SAP GST Preparedness

Goods and Services Tax (GST), is a comprehensive tax levy on manufacture, sale and consumption of goods and services with comprehensive chain of set-off benefits from the producer’s point and service provider’s point upto the retailer’s level.

While the taxable event is ‘supply of goods’ and ‘supply of services’, GST is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

In a GST regime, goods and services are not differentiated as they move through the supply chain. Being a destination based consumption tax; GST is usually levied on import of goods and services with export transactions being zero rated under the GST scheme.

GST Model: As proposed for INDIA

Dual GST Model:

The proposed Goods and Services Tax will be a destination based tax measure, with tax set offs available across the production value-chain. Consistent with the federal structure of the country GST structure is expected to have two components: one levied by the Centre, Central GST (CGST) and the other levied by the State, State GST (SGST). Both components would be applicable on all taxable transactions of goods and services. The Centre and the States would have concurrent jurisdiction for the entire value chain for all tax-payers on the basis of thresholds for goods and services prescribed for the States and the Centre.

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT.

It is also proposed that an Integrated GST model (“IGST”) model be adopted for taxation of interstate transactions of goods and services.

Disclaimer: The above information is based on the various information sources that were made available for public in 2010 during various forums and documents

SAP Solution to GST

The introduction of Goods and Services Tax (GST) will usher in a new era of tax reforms in India. GST, applicable on both goods and services, will replace the existing consumption-based indirect taxes. Tax will be collected on value-added goods and services at each stage of supply.

In India, the GST will be a dual tax regime comprising of the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). All goods and services, barring a few exceptions (such as petroleum and alcohol for human consumption) will be bought under the GST umbrella. The tax burden is expected to be divided equitably between manufacturing and services, with the introduction of GST, along with the added benefits of exports promotion, raise in employment, and growth boost.

What is SAP doing?

SAP SE, the leader in enterprise applications, has always strived towards understanding its customers global and local business needs by delivering solutions that help them run their businesses better.

Globalization Services (GS), the localization wing of SAP SE, is looking in detail at the GST impact on business processes. To further dwell into areas that require clarity, Globalization Services has initiated a working model with customers by setting up individual workgroups. Each of these workgroups focus on GST scenarios (including legal aspects) with respect to various industries, to ensure a smooth transition to GST.

The different workgroups include the following: