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Goods & Service

Tax - Proposal

Giridhar Darak
Senior Consultant

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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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Preface to GST

Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale
and consumption of goods and service at a national level.

GST is a tax on goods and services with value addition at each stage having
comprehensive and continuous chain of set-of benefits from the producers/
service providers point up to the retailers level where only the final consumer
should bear the tax.

GST structure will include 3 types of Taxes viz. CGST (Central GST) SGST
(State GST) and IGST (Integrated GST) and assumed returns to be filed in a
single portal governed by Central Government.

GST is a destination based tax where the benefit will always go to the state
where the Goods and Services are finally consumed.

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Goods and Service Tax

Goods and Services Tax (GST), is a consumption based tax levied on supply of
goods and services

Dual GST model:

SGST
CGST

IGST model: For interstate transactions

IGST, Combination of ( SGST + CGST )

Coverage:
Applicable to all goods an services other than those excluded
Alcohol and most Petroleum products to be outside GST
Tobacco products to be part of GST with non-creditable levy besides GST
Imports to be treated on par with inter-state sale
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Why GST?

Multiple indirect taxes at Central and State levels

Multiple taxable events

Absence of uniform classification principles leading to difference in tax rates


for same/similar commodities in different states

Cascading effect Central and State Taxes not recoverable against one
another

Exemptions from taxresults in distorted credit chain and inverted duty


structure

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Features of GST

Intrastate transactions

Dual GST comprising Central GST and State GST to operate


concurrently on supply of goods and services for consideration
Taxable event of supply as against manufacture (excise) and sales
(VAT)

Inter-state transactions to be covered under Integrated GST (IGST) model

IGST would be aggregate of CGST and SGST


Centre would levy IGST on all inter-state transactions

Exports would be zero-rated

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Features of GST

Input tax Credits (ITC)

Input CGST and SGST recoverable against output CGST and SGST
respectively

Cross utilization of CGST and SGST credit not permitted except under
IGST

However, input IGST recoverable against output IGST, CGST and SGST

Refund of unutilized accumulated ITC allowed to exporters

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How GST benefits?

To Government:
Reduction in number of taxes at Centre /State level
Increased tax collections due to wider tax base

To Businesses:
Reduction in cascading effect of multiple taxes
Seamless input tax credits

To Consumers:
Reduction in incidence of taxes on goods (long-term)

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GST Administrations and IT Strategy

In addition to common registration, returns, and challans, the Common GST


portal will provision for selected information needs of states.
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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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GST - Areas of Impact

Tax Registration - Define GST Registration levels

Master Data Maintenance - Business Partner Tax Data, GST


Accounts

Tax Configuration & Computation - Configure Tax and Pricing


procedures; Tax computation

Document Numbering - Outgoing Invoice Numbering

GST Tax Postings - GST Input and Output Tax postings

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GST - Areas of Impact

Business Process Localization - Extend Support to currently


6 localized Business Processes

Utilization - Input tax credit utilization against payable for GST


7 Taxes

8 Reporting - Tax Register

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Tax Registration
GSTIN GST Registration Identification

Based on Latest, following points needs to be taken care w r t Tax Registration

Single registration for CGST, SGST and IGST

Assumed to be PAN based registration may be up to 15 Character in Length

Individual registration to be obtained in each State of business establishment.

Capturing GST registration at Business Place Level, in the combination of


Company Code and Business Place.

GST Registration Proposed Solution

Business Place will be used in SAP to capture GST Registration Number.

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GST: Impact on Tax Entity

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Capture GST registration at Business Place level

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Master Data Maintenance

Business Partner Tax Data:


Since in GST only Sales data needs to be uploaded in Central Portal and
Purchase Data will be taken form the Registrar from whom the Purchase was
made, we need to update GST Reg No of all the customers and vendors in their
respective masters. We need to update the field under Tax information grid
through LSMW or BDC.

GST Tax Accounts:


Separate tax A/P and A/R accumulation might be required at Business Place
level.
To be defined for CGST, SGST and IGST separately.

Tax Accounts Proposed Solution


Tax Accounts will be determined based on Business Place for both Procurement
and Sales in T Code J_1IT030K_V / OB40.
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Vendor GST Registration- Proposed Solution

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Customer GST Registration- Proposed Solution

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Tax Account - Proposed Solution

Business Place based G/L account determination Both for MM and SD

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Tax Configuration & Computation:
Applicable Taxes for Different types of Transactions.

Intra-State transactions CGST and SGST is applicable

Inter-State and Import Transactions IGST Applicable

Export Transactions Zero Rates (No Tax)

Region level rate variations may exist

Proposed Solution in SAP

To take care of all these transactions mentioned above we need to configure


New Conditions types for (CGST, SGST and IGST), Access Sequence, Account
Keys, Tax Codes and Account determinations for the same.

