GST Paper

2015 SAP SE or an SAP affiliate company. All rights reserved.
SAP Thought Leadership Paper
The Alpha and the Omega of GST
Table of Contents
3
GST The New Beginning
GST Key Imperatives
Business Processes Perspective
13 Need to get GST ready

17 SAP S/4HANA Your trusted partner in the journey
20 Fasten your seat belts
36 Industry specific implications of GST
46 Recent developments that impact your business
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GST The New Beginning

Have you begun 2017-GST Implementation? Accelerate the implementation
with SAP S/4HANA. Financial Year 2017-18 will be defining year for India Inc. with
the advent of much awaited Goods and Services Tax (GST) reform. GST is
expected to have a far reaching and wide impact on business, society and general
economy. It is also expected to address the current issue of inefficiencies in the
tax system, prevent cascading impact of multi-level taxation, plug the revenue
leakages and raise the transparency levels in business.
Selection of right technology enabling and
facilitating the smooth transition to GST as well
as creating a competitive advantage is going to
be the key differentiator for all businesses to
succeed through and post-GST.
Smooth transition to the GST is one of the top 3

agenda items on the Board and Managements
strategy and execution list. With GST, the past
no longer holds good and future is laden with
number of implementation challenges. GST is
also expected to significantly impact all key
business processes, be it Procurement to Pay
(P2P), Record to Report (R2R), Order to Cash
(O2C) and Budgeting, Planning and Forecasting
inter alia. To ensure smooth transition of all key
business processes through the wave of GST, it
is critical for all organizations to be ready with a
cutting edge technology solution.
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There are multiple steps involved in

implementation of GST, which are as follows:
Go-live and GST On business
Post implementation testing
Resource allocation and engagement with

trusted partner in implementation
Design blue print for implementation
Journey from As-Is To-Be status
Evaluate imapct on overall business
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One of the biggest challenges for businesses is to

understand the enormity of the changes brought
by GST and be ready in a timely manner with the
implementation tools. The overhaul brought into
by GST will impact the basic business operating
model, present new opportunities for growth and
also room for the enhancement of margins.
various aspects of the entitys value chain. SAP

S/4HANA offers end to end program
management capabilities with efficient use of
technology solution to deliver maximum value to
the business.
The GST regime will have significant influence

not only on large business houses, but also on
the Micro, Small and Medium Enterprises sector
IMPACT OF GST ON KEY BUSINESS AREAS
GST will be one of the biggest game changers for (MSME). Non/under recording/reporting of
the Indian economy and all key business sectors, purchase and sales transactions, fragmentation
be it organized or unorganized. Below are the key in the methods of availment and utilization of
credits will be the things of past. Tiny units,
areas likely to be impacted by GST
based on the threshold turnover criteria, will be
implementation.
out of the GST net. Even if the turnover increases
Organizations need to formulate business cases to another threshold level, the introduction of
1%-2% self-declared turnover tax will be a
to evaluate the impact of changes, develop
biggest relief for such entities.
robust plan for overall program management
and identify integration opportunities across
Supply chain
Recording and accounting

of tax transactions
Technology enablement
Design of contract
arrangements
Tax structuring decisions

Key Impact Areas
Computation of taxes
Financial reporting
Payment of taxes
Working capital
management
Compliance management
Pricing arrangements
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GST Key Imperatives

Amongst number of business reforms, GST is
the key Indirect Tax Reform that will impact the
economy. The current indirect tax system does
have Value Added Taxation (VAT) methodology
throughout the value chain i.e. from
manufacturing of goods and services to its
ultimate consumption.
taxes across various States in India inter alia.

Thus, the current structure leads to significant
level of inefficiencies from the revenue
perspective and difficulties of doing business in
India. GST is directed to subsume all current
indirect taxes with certain exceptions like
customs duty.
However, there is lack of uniformity among

various aspects of current indirect tax which
includes rates, point of taxation, and type of
With GST coming into force, the current indirect

tax structure existing in India, will undergo
change, which will be broadly as under:
Excise Duty
Service Tax
Central Sales Tax
State GST (SGST)
State VAT
Central GST (CGST)
Entry Tax
Integrated GST (IGST)
Luxury Tax
Entertainment Tax
Other Local Taxes
Implementation of GST is expected to bring

multiple benefits for various types of business
entities in India. Consumer as well as
Governments, both at Central as well as State,

will also benefit from implementation of GST.
Some of the key benefits are as follows:
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Key Benefits of GST
Ease of doing business

Level playing field for business
Savings on the end to end operational costs across the value chain
Elimination of the geographical fragmentation of Indian market
Elimination of cascading effect of multiple taxes
Reduction in gap between organized and unorganized sector
GST will require multiple changes in the business

operations. Companies will need to scale up the
technology infrastructure for ensuring high level
of vendor tax compliances, system to maintain
adequate level of vendor database, review of the
compliances at suppliers end, monitor the
periodicity of the tax payments and filings.
and high volumes of vendor compliance level

management.
GST offers comprehensive indirect tax regime
covering taxation from the point of manufacturer
to the last mile taxation of goods and services in
the hands of the ultimate consumer.
The key events for taxation of good and services
as against different points of taxation under
various laws are as indicated below:
SAP S/4HANA qualifies the businesses in

smooth transition in high level compliance
oriented GST environment and is capable of
administration of complex tax configurations
Point of taxation as per existing Indirect Tax laws
GST Regime
Excise Duty On manufacture
Sales Tax Transfer of ownership in goods
Supply of Goods or Services

Includes sale, removal, disposal
A term of wide scope and coverage
Service Tax Provision of taxable services

Customs Duty Crossing of Indian territory or waters
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An important aspect of GST is the goods and

services are not differentiated throughout the
entire value chain. Since GST is destination
based tax, as compared to current origin based
taxation, the ultimate consumer will bear the full
incidence of GST. All other players in the supply
chain will claim set-off of taxes for upstream or
downstream transactions.
Number of taxes out of scope of GST:

Basic Customs duty

Export Duty
Road/Passenger Tax
Toll charges
Property Tax
Electricity Duty
Stamp duty
Certain cases entertainment tax levied by
local authorities
Key differences between existing Indirect Tax and the GST regime
Area
Existing Indirect Tax

Mechanism
GST Regime
Goods and Services
Differentiation exists
No differentiation from taxability perspective
Incidence of indirect tax
Origin based
Destination based
Power
Centre has power to tax service
Both Centre and State has power to tax

services
Number of Taxes
Multiple
Composite GST with dual structure of

taxation
Tax Rates
Multiple and different across States for

same products
Uniform tax on goods and services
Exemptions
Multiple
Fewer expected
Input Tax Credit/Set-off
Not available across taxes
Seamless flow of tax credit except for 1%

additional levy
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KEY ISSUES AND CHALLENGES OF EXISTING

INDIRECT TAX REGIME
8 different rates based on value and specific
rates based on quantity/capacity/volume for
imposition of excise duty creating
fragmentation across manufacturing value
chain
Different Sales Tax/VAT rates for similar
product across two or more States in India
leading to creation of tax favourable regions
within the country
Centre and State has different list of goods
and services exempted from taxes leading to
unevenness in pricing of the products and
services
Inability of India Inc., to set off taxes paid in
one State against similar liability in another
State impacting working capital management,
increasing the procurement cost etc.
WILL YOUR ORGANIZATION BE GAINING

SIGNIFICANT ADVANTAGE POST GST?
It is expected that the tangible business benefits
of GST will be realized over a long time, the
ability to gain mileage depends on readiness of
the businesses to quickly identify, finalize
business decisions and respond effectively to
evolving post GST business environment.
One of the key deciding factors is the
technological capability of the businesses that
helps management to spot opportunities,
formulate strategies to exploit such
opportunities and evolve a sustainable way to
maintain such positioning. SAP S/4HANA is a
key enabler for implementation of GST and
provides following solutions:
Compliance
Pricing Strategies (B2C, B2B)
Product Costing
Margin Analysis
Cash Flow Forecasting/Working Capital Impact for Tax Flows
Framework for SOP Implementation
Master Data Management
Financial Closing
Tax Compliance Management
Customer Dispute and Input Tax Credit
Shared Services
Contract Management
Invoice Automation
Help Desk
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Business Processes Perspective

