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Decoding GST for Oracle Customers

 

As India gets ready to implement the new GST law, the question on top of most of the IT leaders, finance leaders is regarding the readiness of the IT systems to meet the new requirements.

Are the changes to the system simple or complex? How long will it take to solution and implement the change?  Has this been done before? Can you speed up the process? When do we start with work to be ready on time? These are absolute valid concerns and need immediate attention.

Infosys has been working on building the solution to help enterprises move to new GST law smoothly and quickly. The Infosys solution

-          Uses the Infosys 'Tax Assessment' framework to understand the likely impact areas.

-          Uses the Infosys pre-built solutions, templates to solution the requirements

-          Uses the Infosys Intrak implementation approach to implement the solutions

Note, the solution has not considered Localization patches which Oracle may come up with. As of now, Oracle is still working on the localization patches. 

Assessment - Infosys Tax Assessment framework:

The Infosys Tax Assessment framework, has been built based on our experience in implementing tax solutions across the world for VAT, Sales tax regimes in Americas, EMEA, and APAC.  The framework ensures the tax impacts - easily and in a structured way without any misses.

The Infosys Tax Assessment framework, discusses the impacts within the below five boundaries.

1.       Master Data

2.       Tax rules ( defaulting tax on business transactions)

3.       Cutover Impacts

4.       Business documents

5.       Reporting and Accounting

The provision of 'Credits and Refunds' have also created a lot of confusion and anxiety.  The Infosys framework has been tailored to assess the likely systemic requirements around credits and refunds.

1.       Master Data -

Master data like supplier master, customer master, legal entity setups, General Ledger accounts and Part master needs to be enriched with the new tax registration details and exemption details to meet the GST law requirements.

GST Requirements on Registration:

As per the Model bill, the existing dealers would be automatically migrated. The new GSTIN will be a 15-digit GSTIN based on IT PAN.

Liability to get registered: Every supplier should be registered if aggregate turnover in a Financial year exceeds 0.9 million / 9 Lakhs INR (0.4 million / 4 Lakhs INR if the business is registered in North Eastern States and Sikkim).

 

Liability to pay tax:  will be after crossing the threshold of 0. 5 Million / 5 Lakhs INR for NE states and Sikkim and 1 Million / 10 Lakhs INR for Rest of India. Small dealers having sales below 5 million INR can also adopt the Composition scheme and pay flat of about 1 to 4% tax on turnover.

The tax is also determined based on the type of item, hence the parts should also be categorized using HSN Code.

2.       Tax Rules (defaulting tax on business transactions)

The tax rules default the tax rates on different transactions - P2P transactions and O2C transactions.  The Infosys 'Tax Assessment' framework helps building a tax matrix capturing all the tax rules in a single matrix, considering all the tax determining factors like party, place, product and process. The tax matrix ensures all tax requirements are correctly captured and are easily understood. Based on the tax matrix, the tax rules will be configured.  The tax rules will cover branch transfers and job work (OSP) transactions.

GST Requirements impacting tax rules:

·         GST is based on supply of goods or services against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.

·         GST will be Destination based tax against the present concept of origin based tax.

·         Local Transactions - will attract Dual GST With the Centre and the States simultaneously levying it on a common base

·         Interstate Transactions - will attract Integrated GST (IGST) would be levied on inter-State supply (including stock transfers)

·         Import Transactions - will attract IGST would be treated as inter-State supplies.

There are also likely to be multiple rate based on the type of item

·         Merit Rate

·         Standard Rate

·         De-Merit Rate

·         Zero rate taxes for certain items

 

3.       Cutover

The cutover from an old solution to a new solution is likely to impact the transactions which are mid-way in the end to end process. For example a PO created under an old tax regime might have old tax related data. When an invoice is created by matching the invoice to the PO, it might result in multiple taxes - one with old tax rates, statuses and the other with new tax rates, statuses.

The Infosys solution is able to identify the potential areas of impacts and leverage pre-built solutions to quickly identify and resolve such issues.

  

4.       Business Document -

Tax related information for e.g. tax registration details are usually printed on business documents like shipping documents, bill of lading, AR Invoices, purchase orders. Considering the refund / credit balance, the GST TIN of the buyer and seller should be printed on the AR invoices. The Infosys 'tax assessment framework' specifically poses questions around the business documents and invoices numbering. This is critical and is often missed, leading to penalties and non-compliance issues.

