Topic: Impact of GST on Services

Proposed Rules and its Impact

R Muralidharan

Senior Director in the Tax

Practice of Deloitte

Soumya R
Product Expert, SAP Labs India

GST India Forum

Impact on service sector
R Muralidharan
May 18, 2015

Agenda
Service Sector Current State of Play
Paving way for GST Improvements in Tax Structure
GST Tax structure for Services

GST Broad impact on Service Sector

Potential Implications Place of Supply Rules
Proactive Approach for GST

2015 Deloitte Touche Tohmatsu India Private Limited

Service Sector Current State of Play

GROSS INDIRECT TAX REVENUE FY 13-14

31%

35%

India has the second fastest growing services

sector with its compound annual growth rate at
9%*.

Services constitute major portion of Indias

GDP with a 57%per cent share in GDP at
factor cost (at current prices) in 2013-14*.

Service sector primarily subject to service tax

and is governed by:

Finance Act, 1994;

Service Tax Valuation Rules, 1994;
Service Tax (Determination of Value) Rules,
2006;

34%

Customs Duty

Excise Duty

Service Tax

Source: Budget at a Glance 2015-16 issued by Government of India

Point of Taxation Rules, 2011;

Place of Provision of Services Rules, 2012;
Service Tax (Settlement of Cases) Rules,
2012

2015 Deloitte Touche Tohmatsu India Private Limited

*Economic Survey 2014-15

Paving way for GST Improvements in Tax

Structure
Over the past several years, significant progress has been made to improve the
service tax structure, broaden the base and rationalize the rates to pave way for
GST
Substantial expansion of service tax base by
introduction of negative list regime of service tax

Introduction of Place of Provision of Services, Rules

2012

Pruning of exemptions available under service tax

Increase in rate of service tax vide Budget 2015

2015 Deloitte Touch Tohmatsu India Private Limited

GST Tax structure for Services

In the current regime, taxable event is rendition of taxable service but in GST
regime, the taxable event will be supply of taxable services
The current Place of Provision of Services will be replaced with the proposed
Draft Place of Supply of Goods and Services Rules
Dual GST comprising Central GST and State GST to operate concurrently on
supply of services for consideration
GST Tax Structure:
Intra-State

CGST

SGST
IGST*
(CGST+SGST)

Imports

IGST

Exports

Proposed to be
zero rated

GST

Inter-State

2015 Deloitte Touch Tohmatsu India Private Limited

*Integrated GST (IGST) on imports and inter-state supplies of services in India

GST Broad impact on Service Sector

Issues

Impact

Availability of Input Tax Credits (VAT)

Double taxation on certain services Rates are same

Self assessment provisions to be replaced with regular

assessment
Abatement on value of services with a restriction on
taking of input tax credit in GST regime

2015 Deloitte Touche Tohmatsu India Private Limited

GST Broad impact on Service Sector

Issues

Impact

Service tax rate on services

Refund (with respect to exports) of credits to be obtained

from multiple states
Impact on working capital due to higher rate on
procurements
Taxability of export transactions (current Rule 3 of Place
of Provision of Services Rules, 2012) ) as per Place of
Supply Rules
Increased compliance for service providers having PAN
India operations due to SGST registration requirement in
multiple States Will have to deal with States for SGST
Costly B2C transactions
2015 Deloitte Touche Tohmatsu India Private Limited

Potential Implications
Place of Supply Rules
Highlights of the proposed Place of Supply Rules
Rule

Nature of Service

Services (other than

specified services)
provided to a
registered person
Services (other than
specified services)
provided to other
than a registered
person

Description

Place of Supply

Service receiver registered in one

State

Location of the
registered service
receiver

Service receiver registered in more

than one States

State where supply

is sought to be
billed

NIL

Location of service
provider

Export of services under Rule 4 of Place of Supply Rules???

2015 Deloitte Touch Tohmatsu India Private Limited

Potential Implications
Place of Supply Rules
Delhi

Deloitte

USA
Management
service

Proposed POS is Delhi

2015 Deloitte Touch Tohmatsu India Private Limited

ABC Inc, USA

ABC Inc is
not registered
and has no
BE in India

Current POPS is USA

Proactive Approach for GST

Phases in transitioning to GST regime
Overview Assessment:
Overview assessment of different business functions and operations
in order to be better prepared for transition
Impact Analysis:
Identifying potential impact including quantification of impact,
identifying affected business functions
Fine tuning of operations
Validation & fine-tuning the business process and functions (i.e.
finance, commercial, IT, accounting etc.)
Implementation:
Assistance in transition to new regime to the impacted functions (i.e.
finance, commercial, IT, accounting etc.)
2015 Deloitte Touch Tohmatsu India Private Limited

11

Contact Information

Senior Director
R. Muralidharan
Senior Director
Delhi Office
Phone: +91 124 679 3608
Email: rmurlidhara@deloitte.com

2015 Deloitte Touche Tohmatsu India Private Limited

12

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13

SAP Solution for Services

Current Scenario Vs. GST Scenario
Soumya R / Globalization Services / SAP Labs India
May 18, 2015
GST India Forum, New Delhi

Public

SAP Solution for Services

Current Scenario Vs. GST Scenario

Topic

Current Scenario

GST Scenario

Registration

Central Service tax

Registration number

Central Registration +
State registration for every
state that the service
provider operates in
+IGST??

Service
Invoices

Fields as required by
the central
government

Fields as required by
Center
Fields specific to Recipient
state and Provider state,
Rates and exemptions

Interstate &
Import
scenarios

Central tax

IGST (Central + State tax)

2015 SAP SE or an SAP affiliate company. All rights reserved.

Public

15

SAP Solution for Services

Current Scenario Vs. GST Scenario

Topic

Current Set-up

GST Set-up

Tax incidence

Provision of
service rules
Point of taxation
rules

Place of Supply rules

Point of taxation
rules???

Credit Availment & Service Tax <->

refunds
Service tax, BED,
SED, AED, NCCD,
CVD, ADC, Ecess,
S&HEcess

CGST <-> CGST

SGST<-> SGST
IGST <-> IGST, CGST,
SGST

Returns

Central for CGST

State for SGST
IGST??

Central (ST3)

2015 SAP SE or an SAP affiliate company. All rights reserved.

Public

16

Thank you

Contact information:
Soumya R
Product Expert, Globalization Services, SAP Labs
soumya.r@sap.com

2015 SAP SE or an SAP affiliate company. All rights reserved.