The impact of GST across the value chain
needs to be evaluated on various aspects of
the business:
Business Area/Function/
Process
Key sub activities that will be

impacted
SAP Solutions
Overall GST Implementation program

management
Engagement with Business

Scheduling and monitoring of project
delivery timelines
Quality assurance
Budgetary approvals
Ensuing macro and micro level
readiness of the business
SAP S/4HANA
TAXINN with GST Compliance
Taxation and Compliance Management
Registration across Centre and States

Documentation management
Monitoring systems for returns
Input tax credit
Allied statutory compliance and
documentation maintenance

SAP Shared Services Framework
SAP GRC Access Control,
Process Control
SAP Master Data Governance
SAP TAO
Procurement to Pay (P2P)/Supply

Chain/Commercial
Redesign of the supply chain operating

model and delivery mechanism (Time
to market, cost to market)
Evaluation of flexibility in the supply
chain
Decision related to Consolidation or
decentralisation of the key
warehousing locations, depots, CNF,
Distributor and Stockists points
Evaluation of criteria/algorithms used
for comparison of quotations
Evaluate changes to pricing and other
key arrangements with the Vendors
Review of the vendor business
allocation
Management of Input Credits (new as
well as transitional provisions)
Evaluate dependency on sourcing
locations/concentration of vendors
Make v/s Buy Decisions
Updating of the vendors master and
ensuring compliance with new
requirements
SAP S/4HANA
SAP Integrated Business Planning
Solutions for
- Sales and Operations Planning
- Inventory Planning
- Supply
SAP APO + Advance Simulation
SAP Strategic Freight Procurement
SAP Transportation Management
SAP Extended Warehouse
Management
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Process

impacted
SAP Solutions
Changes in the Material Master/Item

Codification based on tax rates and
classification
Redesigning of purchase order
documentations
Review and redesign of the inventory
management strategies
Review and evaluate the
transportation strategies
Order to Cash (O2C), Sales, Marketing
Evaluation of long term pricing

arrangements with the customers
Updating of the customer master to
ensure compliance with the GST
requirements
Evaluation of the distribution channel
suitability
Maintenance of margin for the channel
partners
SAP Receivables Management

SAP Cash Management on SAP
S/4HANA
SAP Business Planning add-on on
SAP S/4HANA
SAP Net Margin Analysis on SAP
S/4HANA
SAP Predictive Analytics
Manufacturing/ Production/
Operations
Arrangements with the Contract

Manufacturing/Tolling parties/
Sub-contracting
To and fro movement of materials for
job work
Evaluation of scenarios where the
input material is provided to the
contract manufacturer
Locational changes based on
continuity of the area based incentives
SAP S/4HANA
SAP Integrated Business Planning Inventory Planning
- Supply
SAP Profitability and Cost
Management
SAP S/4HANA
Business Strategy and Planning
Evaluation of continuity of key

manufacturing and other facilities
based on availability of location based
tax arbitrage
Costing and Pricing Models
incorporating GST
SAP S/4HANA
SAP Integrated Business Planning Sales and Operations Planning
SAP Integrated Business Planning Inventory Planning
- Demand
- Supply
SAP S/4HANA
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Process

impacted
SAP Solutions
Record to Report (R2R)/Accounting/

Financial Reporting
Revision of Chart of the Accounts

Mapping of the revised business
process to G/L and R2R steps
Identification/Recording and
Reporting of the Input Tax Credit
Recording and accounting of the tax
liability
Vendor/Customer Master
management
Assessment process
Risks emanating of new tax structure
SAP GRC Access Control,

Process Control
Treasury/Finance/CFOs Office
Working capital management

Review of availment and utilisation of
the input tax credit
SAP S/4HANA
SAP Financial Closing Cockpit
SAP Disclosure & Notes
Management
SAP Cash Management on SAP
S/4HANA
SAP Profitability and Cost
Management
SAP Net Margin Analysis on SAP
S/4HANA
SAP Business Planning add-ons
Information Technology/Change
Management/Transition Team
Change, Integration and Transition

management
Systems set up for compliance
according to the GSTN requirements
Automation of business processes to
facilitate smooth transition and
reporting
Engagement with a trusted partner for
implementation

Human Resources
Evaluation of impact on the employee

benefits offered by the company
Evaluation of changes required in the
T&E process

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A number of new concepts have been introduced

by GST which is going to fundamentally change
the way business model operates including:
Supply rules
Widening the coverage of transactions
Flow of credit subjected to payment of
taxes by supplier
Consolidation of multiple taxes into a
single tax
Consumption based tax regime
Valuation of goods and services based on

different pricing
Hierarchy levels
Many more macro and micro level
changes
The ability to quickly carry out required changes

to the business strategy and processes at macro
as well as micro level largely depends on
technology capabilities of the organization.
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Need to get GST ready

GST has widespread implications for businesses
in primarily two major areas, which are
Compliances and Business Operations:
COMPLIANCE
With GST subsuming multiple Central and State
taxes, uniform tax regime will drive restructuring
of pricing and dealer margins. Pass through
effect of taxes will come in and some benefit

might be passed on to the channel and/or to the
consumer. Price changes and competitor
actions will have an integrated and direct
correlation to volume/market share with an
effect across India, making real time pricing
strategies a key part of strategic
decision making.
GST impacted processes
Implications
Tax calculations
Tax Procedure Migration
Tax Percentage determination
Destination based access sequences
TAXINJ to TAXINN
GST Configuration
Vendor and Customer Master Data
Utilization of Input tax credit
Document Numbering
Transition Provisions
Cutover
Reporting / GSTN
Process review
Stock Transfers and Transfer Pricing
Input Credit Utilization
Vendor and Customer Invoice Reconciliation
Tax Registers and Reporting
Tax Declarations Returns, Challans, etc
Actions needed
Migration from TAXINJ to TAXINN

Stock Transfer and Transfer Pricing
Establish Automated Vendor and Customer Reconciliation
Establish Tax Reporting and Declaration Framework
SAP Solutions
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GST Compliance with TAXINN

Key impact areas
Scope
Description
Tax Registration
Define GST Registration levels
Tax registration process at different levels

such as Central and State levels.
Master Data Maintenance
Business Partner Tax Data, GST

Accounts
Maintenance of data of various

intermediaries, transactions, tax credits etc.
Tax Configuration &

Computation
Configure Tax and Pricing procedures;

Tax computation; TAXINN
Defining tax rates, calculation of taxes on

different products and services based on their
valuations, pricing of the products etc.
Document Numbering
Outgoing Invoice Numbering
Creating and keeping track of invoice

documents based on unique numbering
system
Business Process Localization
Extend Support to currently localized

Business Processes
Helps in integration of existing localized

business processes with overall business
operations
GST Tax Postings
GST Input and Output Tax postings
Helps in identifying input and output tax in the

process of sale of goods and services
Utilization
Input tax credit utilization against

payable for GST Taxes
Keeping track of input tax credit set-offs
Master Data Maintenance
Tax Register
Helps in maintaining tax master data, process

controls, identification of tax dues, filing of
periodic returns etc.
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BUSINESS OPERATIONS
Organizations are seeking practical solutions to
number of questions and challenges related to
key business operations that includes:
Key Business Challenges
Solution through SAP S/4HANA
Where do we stand today (As-Is) and how the road map

to GST looks like?
Business Analysis team to quickly evaluate Asis status and draw

an implementation plan to achieve the To-Be status effectively and
efficiently
What are the specifics that will impact the way

organization carry out and record business
transactions?
Organize high volume of unstructured data and gain significant

efficiency in transaction recording and processing
How the new GST regime is going to impact the working

capital management decisions, especially the process
of recording, availing and utilizing of tax credits?
Accelerated Transaction processing and analytical capabilities of

SAP S/4HANA Platform enable business to get significant real
time insights
How to consolidate the erstwhile Tax structure in the

current ERP and other supporting business applications
to align with the new structure?
High level of business process, structures and database integration

capabilities. SAP S/4HANA removes the burden of maintaining
separate legacy systems and fragmented data, so you can run live
and make better business decisions in the new digital economy.
What are the fundamental changes required in the

Procurement to Payment (P2P), Order to Cash (O2C),
Record to Report (R2R) and other key business
process?
Re-imagine business processes and models with SAP S/4HANA
What are the key compliance requirements and what

plan is in place to ensure those requirements are met?
Process, analyse high volume of structured and unstructured data

to ensure robust reporting and compliance
What will be the potential impact on complex pricing

arrangements, composite contracts, multi-location
deliveries, multi-party transactions?
Perform text, predictive, spatial, graph, streaming, and series

processing against large volumes of data in-memory to deliver
unprecedented insight using a single platform
What are the documentation requirements at each step

of business transaction and what systems and
processes are in place to help organizations to sail
through smoothly?
Easy transition through management of current data and future

data requirements
How do we maintain control across all levels of

transactions and ensure timely and accurate reporting
to various stakeholders?
SAP Transaction controls and enhance process and data integrity

levels
.and many more such implementation challenges can be easily transitioned through SAP S/4HANA.
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The key to success lies in formation of a detailed

execution plan with an expert understanding of
impact of GST across people, process and
technology.
WHO WILL SUCCEED THROUGH THE GST?

