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‘Facilitating Trade and Global Competitiveness:

Express Delivery Sector in India’


India

Presentation on addressing State and local level


issues and concerns

S. Madhavan
August 26, 2009
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Agenda

• Factors affecting supply chains

• Fiscal costs – Key determinant of supply chains

• Current State and local level issues and concerns

• Dual GST implementation

- opportunity for a single market

- taxation of inter-State supplies of goods

- tax compliance simplified

• W forward
Way f d
Addressing State and local level Issues and Concerns

Factors affecting
g supply
pp y chains
Supply Chains are impacted by several forces, some intrinsic to the organization,
some market specific and some fiscal in nature ...

Market Fiscal Costs


Responsiveness
p

Changing
Customer
Preferences

Competitive Cost
Intensities Efficiencies

...with fiscal costs forming the bane of most supply chains


PricewaterhouseCoopers Slide 3
Addressing State and local level Issues and Concerns

Fiscal costs - Key determinant of supply chains


Fiscal costs have remained a key determinant of supply chains in India with
manufacturing bases and distribution networks engineered to harness fiscal
benefits...

Investments in Tax Havens


• Sales Tax / VAT Exemptions
• Sales Tax / VAT Deferrals
Manufacturing Units
• Income Tax Exemptions

Depot/Stock
P i t
Points Differential Tax Considerations
• CST VAT tradeoff
• Low /Negligible VAT
Distributors • Partial
P ti l SSett offs
ff for
f Input
I t VAT
Consumer • Multiple tax costs for movement of
Retailer
goods

PricewaterhouseCoopers Slide 4
Addressing State and local level Issues and Concerns

Current issues and concerns

• Irrecoverable tax costs due to State barriers – CST

• Complex compliance requirements – Regulatory forms such as C, F etc.

• Entry barriers at State borders

- longer transportation time

- Increased compliance costs

- Hindrance to free inter-State movement of goods

• Local levies such as Entry tax, Octroi, Cess adding to cost of doing business

• Increased cost of compliance with multiple taxes and multiple regulations

PricewaterhouseCoopers Slide 5
Addressing State and local level Issues and Concerns

Supply
pp y Chain and GST Implementation
p

M
Manufacturer
f t
• Proposed introduction of dual GST by April, 2010

• Phasing out of CST


Primary
Suppliers Distribution

• Uniform Tax Rates

Secondary
Distribution
• Modifications of Sales Tax based incentives
Consumer

• Merging of Multiple Taxes

PricewaterhouseCoopers Slide 6
Addressing State and local level Issues and Concerns

Dual GST – moving towards a single market

• Dual GST to foster a single market

- Multiple taxes at the Central and State level to be subsumed into CGST and

SGST respectively

- Local levies such as Entry tax, Octroi, Cess etc. also to be subsumed in the

SGST

- Move from origin based taxation to destination based taxation

- Reduced indirect tax costs

o Common tax base to remove cascading

o A il bilit off input


Availability i t tax
t credits
dit across the
th value
l chain
h i

PricewaterhouseCoopers Slide 7
Addressing State and local level Issues and Concerns

Dual GST – taxation of inter-State supplies of goods

• The single market means – no barriers to inter-State trade

• Taxation of inter-State supplies of goods is thus critical in the dual GST model

• Alternate models exist but the idea is not to hamper inter-State trade

• Zero rating
g of State GST in the origin
g State and charging
g g of State GST of

consuming / destination State on inter-State supplies

• No check posts / physical barriers

PricewaterhouseCoopers Slide 8
Addressing State and local level Issues and Concerns

Dual GST – tax compliance simplified

• Uniform compliance requirements across the States

• Uniform classification of goods and services across States


- Minimum number of exemptions
- Reduced tax disputes

• Thrust on IT based tax compliance methodology


- E-filing of returns
- E-payment facility

• Implementation of IT infrastructure in State Tax Administrations


- Verification of inter-State transactions through electronic means
o Dispensation of Statutory forms such as C, F etc.
o Reduced compliance costs

PricewaterhouseCoopers Slide 9
Addressing State and local level Issues and Concerns

Way forward

• Dual GST is an inflexion point

• It can potentially foster a common market for goods and services

• Issues and challenges in relation to taxation of inter-State transactions remain

• All stakeholders need to quickly arrive at a consensus on this issue

We are all stakeholders in ensuring


g that an ‘express
p delivery’
y friendly
y GST
is in place by April 2010!

PricewaterhouseCoopers Slide 10
Thank you

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