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Tax Configuration and Computation- Proposed
Solution

Tax Procedure New Condition Types Access Sequence, Account Keys, Tax Codes and
Account determinations

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Tax Configuration and Computation- Proposed
Solution Cont

SD Pricing Procedure New Condition Types Access Sequence, Account Keys,


Tax Codes and Account determinations

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Tax Configuration and Computation- Proposed
Solution Cont

SD Access Sequence

MM Access Sequence

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Document Numbering:

The Logic for having New Document Number

New Document numbering is required for Outgoing document numbers which


will be done by creating a documents class (as suggested by SAP) and will in
turn needs to be assigned to Document types.

Number ranges needs to be assigned with the combination of Company Code,


Business Place and Document Class.

Proposed Solution in SAP

Create a Document Class in SAP and assign the same to Document Type and
maintain Number range based on Company Code Business Place and
Document Class

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Document Numbering- Proposed Solution

Maintain Document Class

Assign Document class to Document Types

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Document Numbering- Proposed Solution

Assign Number Range to Business Place

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GST Tax Postings

Scenarios for GST Tax Posting

Separate accumulation of credit and payables for


CGST
SGST
IGST

Separate accumulation at Business Place level,

Automatic Tax posting to respective accounts from business processes.

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GST Tax Postings - Proposed Solution

Billing (A/R) Accounting Document

Vendor Invoice (A/P) Accounting Document

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Taxes to be subsumed in GST

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GST : Impact of Tax Applicability

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Business Process Localization

Business Process Mapping and Accounting

Business Processes for Sales Order, Purchase Order, Sub Contracting, Stock
Transfer etc. will be taken care by creating new Conditions type and Account
keys for Automatic account posting for the relevant business process.

Accounting entry will posted either separately for Taxes or for GST Invoices or
can be posted for both at the time of GST Invoice verification or GST
Commercial invoice generation.

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GST : Impact on GST utilization

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Utilization

Utilization of Input Tax Credit (ITC) would be as under.

Input CGST to be utilized against output CGST and IGST

Input SGST to be utilized against output SGST and IGST

Input IGST to be utilized against output IGST, CGST and SGST

Pls note Utilization accounts and amounts will be determined


based on the Company Code and Business Place combinations.

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Utilization - Proposed Solution

New Utilization program to handle GST credit utilization Business Place

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Utilization - Proposed Solution

Cross Utilization as per GST rules

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GST Report

As of now, there is no information on the format of the report to be filed, but one
thing is sure that returns needs to filed in soft copy on central portal maintained
by central government and may be report format will be uniform across all the
industries.

GST report will be developed in line with statutory requirement, however existing
Tax Reports which are available in R/3 can be used and fine tuned to suffice the
statutory requirement. If requires new reports can be developed.

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Tax Register - Proposed Solution

Tax on Sales and Purchases GST

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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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Points need clarifications.

Registration still there is a dilemma whether registration is at central level or


state level.. However I feel PAN based means it should be at central level.

Thresh hold limit Exemption Limit for registration differs between central and
state and among the states.

GST on Sub contract No clarifications as of now on how sub contract


process will be dealt in GST.

GST on Stock Transfer - Stock transfer within state having single registration.

GST on Capital Goods whether full credit will be available in the year of
acquisition or part in current year and balance in following years.

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Pre requisites for GST implementation
Tax
Tax Procedure
Procedure should
should be
be Condition
Condition
SAP
SAP APPL
APPL Rel.
Rel. Support
Support Pack
Pack Current SAP System Based
Based tax
tax procedure.
procedure. In
In Formula
Formula based
based
tax
tax procedure,
procedure, number
number ofof tax
tax codes
SAP
Landscape & System codes
SAP ERP
ERP 6.0
6.0 (600)
(600) SP26
SP26 will
will increase,
increase, which
which will
will be
be limitation
limitation to
to
SAP
SAP ERP
ERP 6.0
6.0 EHP2
EHP2 (602)
(602) SP16
SP16 Configuration the
the GST
GST solution
solution in
in future.
future. TAXINN
TAXINN
SAP
SAP ERP
ERP 6.0
6.0 EHP3
EHP3 (603)
(603) SP15
SP15 procedure
procedure isis condition
condition based
based tax
tax
SAP
SAP ERP
ERP 6.0
6.0 EHP4
EHP4 (604)
(604) SP16
SP16 procedure.
procedure.
SAP
SAP ERP
ERP 6.0
6.0 EHP5
EHP5 (605)
(605) SP13
SP13
SAP
SAP ERP
ERP 6.0
6.0 EHP6
EHP6 (606)
(606) SP14
SP14

SAP
SAP ERP
ERP 6.0
6.0 EHP6
EHP6 For
For HANA
HANA
(616
(616
SAP
SAP HANA)
HANA) SP16
SP16
SAP
SAP ERP
ERP 6.0
6.0 EHP7
EHP7 (617)
(617) SP07
SP07
TAX
ECC6.0 procedure
Enhancement TAXINJ /
Pack level TAXINN?