While there will be implementation challenges,
the business that quickly identifies and prepares
for the changes, will be gaining a significant and
sustainable competitive advantage, much ahead
of the industry peers. To do so, businesses
needs a solid implementation plan and a trusted
technology implementation partner.

WHAT DO YOU NEED TO SUCCEED?
Ability to view and understand the Macro and
Micro level impact of GST on your business
Detailed technology enabled implementation
plan
Technology tool to smoothly sail through the

GST and emerge as a leading player post GST
Ability to quickly make decisions on pricing,
supply chain, working capital management,
compliance
Ensure robust internal and external reporting
with sound internal controls
Ability to analyse business situations for
multi-dimension
Ability to seamlessly integrate business
applications with vendors, customers,
bankers, regulators and other key
stakeholders
Last but not the least, maintaining uniform
database structure, ensuring integrity of the
current business information and real time
information availability
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SAP S/4HANA Your trusted partner in the journey
All of the above needs are part of the inbuilt

capabilities of SAP S/4HANA to accelerate the
journey of GST Implementation by businesses.
As a cutting edge technology pioneer SAP
S/4HANA can provide a comprehensive
business solution through

Establishment of common infrastructure as

per the requirements of GST
Development of efficient and effective
interfaces with the business and tax
administration ensuring smooth flow of
business data for tax reporting purpose
Facilitating, implementing and setting the
best standards across industries and
business segments
Development of a business aligned
ecosystem for seamless transition from the
current indirect tax system to much awaited
GST regime
Ensuring transition to new GST regime
through nil or minimal disruption to existing
business process, workflow and data
management system
Condition and rule based tax application
Stage
Determination of the applicability of the taxes
procedure for maximizing the benefit arising

out of GST implementation
Efficient management of the dual structure
across different states, product segments
and verticals
Aggregation of data for management
reporting, evaluation and scenario analysis
for facilitating quick decision making
Identification of overlaps between the
existing indirect tax system and the GST
regime and adequately incorporating insights
into the transition plan for timely migration
to GST
SAP S/4HANA accelerates your journey through

flexible data acquisition tools, integrating the
data from wide variety of sources, making
available the up-to-date insights, facilitating a
predictive analytics capability that makes the
implementation process faster, and better.
SAP S/4HANA is well equipped to ensure
smooth sailing through the GST for India Inc. The
technology solution will enable organizations
through transition across various stages. A brief
view is depicted as under
SAP S/4HANA Capabilities and Functionalities

Definition and accurate configuration of the rules for

determination of applicable taxes based on target/
destination/receipt of goods and services
Adequacy of the master data and tagging of data to
transactions based on the defined rules
Maintenance of tax masters
Allocations and assignment of the tax masters to list
comprehensive business transactions and scenarios
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Stage
Capturing taxable events
SAP S/4HANA Capabilities and Functionalities

Computation and recording of taxes
Tax returns and payments
Compliance management
Business reporting and management decision

making
Capturing taxable events through end to end supply chain

(supply of goods and services)
Tracing the movement of the goods across the chain and taxes
applicable thereof
Management of credits/debits and the exceptional
transactions
Service management
Formulation and maintenance of process logic for computing
the taxes
Booking the tax through end to end sequence
Recording of taxes in the financial set of books
Summarising and reporting of the tax liability duly linked to
each tax authority and category of taxes (composite yet
segregated for set off order)
Determination of the tax payment requirement
Generation of the information for filing of various tax returns at
set frequency
Ensuring compliance management through the tax
management process
Generation of the compliance reports
Generation of monitoring reports
Generation of multi-layer and multi-dimensional reports
Reporting of business insights
Management information system for macro and micro level
decision making
Linkage to prospective business transactions
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In addition to the master data, transaction data

also needs to be reviewed for transition
requirements
MASTER DATA AND TRANSACTIONAL

TRANSITION CONSIDERATIONS
Organization needs to consider some of the
following key master data transition
requirements immediately, which is expected
to include
GST Registration information of business

partners (suppliers, legal entities,
manufacturing locations, service centres,
depot, point of sales etc.)
Item master data
Exemption status of goods and services as
well as upstream and downstream business
partners
Tax codes
Condition based tax masters
Pricing masters and many more
Open purchase orders (partial as well as

no-delivery)
Long term rate contracts
Long term quantity contracts
Unexecuted, unbilled and unpaid portion of
the service and maintenance contracts
GR/IR (Goods received but pending for
invoices/tax documentation)
Open pricing and customer quotations
Unaccounted and unsettled debit and credit
notes
Unreturned material sent for job work and
many more
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Fasten your seat belts

With SAP S/4HANA the businesses now will be
able to perform tax impact analysis from various
management decision making perspective which
may include:
and distribution facilities in multiple

locations?
Is there any opportunity to consolidate the
upstream and downstream operations of the
organization to gain economies?
Does the organization require warehouses at
all distribution/consumption locations?
Re-looking at product positioning and pricing

arrangements
Identification of opportunities for
consolidation of locations across business
TAX RATES
verticals
While the CGST rates are expected to be uniform
Analyse patterns of procurement and evolve
across the country, the GST rates may vary as
completely new procurement strategy
the respective States will be able to set the rates
Assess and re-define the customer segments within the bands recommended by the GST
Explore impact on various key metrics in
council above the floor rates. Though in a narrow
simulated post GST business environment
range, the composite GST rate is expected to
vary from state to state.
RE-EVALUATION AND RE-CALIBRATION OF THE
Corporate thus needs to ensure readiness to
BUSINESS MODEL
work amongst the state wise difference in the tax
With seamless flow of taxes paid on inputs for
rates.
settlement of taxes collected on output in a
unified regime, the location of production or sale
SAP S/4HANA has the ability to support
becomes irrelevant. Manufacturing and
business through such complex tax
consumption location structure, based on
administration regime, and it is one stop solution
current indirect tax regime, needs a thorough
to sail through the journey from current indirect
relook. Business Heads needs to evaluate the
tax regime to GST.
model based on the value and volume of
business transactions, the continual relevance of
existing locational arbitrage from taxation as well THRESHOLD LIMITS
as profitability perspective.
Companies need to ensure robust monitoring
mechanism on the vendor thresholds of the
Companies need a dependable technology
business to review whether the vendor or service
solution which can provide insights into how the
provides falls under the ambit of GST.
key business performance indicator gets
Companies thus need to establish a robust
impacted post GST implementation.
technology solution for increased level of
monitoring, which SAP S/4HANA aptly provides.
Some of the key questions before the
Management are-
Do we need to operate the manufacturing
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PRODUCT PRICING STRATEGIES

Post GST environment, number of companies
are expected to witness increased levels of price
competition. With the price of the products being
uniform across the states but the input cost
varying from state to state, the companies will
have to work on product pricing strategy which
will be driven by margin concerns.
With GST subsuming multiple central and state

consumer. Price changes and competitor
actions will have an integrated and direct
correlation to volume/market share with an
effect across India, making real time pricing
strategies a key part of strategic decision making.

competition. With the price of the products being
uniform across the states but the input cost
varying from state to state, the companies will
have to work on product pricing strategy which
will be driven by margin concerns.
With GST subsuming multiple central and state
consumer. Price changes and competitor actions
will have an integrated and direct correlation to
volume/market share with an effect across India,
making real time pricing strategies a key part of
strategic decision making.
Pre GST
Post GST
Price Points Backward Calculation
Price Points Backward Calculation
Distributor Margins
Distributor Margins
Distributors
Suppliers
Distributors
Suppliers
Consumer
Manufacturing/
Service
Consumer
Manufacturing/
Service
Complete Pass-through
21/47
Potential impact of GST on pricing of goods and

services and its implications on business are as
follows:
GST impact
Implications
Pricing Analysis across value chain

Calculation of GST impacts on selling price keeping dealer
margins and consumer price neutral
Impact on selling price keeping dealer margins and dealer
price constant
Impact on volume with a consumer price change
Impact on dealer margins with a consumer price change
Geographical analysis on volume and price changes
Recalibrate Pricing and develop what-ifs with system
based data points
Channel Incentives and Margins

Dealer/ Distributor incentives
Tax benefits and working capital implications
to channel
Review process and Benchmarks
FG pricing to end consumer
New price points and elasticity
Volume and Market Share implications
Service Pricing
Support and Maintenance Service pricing
Scenario Analysis
Introduce and develop pricing volume scenarios.

