SAP Thought Leadership Paper
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Run Simple with GST Retail, E-Commerce & FMCG Industry
Run Simple with GST – Retail, E-Commerce & FMCG Industry
GST – The New Beginning Financial Year 2017-18 will be the 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. Smooth transition to the GST is one of the top 3 agenda items on the Board and Management’s strategy and execution list. With GST, the past no longer holds good and future is laden with number of implementation challenges. Retail, E-Commerce and FMCG industry is expected to have high level of impact on account of intensive supply chains, wider reach to consumers in rural as well as urban markets and high volume of upstream and downstream business sourcing and distribution channels.
GST regime has a high level of impact on the end to end business model of companies engaged into Retail/E-Com/FMCG.
Supply Chain
Working Capital
• Phasing out of Central Sales Tax (CST) will bring efficiency in supply chain • Consolidation of multiple warehouses
• Inventory management • Input credit availability throughout the supply chain will lead to efficiency in working capital management
Taxationa
Consumersa
• Higher incidence of taxation on “Sin/De-merit goods” • Gifts, free samples also taxable
• High level of B2B and B2C exposure • Free movement of goods across the nation
Business Model • Place of supply-destination based consumption tax • Impact of phasing out of area based tax incentives • High level of FDI
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Run Simple with GST – Retail, E-Commerce & FMCG Industry
An organization needs to re-evaluate the business models, business processes and carry Impacted Processes/ Functions/Departments
out significant changes in order to ensure smooth sailing through the GST journey.
Impact Sub-areas
Key Imperatives
SAP S/4HANA Solutions
Technology and IT Systems
• Upgradation and modification in the IT systems for ºº recording of transactions ºº making alterations in IT masters ºº tax coding systems ºº invoicing formats ºº formats of sales and purchase register etc.
• Developing technological changes to adapt improved taxation system and required forms, formats, records and coding system
• TAXINN with GST Compliance • SAP GRC – Access Control, Process Control • SAP Master Data Governance • SAP TAO
Working Capital Management
• Identification, recording and efficient utilization of the input tax credit • End to end visibility of the inventory across the remodelled supply chain • Set-off of service tax paid on rental payments and other services as inputs
• Understanding and evaluation of the elimination of cascading impact of the taxes on working capital efficiencies
• SAP Cash Management on SAP S/4HANA
Procurement to Pay (P2P), Manufacturing
• Potential tax savings on procurements on account of discontinuance of various types of taxes such as Central sales tax, State entry taxes etc. • Wider selection opportunities of vendors across states • Renegotiation of the transportation and logistics contracts • Transition of the vendors to the new tax model • Supply of raw materials/ inputs to the vendors
• Realignment of the Procurement Function and its impact on various types of taxation • Educating vendors for realignment initiatives and design agreements accordingly • Recalibrated supply chain design • Comprehensive review of the existing supply chain and modelling of the required supply chain with scenario analysis
• SAP Business Planning add-on on SAP S/4HANA • SAP Predictive Analytics • SAP Profitability and Cost Management • SAP Net Margin Analysis on SAP S/4HANA • SAP GRC – Access Control, Process Control
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Run Simple with GST – Retail, E-Commerce & FMCG Industry
Impacted Processes/ Functions/Departments
Impact Sub-areas
Key Imperatives
SAP S/4HANA Solutions
• Consolidation of the warehousing, logistics and distribution facilities • Stock transfers across states will become less complex • Withdrawals of area based incentives impacting cost of sourcing
• End to end visibility of the supply chain • Build adequate flexibility in the overall supply chain • Review the volume and value of interstate movement of the products
Order to Cash (O2C)
• Valuation of inventory, products and services • Withdrawals of area based incentives impacting the pricing of key products • Re-modelling of the pricing of products impacting dealers and commissions
• Understanding valuation, accounting and reporting impact on inventories • Formulation of a new geography linked distribution plan • Distributor education and awareness, transition plan
• SAP Business Planning add-on on SAP S/4HANA • SAP Predictive Analytics • SAP Profitability and Cost Management • SAP Net Margin Analysis on SAP S/4HANA • SAP GRC – Access Control, Process Control
Record to Report (R2R)
• Accurate recording and reporting of the tax credits • Correct administration of the taxable and exempt inputs/products • Generation of multiple reports and returns and timely filing
• Manpower skills development to adapt to the new reporting systems • Initiatives for increasing awareness of the key reporting requirements across business functions • Establishment of strong internal controls for apprehending transactions recording, reviewing and reporting
• SAP GRC – Access Control, Process Control • SAP Master Data Governance • SAP S/4HANA • SAP Financial Closing Cockpit • SAP Receivables Management • SAP Disclosure & Notes Management • SAP Shared Services Framework
Tax and Compliance Management
• Dual compliance structure – CGST and SGST • Tax compliance with multiple authorities at Centre and State level
• Ensuring coordination with Central and State Authorities for compliance related queries • Collaboration with multiple business functions to ensure tax compliances • Ensuring technology readiness
• SAP Shared Services Framework
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Run Simple with GST – Retail, E-Commerce & FMCG Industry
Impacted Processes/ Functions/Departments
Impact Sub-areas
Key Imperatives
SAP S/4HANA Solutions
Business Planning and Forecasting
• Accurate planning and management of Goods and Services • Distributors profitability and efficiency analysis
• Formulation of robust budget and operations plan incorporating the impact of GST regime • Frequent review, monitoring and sharing insights with business to reframe operational strategy • Understand, evaluate and guide business team for leveraging opportunities and margin expansion and monitor realization • Evaluate impact of GST on key capital investment decisions
• SAP Business Planning add-on on SAP S/4HANA • SAP Predictive Analytics • SAP Profitability and Cost Management
Business Planning and Forecasting
• Accurate planning and management of volume • Channel partner profitability and efficiency analysis
• Formulation of robust budget and operations plan incorporating the impact of GST regime • Frequent review, monitoring and sharing insights with business to reframe operations strategy • Recording and reporting of the savings in supply chain costs • Understand, evaluate and guide business team for leveraging opportunities arising due to GST implementation like expansion of margin, better realizations etc. • Evaluate impact of GST on key capital investment decisions
• SAP Business Planning add-on ON SAP S/4HANA • SAP Predictive Analytics • SAP Profitability and Cost Management
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Run Simple with GST – Retail, E-Commerce & FMCG Industry
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 Retail/E-commerce/FMCG companies to sail through the requirements of GST smoothly. It will help the Retail/E-commerce/ FMCG companies to maintain proper records
and matching of the inward supplies with the outward supplies of the vendor and for 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.
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.
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Run Simple with GST – Retail, E-Commerce & FMCG Industry
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