As per required Less Than


Support Pack required Pack TAXINJ TAXINN

Technical
Migrate to
No Action Upgrade to No Action
TAXINN
Required ECC6.0, EHP2 Required
Procedure
SP16 and above

Migration to GST

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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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CoE initiatives for GST implementation
Ready templates for GST implementation
Preparing Question Bank for Preparing Master data templates for
understanding customers Preparing List of scenarios capturing GST relevant information's in
business w.r.t. GST Material, vendor and customer master

Preparing Business process Preparing Test case documents per


Configuration and testing of
Document with Process Flow scenarios, and One recording per
all processes in CoE system
for all possible scenarios process

Training all Delivery Preparing cut over strategy


Preparing Configuration
consultants on GST Migration document
Document
and support

Key Deliverables
Key
Key Deliverable
Deliverable to
to Projects
Projects
1.
1. Process
Process catalogue
catalogue
2.
2. Question
Question Bank
Bank for
for requirements
requirements
3.
3. Master
Master data
data templates
templates
4.
4. L1,
L1, L2
L2 Training
Training on
on GST
GST
5.
5. Business
Business process
process Document
Document with
with
Process
Process flow
flow diagram
diagram
6.
6. Test
Test case
case document,
document,
7.
7. SAP
SAP Tutor
Tutor for
for each
each process
process
8.
8. Configuration
Configuration document
document
9.
9. Cut
Cut over
over strategy
strategy document
document

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Overall Activities for GST Implementation
Overall Activities for GST Implementation

S. No Activities to be performed Resource Tentative Timeline

Understanding current Business Processes and Organization SAP FI, MM


1 1 Week
structure, Tax Procedure, Pricing Procedure etc. and SD
SAP FI, MM
2 Configuration of GST in SAP system 2 Weeks
and SD
SAP FI, MM
3 Creating Business Processes for Handling GST processes 1 Week
and SD
Updating of Master data required for GST (Tax codes, Condition SAP FI, MM
4 1 Week
records, Materials, Vendor, Customer Master) and SD
SAP FI, MM
5 UAT Integration Testing of all GST Processes 2Weeks
and SD
SAP FI, MM
6 Organization wide training Top Mgt, Super user 2 Days
and SD
SAP FI, MM
7 End User Training on GST 3 Days
and SD
SAP FI, MM
8 Go Live and support 2 Weeks
and SD

Note Above requirements are considered as pure configuration in standard SAP. No ABAP efforts
considered for any report or enhancement

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GST - Agenda

GST Overview

Areas of Impact GST in SAP

Clarifications and Prerequisites

COE Initiatives, Roadmap and Effort Estimation

Questions and Answers

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Comprehensive Comparison

Comparison between Multiple Indirect tax laws and


proposed one law.
Particulars Without GST With GST Retailer to Consumer:
in INR COG to Retailer (b) 8624 7700
Add: Profit Margin @ 10% 862.4 770
Manufacturer to Wholesaler 9486.4 8470
Total Value(c)
Cost of Production 5000 5000
Add: VAT @ 12.5% 1185.8 0
Add: Profit Margin 2000 2000
Add: CGST @ 12% 1016.4
Manufacturer Price 7000 7000
840 0 Add: SGST @ 12% 1016.4
Add: Excise Duty @ 12%
Total Value(a) 7840 7000
Add: VAT @ 12.5% 980 0 Total Price to the Final consumer 10672.2 10502.8
Add: CGST @ 12% 840
Add: SGST @ 12% 840 Cost saving to consumer 169.4
% Cost Saving 1.59%
Invoice Value 8820 8680

Wholesaler to Retailer Notes: Input tax credit available to wholesaler is Rs.980 and
Rs.1,680 in case of without GST and with GST respectively
COG to Wholesaler(a) 7840 7000
Add: Profit Margin@10% 784 700
Total Value(b) 8624 7700
Likewise Input tax credit available to Retailer is Rs.1,078 and
Add: VAT @ 12.5% 1078 0
Rs.1,848 in case of without GST and with GST respectively.
Add: CGST @ 12% 924
Add: SGST @ 12% 924
In case, VAT rate is also considered to be 12%, the saving to
Invoice Value 9702 9548 consumer would be 1.15%
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