Dealer margin and selling price calculations with different
scenarios
Impact on Company margins with constant dealer margins
SAP Solutions

SAP S/4HANA
SAP Predictive Analytics
through effect of taxes will come in and some

benefit might be accrued by renegotiating prices
and delivery mechanism from vendors. This will
have a direct impact on final products and
services cost.
SAP S/4HANA has in-built capabilities to

generate and distribute business intelligence to
single as well as all the decision makers in the
organization, which helps them to formulate
right response to changing business situations.
PRODUCT AND SERVICES COSTING
taxes, uniform tax regime will drive change in
raw material and service procurement cost. Pass
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Implications
Product and Service Costing

Calculation of GST impacts on procurement prices for raw
materials and services
Impact of vendor renegotiations
Impact analysis by manufacturing or service locations
Impact analysis with capacity utilization and change in
built capacities
Forecasting and simulation of product and service costs
Product Cost
Raw material sourcing can change
Impact on current tax benefits
Review capacities and utilization reducing fixed cost
Scenario Analysis
SAP Solutions
GST impact on cost of products and services

Continuous analysis of procurement cost of goods
and services
Services Cost
Impact on operations that are sub-contracted
Review outsourced services
SAP Profitability and Cost Management
VALUATION
Companies need to evaluate the allocation of
Under the GST regime the taxable value is
capital resources on the basis of criteria like
Transaction
Value. The valuation concept is
economies of scale, access to market, adequacy
expected to create number of challenges for levy
of infrastructure, centralisation of production
and other key facilities in various states inter alia and computation of taxes especially related to
complex business transactions like captive
instead of decisions made on the basis of
consumptions, captive supplies, and transfer of
taxation laws.
services like leasing of capital equipment for
certain period of time. Businesses need to be
SAP S/4HANA enables the business to review
ready with information to adequately justify the
capital allocation decisions through analysis of
transaction value and also assess the impact
high volume of business data and facilitation of
where there is a possibility of transaction value
review through scenario evaluation.
being significantly different from the invoice
value.
Companies will also need to review the
procurement strategies and needs to have
The valuation rules as and when released, the
access to robust information for cost effective
businesses also needs to ensure readiness.
purchasing.
SAP S/4HANA with its ability to provide data
and share information at multiple levels,
Availability of vendor masters with all the
valuation for the purpose of GST is expected to
necessary data, ability to filter, summarise,
be aligned thereof.
compare and explore insightful information is
one of the key solutions offered by SAP
S/4HANA that will guide the purchasing
strategies of companies.
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MARGIN ANALYSIS
With GST impacting both pricing strategies and
product or services costs, it has a direct impact
on the margins as well. Given the changes
forecasted or simulated on revenues and costs,

margins will also need to be analyzed and
optimized as per the new GST regime.
Implications
Product and Services Margin

Calculation of GST impact on margins
Impact of changes in pricing and costing
Impact analysis by various dimensions like region, state,
manufacturing location, etc
Optimization of margins through what-if scenario analysis
Margins
Redefined margins may result in opportunity to
maximize profits
Some Product and Customer viabilities might
change dramatically
Increased volumes can impact absolute margins
Scenario Analysis
SAP Solutions
GST impact on margins of products and services

Continuous margin analysis and comparison between
plan and actual
SAP Business Planning add-on

on SAP S/4HANA
SAP Net Margin Analysis on HANA
is a need to have a very strong invoice matching

FINANCE OPERATIONS
process as part of the SOP. Since if they get
In the GST environment, organizations need to
missed out due to dispute or leakages
have time-line based closing process with
organizations would lose ITC at the end of the
centrally managed SOP; as the ITC refunds and
year which will have a direct impact on the P&L.
the resultant cash flow is a pan India affect and
This holds true for the customer side matching
not a location based exercise any longer.
process and disputes as well. Also the
Organizations will lose taking the ITC which in
turn will impact the cash flow immediately. There reconciliation is expected to be at line item of
the invoice.
will be an impact on P&L if you dont file
reconciled returns at the year end. Hence, there
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Implications
Invoice reconciliation at line item wise

Financial Closing
GST filing on the GSTN network
Compliance
- Meet stringent filing deadlines
- Application of internal controls
Centralized Tax filing will stream line closing process
with transparency
Scenario Analysis
SAP Solutions
Time taken to resolve disputes in invoices

Time taken for filing Tax returns under GST regime
Time taken to close financial books
WORKING CAPITAL MANAGEMENT

Effective and efficient deployment of working
capital is a key priority for the CFOs office in
volatile business environment.
SAP S/4HANA
SAP Financial Closing Cockpit
SAP Disclosure & Notes Management
Working capital requirement will undergo

significant changes in the new GST regime
which has the following structure:
IGST
Integrated GST (IGST)
CGST
SGST
CGST
Central GST (CGST)
IGST
SGST
State GST (SGST)
IGST
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In the advent of GST on account of time gap

between Goods Received Note (GRN) and Sale of
Goods (Delivery/Billing document) there would be
a need to calculate the GST payable and Input Tax
Credit (ITC) available. In case of inter-state stock
transfer, IGST has to be paid in full in the

dispatching State which is available as credit in the
destination State at the time of sale. This has the
impact of blocking of working capital from the time
of dispatch till the sale in the destination State.
Implications
Cash Outflow Management on account of GST payable

Working Capital blockage due to time gap in GST payable
in dispatching state and ITC availment in source state at
the time of sale
Better forecasting of Cash flow for the enterprise

Better visibility of blocked working capital
Scenario Analysis
SAP Solutions
Simulation of the ITC/GST using the schedule line delivery

due dates for open PO/SO
By applying FIFO concept in the destination state, and
average time to actual sale, projection of working capital
block for a particular amount of time can be done
Analysis of goods movement and the impact of GST and
ITC for : Own movements, consignment movements,
Agent movement etc
SAP S/4HANA with its real time computing and

reporting capabilities; renders CFOs desk with
reliable information on the Input Tax Credit (ITC)
available at any given point of time for effective
and efficient use of working capital.
GOVERNANCE FRAMEWORK FOR STANDARD
OPERATING PROCEDURES (SOP)
IMPLEMENTATION
In the GST environment, there will be a need to use
centralized SOPs for various Master data in the
system; tax configurations would need to be
centrally monitored and managed. There will be a
SAP S4HANA
SAP Cash Management on SAP S/4HANA
need for e.g. to maintain Material master HSN

number for GST rate determination; Vendor
master update of GST number along with various
BIN; Customer master update of GST number
along with various BIN; Depo update of GST
number along with relevant BIN. This is best
managed if there is system based governance
framework for various SOP implementation.
Following are the various processes impacted by
GST and their implications.
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Implications
Master Data Cration and Changes

Org Structure changes in the system
Centralised Tax Configuration
Contracts Management
Data Cleansing
Authorization Matrix
Automated Testing of processes before moving to production
Scenario Analysis
SAP Solutions
Number of Master data created in a period

Time taken to roll out any new changes in regulatory
and tax rules
Time taken to setup organization structure dynamically
as and when needed
Time taken to move a new development from quality to
production without errors
Organizations need to correctly align all taxes

that are related to inward and outward
movement of goods and services in the ERP.
Further business processes which includes
inter-state stock transfers, outward and inward
movement of sub-contracted/job work,
movement of goods for repairs and
maintenances needs to be thoroughly evaluated.
The business need to completely realign the
process followed for recording and utilisation of
the input tax credit as well as settlement of the
tax liability in alignment with the schedule
proposed under the GST regime.
SAP GRC Access Control, Process Control

SAP TAO
MANAGING TAX COMPLIANCES

Companies will need to ensure robust
preparation and be ready for increased level of
tax compliances under the GST regime. The key
areas include

