 12
Increase/(Decrease) in Output tax per month (L)=(J)/(K) 3,404 2,690
Customer credit period (M) - -
Impact on Working Capital (N)=(L)*(M) - -
No Impact on Cash Flow due to change in output tax -
No Impact on Cash Flow due to change in output tax -
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NET IMPACT OF GST ON YOUR WORKING CAPITAL – CONCLUSION AND ACTION POINTS
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Notes/ Assumptions:
- Tax payments under current tax regime are assumed to be on monthly basis
- There is enough output tax liability to set off input tax credit available on account of GST levied on stock
transfer
Particulars Reference
Scenario -
Revenue
Constant
Scenario
- Profit
Constant
INR INR
No Impact on Cash Flow due to change in ITC (A) - -
No Impact on Cash Flow due to change in output tax (B) -
No Impact on Cash Flow due to change in output tax (B) -
No Impact on Cash Flow -
No Impact on Cash Flow -
ACTION POINTS
Not Applicable as there is no impact of GST on your working capital
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TO SUMMARISE, HERE ARE 5 KEY STEPS FORYOU TO BE GST READY
Obtain relevant registrations/ get yourself enrolled on GSTN
Initiate discussions with IT vendor and in-house IT team to make appropriate changes in the
IT systems to align with GST requirement
Discussion with vendors and also revisit the distribution & supply chain
Assess and implement compliance requirements
Training of teams for transitioning to GST
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For any other GST related assistance, please contact us:
GSTimpact.com
Address: 448A, Enkay Square, Udyog Vihar Phase 5,
National Highway – 8, Gurugram – 122016, Haryana, India
Landline: +91 124 4309061/62
E-mail : [email protected]
Website: www.gstimpact.com
THANK YOU!
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WE WISH YOU MORE SUCCESS UNDER GST…
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