 

5.       Reporting and Accounting

The Infosys 'Tax Assessment Framework' finally looks at the reporting and the accounting requirements.  The monthly, quarterly, yearly, ad-hoc reporting requirements are captured as part of this step. The reports used for reconciliation with the general ledger and the number of GL accounts needed for reconciliation and reporting.  Companies may want separate accounts for Input IGST, Input SGST, Input CGST, Output IGST, Output SGST and Output CGST for easy reconciliation and credit tracking.

GST Requirements on reporting:

The Model GST Law proposes following reports

Monthly

Quarterly

Annual

Others

GSTR 1- Outward supplies

GSTR 4 - Quarterly return for compounding Taxpayer

GSTR 8 - Annual Return

GSTR 5 - Periodic return by Non-Resident Foreign Taxpayer (Last day of registration)

 

GSTR 2-Inward supplies received

 

 

ITC Ledger of taxpayer(Continuous)

 

GSTR 3-Monthly return

 

 

Cash Ledger of taxpayer(Continuous)

GSTR 6 - Return for Input Service Distributor (ISD)

 

 

Tax ledger of taxpayer(Continuous)

GSTR 7 - Return for Tax Deducted at Source

 

 

 

 

GST Requirements - Credits and Refunds

This is probably the most controversial change suggested by the Model GST Law. The credit claim process has been a topics of hot discussions as it could have big impact on the cash flow and even margins of the enterprises.

Below are the details of the credit and refund process.

Tax Credits to be Utilized as below

Conditions to Claim Credit

Timelines

Input CGST to be utilized against output CGST and IGST

Possession of tax invoice

One year from the invoice date

Input SGST to be utilized against output SGST and IGST

Receipt of the goods/ service

Credit pertaining to a financial year cannot be claimed after filing the return (for September) of the next financial year or the filing of the annual return for the year to which the credit pertains - whichever is earlier

Input IGST to be utilized against output IGST, CGST and SGST in the order of IGST, CGST and SGST

Payment of tax charged on the  invoice by supplier

 

 

Filing of GST return

 

 

Match the claimed credits with the vendor tax liability. In case of a difference / discrepancy, excess credits will be disallowed to the recipient.

 

 The above requirements are likely to lead to the following systemic requirements

·         A systematic way to automatically calculate the credits

·         A systematic way to do a vendor account reconciliation

·         The need to do a vendor reconciliation will need an ability to upload the vendor data from GSTN into Oracle.

·         A form to view the GST balance and ability to write-off credits which cannot be claimed

 

Solutioning using Infosys Accelerators -

We have a pre-built repository of ready-to-deploy solutions, which will help enterprises shorten the time to solution and then to develop the solutions. The solutions cover all the areas mentioned below

S Num

Item

Infosys Accelerator

1

Master Data

Re-usable solution to enrich master data

2

Tax rules ( defaulting tax on business transactions)

GST Tax Matrix, Pre-Built GST Configuration Templates

3

Cutover Impacts

Pre-identified components and pre-built solutions to correct cutover impacts.

4

Business documents

Re-usable solution to fix business documents

5

Reporting and Accounting

Pre-built reports, solutions to meet the reporting and accounting needs.

 

Refunds and Credits:

The Infosys solution for claiming refunds and credits will require developing the following programs and solutions to track credits, perform vendor reconciliation, claim credits and write-off credits.

·         Tracking Credits - A custom form will be developed to track the GST credits.

·         Vendor Reconciliation - Two custom programs will be built

1.       A custom program will be built using API provided by GSTN, to upload supplier data.

2.       Custom program will be built to automatically list the unreconciled items with reason code e.g. Goods in transit.

·         Claim Credits - A custom program will be built to automatically claim credits as per the GST rules

·         Write-off credits - The custom form to track credits, will include the ability to write-off credits.

 

Timelines:

The Infosys solution will enable enterprises to freeze the GST solution in 5-8 weeks, leveraging the Infosys 'Tax assessment framework' and pre-built solution repository.The likely timeline for the solution will be as below.

 

 

 

 

India GST Plan.PNGIn Conclusion:

Considering time frame-work of 1-2 months for solution finalization plus implementation effort of 2-4 months, it is prudent for organizations to start the work on GST immediately, to be ready for the 01-Apr-2017 launch.

 

 

 

 

 

Comments

This article helps to understand end to end implications of GST and how to go about resolving the same

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