SAP S/4HANA offers built in business process

alignment capabilities to ever changing
regulatory environment.
Streamlining of Master Data, Org. Structure

creation, change
Centralization of Tax compliance framework
Standard Operating procedure for Organization
structure changes
Centralization of Contract management
Delegation of Authority matrix based on SOPs
Error free production environment due to automation
of Testing as there will be Pan India impact
Migration of registrations
Reporting of the inputs tax credit balance
Change in the format of purchase and sales
documentation like invoice, waybills, packing
list, challans etc.
Implementation of the changes in rates in the
tax masters
Ensuring right classification of goods and
services
Framing the manner of computation of value
and assessment of GST
Timely submission of returns
Do away with the statutory forms and
records post GST implementation
Evolve new set of documents for records
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SAP S/4HANA is well equipped to facilitate

compliance on various aspects under the GST
regime.
TAX CONFIGURATIONS
Business needs to ensure that the enterprise
systems are fully equipped to incorporate the
proposed GST framework in total. Appropriate
evaluation studies to be performed to ensure
that the ERP is not only ready to incorporate the
short term changes, but also scalable and ready
to absorb new rules as and when those are
published and made effective under the GST
regime. SAP S/4HANA solution is scalable and
adaptable to the future changes expected in the
Indian business and regulatory environment.
Chart of Accounts
Material Master
Vendor Master
Customer Master
Price Master
Location Master
Terms of trade
RETURNS
Periodically the business needs to generate
voluminous amount of information for
preparation of the different set of returns. The
accuracy of the data upload in the return will
decide the ability of the enterprise to assess the
available input tax credit and utilisation, thus
directly impacting the working capital
management.
Organizations need to ensure that the key

master data sources across the business are
appropriately configured to meet the
requirements of GST. Some of the key master
will include:
Monthly
Returns
Outward Supply
Inward Supply
Consolidated
Monthly
Annual
Matching of data by GSTN with suppliers and customers
Miscellaneous
Report of available input
credit (Short/Excess)
Working Capital
Management
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There is just 5 days window available for filing of

OPEN TRANSACTIONS ON THE DATE OF
each of the outward, inward and monthly
MIGRATION TO GST REGIME
consolidated return. SAP S/4HANA with
Any industrys biggest nightmare will be to seek
capabilities to process high volume of business
solution for management of open transactions
data and generate accurate reports will provide a like
relief to the management. It also has robust data
processing and matching system for generation Open purchase orders
and upload of frequent returns as required under Partially executed sales order
the GST Regime.
Goods in transit
Partially executed contracts
MANAGEMENT OF INTERFACES
Work in process
As the businesses have evolved, it often deploys Material received pending for documentation
different systems and application for distinct
Purchase and sales return
purposes of the business unit, vertical, function Material lying at job worker premises
or department. While the business data is spread Material held on behalf of customer/principal
out and linked through various interfaces
Many other smaller or large pending issues
operated through different platforms, it is going
as on the date of migration.
to be a very challenging task for the businesses
to integrate the data for management reporting, SAP S/4HANA provide end to end transition of
evaluation of business scenarios and tax
existing, new, open transactions without any
compliance management.
hassles to the operations management team.
SAP S/4HANA offers seamless integration
capabilities with various types of business
applications and tools, often without any need
for development of any interface.
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SHARED SERVICES
The following chart shows the different
processes typically included in Shared Services
which will be impacted because of GST
implementation:
General Accounting
Customer Service
Call Centers
HR/Payroll
ssc
Finance
(AR/AP/Billing)
Contract Management
IT Help Desk
With the implementation of GST, the tax filing is

expected to be standardized across India via the
GST network. Due to this standardization the
shared services team can facilitate the local
units in tax filing procedures. Also, due to
standardization of invoice formats, the
automation of invoice processing in a shared
services environment becomes extremely

feasible and simple. Hence, there are definite
benefits for organizations to setup Shared
Services units to facilitate Tax filings, Invoice
automation and contract management process
as part of their business transformation exercise.
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Implications
Invoice Automation
Tax Compliance
Contract Management
Scenario Analysis
Analysis of Number of open invoices,

un-accounted/un-reconciled invoices for input tax
credit with vendors
Status of Tax filings and total credit availed/outstanding
over a period
Faster payment processing for vendors

and customers
Better Dispute resolutions with vendors
and customers
Streamlining of Tax compliance process wherein
the central team can facilitate local business units in
GST filings
Efficient Contract management due to central
shared services.
SAP Solutions
SUPPLY CHAIN NETWORK

taxes, a uniform tax regime will drive
restructuring of the supply chain network. The
distortions imposed by the taxation will go away
and the logistics networks will be designed to
support the speed and efficiency required for
that particular product.
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Implications
INTEGRATED NETWORK DESIGN

Logistics network design considerations such as no. of depots, number of
echelons, linking markets to the depots, depots to RDCs, RDCs to the plants
will be determined based on required response times and the total supply
chain costs
FG NETWORK DESIGN
Considerations for opening an FG depot will be guided by the considerations of acceptable supply lead times and demand volumes of the
markets instead of tax considerations. In certain logistics chains it can
lead to consolidation of FG depots
Total supply chain costs will be reduced

(procurement + inbound logistics + RM inventory +
production + outbound logistics + FG inventory +
excess inventory cost + loss of sale + plant set up
costs + warehouse setup costs)
Ability to reach the markets fast (information lead
time + physical transportation time + waiting time)
The sales and distribution processes undergo a
change in terms of scope and scale
RM NETWORK DESIGN
Sourcing done locally for tax reasons will go away. Best supply
source will be determined from the point of view of product quality,
price and service considerations
SAP Solutions
MANUFACTURING NETWORK (PLANTS + INTERPLANTS +

CONTRACT MANUFACTURING)
Sourcing done locally for tax reasons will go away. Best supply
source will be determined from the point of view of product quality,
price and service considerations
Scenario Analysis
Simulating depot locations and depot-market linkages on

the total supply chain costs, lead times and the inventory
SALES AND OPERATIONS PLANNING

GST impact on the sourcing, manufacturing and
distribution will drive consolidation. This shift
from a more local and loosely integrated supply
chain towards pan India and integrated supply
chain would need strong demand side and
supply side alignment. A disruption or mismatch
will have a much larger implication to demand
satisfaction or cost against a local impact today.
This makes the sales and operations planning
strategic process driving supply chains.
SAP S/4HANA
SAP Integrated Business Planning - Sales and
Operations Planning
SAP Integrated Business Planning - Inventory
Planning
SAP Integrated Business Planning - Supply
production and sales will be reduced indicating

increased agility because of less obsolete
inventory and increased visibility of sales
revenue. This will reduce the working capital
requirements for the organization.
Due to GST and aligned processes of the

implementation alongwith technological changes
in the organization, future uncertainties about
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Before
Plan
Lost Sales
Probability
Obsolete Inventory
Demand
Variability
Supply
Variability
Future
Uncertainty
Future
Uncertainty
Demand
Variability
Supply
Variability
Assets
Inventory
After
Plan
Probability
Obsolete Inventory
Lost Sales
Increased Agility
Increased Visibility
New Target
Service Level
Supply
Variability
Demand
Variability
Demand
Variability
99.99 %
Supply
Variability
Assets
Inventory
33/47
Potential impact on the different processes of

sales and operational planning along with its
implications are given as below:
Implications
Demand and Supply Matching

Forecast, Rollups and Collaboration
Frequency of review
Mature Program for Sales and Operations Planning

Supply Chain decisions taking center stage for
operational efficiencies
Framework for Cross Organizational S&OP.
Flexible Scenario building/Hypothesis and
SOP decisions
Scenario Analysis
Revenue Impact what - if analysis
Cost impact what - if analysis
Buy vs Make scenarios
KPI Framework and Benchmarks
Proactive lead indicators
Comprehensive historical and current SCM performance
Inclusion of Extended Supply Chain Partners into

Sales & Operations Planning
Integrated Plans and Collaboration
SLAs and monitoring
SAP Solutions
Scenario Analysis
Revenue Impact Analysis, Demand and Supply Decisions

Cost Impact Analysis, Demand and Supply Decisions
INVENTORY MANAGEMENT
Current tax regime caused sub-optimal inventory decisions guided more about tax incidence
minimization. Post-GST, strategic inventory
placement is possible achieving more customer
service level for the same inventory investment
or lower inventory investment for the same
service level.
SAP Integrated Business Planning - Sales and

Operations Planning
SAP Integrated Business Planning - Demand
SAP Integrated Business Planning - Supply
SAP APO
Strategic inventory investment = right coverage

for a product at the right place.
Potential impact on the different processes of
Inventory Management alongwith its
implications are given as follows:
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Implications
How much inventory to maintain?

Consolidation of the warehouses - > Larger shipments ->
Higher cycle stock
Larger consolidated volumes -> Frequent replenishment ->
Lower cycle stock
Consolidated demand -> Lower variability at the warehouse ->
Reduced safety stock
Where to keep the inventory?
Plant -> Mother warehouse -> Depots -> Distributors
What is the variability at each consolidation level and how many
days safety stock should be maintained at each of the levels?
Scenario Analysis
Inventory norms at each node of the supply chain

Raw materials @ plants, FG @ plant/mother
warehouse/depots
Cost of carrying the inventory - different at each level.
Impacts where to keep the safety stocks.
Service levels - inventory investments determine the
service levels achieved. Wrong inventory at a place
can bring down service levels in spite of very high
overall inventory investments.
SAP Solutions
SAP Integrated Business Planning - Inventory

Planning
Impact of changes to inventory drivers on the overall

supply chain costs and service levels

OTHER ISSUES AND CHALLENGES
Basic and necessary products like petroleum,
electricity will be kept out of GST.
Accounting and claiming input tax credit will

remain a challenge in the post GST business
environment.
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Industry specific implications of GST

Industry
Upside
Limitations
Retail/E-commerce/Consumer Goods
Expected reduction in the end to end

cost of supply chain
Elimination of the cascading effect of
the multi-level and layered taxes
Freed working capital
Margin expansion of the company and
channel partners
Simplified taxation process
Concern related to continuity of

area based incentives
Higher incidence of taxes on sin/
demerit goods
Higher incidence of taxes on certain
consumer durables
Increased administrative and
compliance work due to E-Com
companies responsibility of
collecting Taxes
Fundamental challenges related to
classification of products into goods
or services for E-commerce
companies
Local registration requirements
(Every state)
Telecom
Expected reduction in the prices of

handsets
Savings in the warehousing and
logistics costs
Fuel products/key inputs for

running network/infrastructure out
of the GST regime
Increase in rates of call, data
services on account of higher tax
incidence
Transportation/Warehousing/
Logistics
Increased level of consolidation in the

industry
Change over and lean business model
Fuel products out of GST regime

poses challenges for claiming any
input tax credit
Professional Services
Reduced costs on account of

availability of input credit across
goods and services inputs
Higher incidence of tax on services

Impact of reduced discretionary
spend
Loss of centralized registration and
administration - need of registration
in multiple states on account of
supply of services to entities
present in those states
Chemicals and Pharmaceuticals
Gain from supply chain efficiencies

Reduced costs across value chain on
account of elimination of the
cascading effect of taxes
Dependency of investments on
continuity of the area based
incentives
Application of GST on the basis of
transaction value instead of MRP
Channel partner margin shrinkage
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Industry
Upside
Limitations
Lack of clarity on grandfathering of
the input credit, continuity of
exemption on life saving drugs and
taxability of free supplies
Metals and Mining

Reduction in costs across value chain
on account of elimination of the
Marginal increase in the tax

incidence
Industrial Machinery and Components
Expected reduction in the litigation on

account of issues related to taxability
Reduced costs across value chain on
account of elimination of the
Lack of clarity on bundling of goods

and services
Discrete Manufacturing and

Automobile
Reduction and rationalization of end to

end cost of supply chain
Elimination of cascading effect across
multiple levels in the value chain
Elimination of taxes like NCCD, Auto
Cess etc.
Flexibility for the industry to build
supply chains
Seamless flow of input credit
Margin expansion for the channel
partners
Expected reduction in on-road

prices of automobiles
Lack of clarity on withdrawal of area
based tax incentives
RETAIL/E-COMMERCE/FMCG
Companies like Hindustan Unilever and Hero group have

witnessed increased level of profits over last 5-7 years,
Phasing out of Area Based Tax incentives

Companies having manufacturing sites in
various states of North-East, Himachal Pradesh,
Jammu and Kashmir needs to re-evaluate the
supply and distribution chain. Further there are
number of companies that are dependent on the
primary manufacturer in such locations and
engaged in peripheral activities like re-packing,
re-labelling, sorting, alteration, storage, cleaning
operations will be significantly impacted.
duly reflected in respective market capitalisation. In

case the exemption is not extended, the investments in
Himachal Pradesh and Uttarakhand may get adversely
impacted leading to flight of capital to other states.
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also expected that with rationalisation of the

Retail
warehousing and distribution model, certain
GST is expected to make a positive impact on
tangible gains will follow.
Retail and Consumer, personal care space. The
overall warehousing and logistics costs are
On the flip side, goods which can be termed as
expected to reduce significantly in the GST
sin or demerit like aerated beverages or
regime. However, the key benefits may get
tobacco based products will be subjected to the
transferred primarily to the manufacturers and
highest tax rates.
to the end consumers. The wholesalers,
distributors, retailers working capital and
administration costs are expected to increase on It is also expected that majority of the consumer
durable will be taxed at the highest rate of 28%
account of requirement of payment of tax by
and certain items to be taxed at 18%. Currently,
suppliers for the following entity in the value
number of goods falling under the consumer
chain to claim input tax credit. SAP S/4HANA
durable segment are being taxed anywhere from
enables businesses to effectively and efficiently
26 % to 31%, depending upon the nature,
manage the tax compliance, payments and
features and application. Technology products
return processes and will also help them in
may see certain rise in price as it is expected that
freeing up of the working capital requirements.
the manufacturers may pass on additional
burden to the consumer on account of marginal
Consumer Goods
increase in the incidence of tax. The consumer
Availability of input credit on number of services
durables sector is laden with high levels of
availed by Distribution channels e.g. rental/
inventory across the end to end supply chain as
operating expenditure will help the channel
well as enormous volumes of inter-state
partners to increase the margin. The ability to
identify and categorise the nature of expenditure transport of such products. The GST regime is
expected to simplify the taxation aspects and
on which the input credit needs to be availed
the ultimate benefits will be enjoyed by the
depends on appropriate configuration of the
consumer. While it is expected that the sector
business process through use of robust
will have positive impact, the exact benefit will be
technology solution.
evaluated only after understanding the
SAP S/4HANA enables accurate configuration of classification of the durable products and tax
rates to be applied.
the business process to effectively manage the
recording and utilisation of the input credit
SAP S/4HANA is completely equipped with
through the value chain.
management of multiple SKUs of products
through end to end supply chain with dynamic
It is expected that the logistics and
application of the tax structure to transactions.
transportation costs through multi levels of
Organization will be able to decide the inventory
distribution would reduce translating into gains
management strategies and evaluate the
for the manufacturers of consumer goods. It is
implications of taxes under various categories of
38/47
consumer products effectively and efficiently.

The current issue of tax leakages thus also will be
addressed by the technology solutions.
transactions have evolved tremendously,

however indirect tax authorities are yet to catch
up with the changing industry trends.
E-Commerce
It is fairly acknowledged, that it is not the
e-commerce companies but the seller of product
would be liable to discharge the GST liability.
However, considering high volume of products
traded through an e-commerce platform and
with an objective to ensure tax compliance and
safeguarding interest of the Revenue,
E-commerce companies are required to collect/
deduct tax at a source.
Inter-state movement of goods has also been

one of the key challenges for e-commerce
companies. The documentation requirements
including various statutory forms, way bills,
permits create logistical and process challenges
for such companies. Additionally, local
registration requirements for State VAT have
also increased the burden of compliances.
Such tax deducted at source will be available as

credit while discharging the tax liability on sales.
Administration of online transactions, tax
compliances related to suppliers needs a robust
technology platform which is capable of dealing
with nuances of the law and keeps the business
model out of trouble. Tax deduction at source is
expected to increase the documentation and
administration costs.
E-commerce sector also has challenges in one of
the fundamental aspects of indirect taxation i.e.
classification of the deliverables or offerings into
goods or services and thus lack of clarity on
taxes that will be applicable.
Further, offering that doesnt involve provision of
goods or services e.g. download of license,
applications, e-book, software, music etc. further
aggravates the challenges. State VAT and
Central Service tax authorities have been
perennially disputing on taxability of such
transactions. Over a period of time digital
E-commerce companies have been subjected to

indirect tax, however, not been able to utilize the
taxes paid as input credit for variety of reasons.
The current tax law does not provide any clarity
on indirect tax applicability to various types of
transactions such as payments and sourcing
through e-wallets, cash on deliver arrangements,
usage of reward points, and adjustment of cash
back, utilization and redemption of gift vouchers,
direct deliveries. Lack of clarity on taxability of
such transactions also creates a challenge for
e-commerce companies. Such issues have led to
differential treatment and application of various
taxes.
The companies need to watch out for more
clarity on application of GST and should be ready
with robust technological solution to quickly
adapt and respond to the requirement.
SAP S/4HANA with its capabilities to manage
high volume of business data and management
reporting, will serve as a business enabler and
help the e-commerce companies to sail through
the requirements of GST smoothly. It will help
the e-commerce companies to ensure proper
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Cost of calls, data may increase as the rates for

services are expected to increase. Also
companies engaged into the telecom
infrastructure may lose the benefit of input tax
credit on use of petroleum products/fuel, as
those products are out of GST framework.
records and matching of the inward supplies

with the outward supplies of the vendor and
accurate determination of the tax liability. The
cost of documentation and compliance will be
under control through implementation of
technology solution offered by SAP S/4HANA.
The evolving e-commerce industry in India is
managing high volume and value of shipments
across the country. The growth rates are beyond
all estimates. In the current taxation regime and
also on account of multiple views by State High
Courts, the e-commerce sector does not have
clarity on indirect taxes applicability, collection
and responsibilities. Currently, the indirect tax
laws have not been able to provide definitive
view or framework to constantly evolving
business and revenue models in the sector.
On a positive note, GST will eliminate the
cascading impact of taxes and further enhance
the ability of e-commerce companies to price
the product competitively in the market.
TELECOM
It is expected that the prices of mobile phone/
handsets to reduce. The manufacturers are also
expected to benefit from elimination of the
cascading impact of the taxes and savings on
account of rationalisation of warehousing and
logistics. The hand set manufacturers need not
require setting up the warehouses in each state
and will able to consolidate the inventory
management post GST implementation.
SAP S/4HANA enables efficient supply chain
management with functionalities to maintain
superior control over the movement of products
and efficient management in inventory.
TRANSPORT/WAREHOUSE /LOGISTICS
The current level of arbitrage possibilities that
exists because of differences of respective State
VAT, Central Sales Tax will be eliminated
completely. This also gives rise to the increased
level of consolidation in the supply chain
industry.
The logistics sector is set for complete makeover of the business models and should make
itself ready to seize opportunities emerging out
of the GST. With SAP S/4HANA the businesses
can review impact of different business models
on its key performance metric and formulate
dynamic strategies to capture the evolving
market.
PROFESSIONAL SERVICES
On account of increased taxes on services, it is
expected that the services are going to be
expensive. Companies with significant level of
revenue from services e.g. technology
companies, consulting firms, professionals
across various domains, commercial leasing,
hotel management will be impacted on account
of higher incidence of tax on the ultimate
consumer. The customers discretionary
spending will be affected in the short term, till
that time savings on account of lower taxes on
goods will be compensated by higher taxes on
services spend.
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Business needs to rethink their business models,

evaluate the product mix, assess the
contribution of revenue from services and
products and formulate customer contracts.
With ability to manage, administer and report
high value and volume of data, SAP S/4HANA
will enable businesses to formulate robust
product structuring strategies.
GST is expected to have a positive impact on the
costs side, a result of elimination of multiple
levies; however, on the flip side services
including technology services, with multilocational deliver centres may need to provide
separate invoice to every customer. Cost of key
technology equipment including electronics is
expected to increase.
CHEMICALS AND PHARMA
Chemical and Pharmaceutical companies will be
impacted on account of GST being applied on
transaction value and not on MRP reduced by
abatement applicable. This move may increase
the incidence of tax and may shrink the margins
earned by the channel partners and thus the
manufacturer; the companies choose to remain
competitive on the pricing front.
Numbers of pharmaceutical companies are

enjoying area based tax incentives. The
grandfathering of such incentives in addition to
supply chain efficiencies can be very
encouraging to the sector; however, currently
there is lack of clarity of continuity of such
incentives under the GST regime. Such factors
will have impact on the capital investment
decision of the companies. Continuity of the
incentives also impacts indirectly the cost of
medicines manufactured and finally the price
incidence will be on the patients.
In case of generic medicines, the rate applicable
currently and rate under GST is expected to be
the same. The key issue for pharmaceutical
industry is clarity on continuity of the exemption
for certain life-saving drugs and APIs which are
used as inputs in manufacturing of life saving
drugs.
The pharmaceutical industry is already struggling

with the high level of accumulated inputs credit
balances primarily on account of high tax rates in
input goods and lower rate of tax on output.
Such scenarios will, impact the working capital
management adversely. Grandfathering or
refund of accumulated credit will be a big relief
for the industry. Further, the continuity of the
The current structure of indirect taxes is 4% to
8% on API and Formulations, 2% CST, State Vat duty free movement of goods under the GST law
which is 5% and above and additional duty (input is also a breather for the industry in general.
creditable). The pharmaceutical sector is
With elimination of the differences in interstate
expected to positively benefit from the GST as
movement of the goods, the pharmaceutical
long as the average rates remain under 15%.
companies can now re-look at the redesigning of
This sector is also likely to gain immensely from
the supply chain efficiencies that will be brought entire supply chain which will include decision on
manufacturing facilities, C&F agents, stockists
in by GST.
and distributors, depots and retail points.
41/47
DISCRETE MANUFACTURING AND AUTO
The industry is looking at absolute clarity on

taxability of free supplies, assistance programs
run for patients, supplies of testing etc.
METAL AND MINING
The current indirect tax incidence on Metals and
Mining companies is close to 10-11%. Further the
tax incidence on products like steel and
aluminium is in the range of 18-20% which is
expected to remain same or increase marginally
under the GST regime.
It is expected to increase to more than 20% post
GST implementation. The impact on increased
taxes is expected to be absorbed by players in
the downstream through reduction of tax rates.
Cement
Currently, effective tax rate for cement
manufacturers is 25% coupled with increased
transportation and logistics costs per metric ton.
It is expected that the reduced GST rates will
bring down the overall tax incidence. Further, the
sales depot structure may also get rationalized
leading to substantial savings in the
transportation, warehousing and logistics costs.
INDUSTRIAL MACHINERY AND

COMPONENTS
In certain cases, there is a bundling of goods and
services for various types of industrial machinery
and components. This phenomenon has given
rise to litigation with the tax authorities on the
taxability of goods and service portion, both
being subject to different tax rates. With
uniformity in the taxes, such litigations and costs
on account of litigations are expected to reduce
significantly.
Automobile
It is expected that the on road prices of vehicles
will reduce. Such reduced prices level may
translate into increased volume for the
automakers. This will also lead to significant
expansion of the margins. GST is expected to
bring in rationalisation and reduction in cost of
doing business for automobile manufacturing
companies. It will help the automotive
distributors in being specific by eliminating the
cascading effect of the current tax regime.
The automobile industry is currently getting
impacted on account of taxes like NCCD, Auto
cess, Octroi, entry tax, registration changes and
road taxes. With the elimination of most of the
cess and taxes, the automobile industry is likely
to become more cost completive and companies
that already present or evaluating export market
for next level of growth will be benefitted from
the GST regime.
Automakers will have far greater flexibility in
building their supply chains as the additional
costs on account of inter-state movement of
goods is being eliminated under the GST regime.
Organization will be able to optimise the
warehousing, logistics and distribution costs.
Automobile manufacturers can also re-negotiate
the contract terms as the vendor on the
upstream will also be able to enjoy significant
reduction/rationalization of the costs.
Importer-Distributors of automobiles and the
resellers in the domestic market will be able to
claim input credit on all costs associated with the
business on the basis of taxes paid. Seamless
42/47
flow of tax credit across the supply chain is also

likely to make the distributor-importers and
reseller more competitive in the market in
addition of expansion of margin.
Automobile companies are also likely to be
benefited from the reduced levels of litigations,
ease of compliances with the taxes being limited
and operate effectively under the simplified GST.
However, any withdrawal of area based/linked
incentives; limitation of export based incentives
is likely to impact adversely, especially to the
companies that have already made significant
capital expenditure.
The used car/pre-owned car industry is also
awaiting guidance from the GST law on
application of taxes. Currently, except for few
organized players, the market is largely
unregulated. GST law and rules applicable to
used car market is also likely to have significant
impact on the automobile manufacturers,
though indirectly.
Two Wheelers
In case of two wheelers/entry level passenger
cars it is expected that the tax rates will be
reduced to 18% from existing 24%. In such a
scenario, the automakers are expected to be in
position to transfer the benefits to end
consumers, though partially. However, such
benefits will quickly phase out and the auto
makers will be under pressure to ensure robust
cost management coupled with competitive
pricing without compromising the value offered
to the customer. It also indirectly impacts the
sourcing of auto components. The ability to
maintain procurement costs of auto
components under control and formulation of

product specific pricing models/strategies/
offers is a key imperative.
SAP S/4HANA enables businesses to view the
impact of price components on the overall costs
of the production and supply chain. Also it helps
in formulating the product, market, segment
level pricing and sales strategies to gain
maximum mileage.
Commercial Vehicles
GST is expected to remove number of logistics
related issues and provide impetus to the overall
transportation and logistics industry. In such a
scenario, ensuring appropriate productivity and
efficiency levels is one of the key priorities for the
transportation and logistics industry. This
incidentally will exert pricing pressures on the
manufacturers of commercial vehicles.
Commercial Vehicle manufacturers needs a
robust technology solution and CRM capabilities,
available with SAP HANA, which will assist the
company to capture post sales/warranty/
service revenue opportunities through
maintaining continual engagement with the
customer through-out the customer/vehicle
life cycle.
Further, improvement in the productivity of the
fleet may reduce the incremental demand for
replacement of commercial vehicles.
Margin benefits will also accrue in the farm
equipment segment translating in reduced cost
of capital expenditure for farmers.
43/47
Auto-component
Organized manufacturers of auto components,
batteries and other spares are expected to
become more cost competitive.
micro level costs through-out the value chain is

of paramount importance for the development of
innovative product pricing and marketing plans.
SAP S/4HANA enables businesses to leverage
data and generate insights for formulation of
innovative and consumer centric product pricing
and marketing strategies.
DISCRETE MANUFACTURING
Indian Inc. with focus on manufacturing does not
review the decision to set up manufacturing
Media and Entertainment
facilities solely from tax benefits perspective.
Elimination of the entertainment tax is expected
The review also includes evaluation of the core
to reduce the cost of such services for the
business efficiency at all times. While GST may
customer. This may also lead to reduction in the
have in immediate impact on number of capital
average ticket price and increased levels of
investment decisions, a robust modelling of the
footfalls in locations, especially multiplexes.
scenarios post GST is required for the
Production houses and studios will also be able
manufacturing community to take a sustainable
to claim input tax credit of payment made for
and economically advantageous capital
creative services as against their tax liability on
investment decisions.
service revenue.
With SAP S/4HANA, manufacturers will be able
to analyse high volume of data on the basis of
The current indirect tax system with respect to
market, demand, production, inventory across
various locations and compare with the post GST media and entertainment sector does have
issues on account of high level of entertainment
scenario. Such analysis will enable the
tax, cascading impact of input taxes and
management of the companies to capture the
exorbitant rates. While GST is expected to bring
opportunities in disguise which will be unfolded
in relief, the quantum of tax that will be levied by
only after the launch of new tax regime.
local bodies in respective states will also decide
the fate of the Media and Entertainment industry
OTHER INDUSTRIES
post GST.
Tobacco
Bank, Financial Services and Insurance
Tobacco and ancillary industries to Tobacco are
Cost of insurance policies may increase on
expected to face pricing pressures as the
account of incidence of the tax on services under
products are expected to fall under the highest
the GST regime.
tax rate regime. The industry has been quiet
successful in transferring the impact of
increased taxes to consumers by increasing the
prices. However, with introduction of product by Civil Aviation
Flying may become more expensive on account
competitors at lower price points, the industry
needs to re-evaluate its production, distribution, of increased taxes on services under GST.
packaging and logistics costs. Visibility of the
44/47
Real Estate
Currently, the real estate sector is unable to
utilise significant portion of the input credit on
construction materials. Under the GST regime,
the concern continues. However, uniform tax
structure and increased levels of tax compliance
is expected to have a positive impact on the
real estate.
Infrastructure
The fate of infrastructure under the GST regime
depends on the continuity of the various
incentives available.
Oil and Gas

The Oil and Gas sector is largely out of the GST
net. As the products i.e. crude, natural gas,
aviation turbine fuel, diesel and petrol will be
kept out of the GST regime while certain
products like kerosene, naphtha and LPS will be
covered. The Oil and Gas sector will have
enormous challenges on account of compliance
requirements with existing as well as the new tax
regime. It is expected that high value of input tax
credit may get foregone and this will give rise to
inflationary situation for the Oil and Gas
products and for rest of the economy, being
basic inputs for all key manufacturing and
processing activities.
45/47
Recent developments impacting your business

INVESTMENT LINKED TAX INCENTIVE
GST Council is deliberating on conversion of the
tax incentives refunds. The transactions will
continue to be taxed to maintain the value added
tax system post GST. Businesses that are
subject to area based incentive/SOPs need to
ensure establishment or upgradation of the ERP
system which ensures the application of
appropriate tax principles to diverse
transactions and accurate computation of the
available input credit vis a vis adjustable
input credit.
SAP S/4HANA has capabilities to generate
robust management information systems duly
providing periodic reports which contain
business information that matters most to the
decision makers. Organizations thus need to
define business strategies and tactics not only at
business unit, segment but also at product level.
SAP S/4HANA enables formulation of micro
strategies.
GOODS AND SERVICES EXEMPTED

FROM GST
GSTs impact on the inflation largely depends on
the decision of the GST Council in the process of
selection of items that will be exempted under
GST regime. It is thus very crucial for India Inc.
to ensure readiness for evaluation of the impact
of rates on current set of exempted goods vis-vis the new set of goods exempted from Excise
duty and state VAT.
Through robust technological capabilities, SAP
S/4HANA enables business to apply various
business scenarios to existing business
transactional data and perform impact analysis.
For more information on GST,

visit: http://sap.com/india/simplegst
Note: The material and the information therein related to taxation are proprietary to Dun & Bradstreet Information Services India Private Limited.
Any content that has mention of SAP products/services is owned by SAP.
46/47

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SAP Thought Leadership Paper

The Alpha and the Omega of GST

GST The New Beginning

GST Key Imperatives

Business Processes Perspective

13 Need to get GST ready

2016 SAP SE or an SAP affiliate company. All rights reserved.

The Alpha and the Omega of GST

GST The New Beginning

Smooth transition to the GST is one of the top 3

There are multiple steps involved in

Go-live and GST On business

Post implementation testing

Resource allocation and engagement with

Design blue print for implementation

Journey from As-Is To-Be status

Evaluate imapct on overall business

2016 SAP SE or an SAP affiliate company. All rights reserved.

The Alpha and the Omega of GST

One of the biggest challenges for businesses is to

various aspects of the entitys value chain. SAP

The GST regime will have significant influence

Recording and accounting

Tax structuring decisions

2016 SAP SE or an SAP affiliate company. All rights reserved.

The Alpha and the Omega of GST

GST Key Imperatives

taxes across various States in India inter alia.

However, there is lack of uniformity among

With GST coming into force, the current indirect

Implementation of GST is expected to bring

Governments, both at Central as well as State,

2016 SAP SE or an SAP affiliate company. All rights reserved.

The Alpha and the Omega of GST

Key Benefits of GST

Ease of doing business

GST will require multiple changes in the business

and high volumes of vendor compliance level

SAP S/4HANA qualifies the businesses in

Point of taxation as per existing Indirect Tax laws

Excise Duty On manufacture

Sales Tax Transfer of ownership in goods

Supply of Goods or Services

Service Tax Provision of taxable services

2016 SAP SE or an SAP affiliate company. All rights reserved.

The Alpha and the Omega of GST

An important aspect of GST is the goods and

Number of taxes out of scope of GST:

Basic Customs duty

Existing Indirect Tax

Goods and Services

No differentiation from taxability perspective

Incidence of indirect tax

Centre has power to tax service

Both Centre and State has power to tax

Composite GST with dual structure of

Multiple and different across States for

Uniform tax on goods and services

Input Tax Credit/Set-off

Not available across taxes

Seamless flow of tax credit except for 1%

2016 SAP SE or an SAP affiliate company. All rights reserved.