A project Report on

GREAT TAX REFORMS IN INDIA

GST
Presented to

SALEPUR AUTONOMOUS COLLEGE , SALEPUR

For the Award of Degree in Commerce

+3 Final Year (6th Semester)

Submitted By:-

Name: SK Taufique Tlahi

Roll no.: BC-17-036

Autonomous roll no.: SAC170201027

SALEPUR AUTONOMOUS COLLEGE

Salepur, Cuttack
Under the Guidance of Prof. Sambhudhar Swain
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DECLARATION

I hereby declare that the project titled “A GREAT TAX REFORM

IN INDIA – GST “creation out by me is my own creation.

This project was carried down under the supervision of Respective

guide, Prof. Sambhudhar Swain HOD in commerce, Salepur Autonomous
College, Salepur, Cuttack in parcel fulfilment of the award of bachelor degree
in commerce is the record of my own research work. The report contents the
finding best on my study & observation common and has not been submitted
earlier for the award or any degree or diploma to any institute or university.

Place : Salepur ( SK Taufique Tlahi)

Date : 01/07/20 (name of student)

(SAC170201027)
(roll number)
 4

CERTIFICATE

This is to certify that the project entitled “ A GREAT TAX REFORM

IN INDIA – GST “ submitted by SK Taufique Tlahi bearing college roll no.
BC-17-036 ,a student of Salepur Autonomous College, Salepur, Cuttack for
fulfilment of bachelor in commerce degree is the original work of her under my
guidance her filled work is satisfaction. I wish here the all the best.

Date : 01/07/20 (Prof. Sambhudhar Swain)

Place : Salepur
Designation of guide
Department in Commerce
Salepur Autonomous College,
Salepur, Cuttack
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ACKNOWLEGDEMENT

I hereby thank my project faculty Prof. Sambhudhar Swain for his

valuable advice, support and guidance throughout this project.

I wish to thank our principal Prof. Umesh Chandra Pati of Salepur

Autonomous College, Salepur , Cuttack for permitted me to undergo the project
work under the guidance of Prof. Sambhudhar Swain .

I am also deeply indebted to my friends and family members who are

directly and indirectly involved in bringing out this project.

SK Taufique tlahi

Place : Salepur (Signature of student)

Date : 01/07/20 SK Taufique Tlahi

(Name of student)

Table of contents
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Chapter Particular Page

No. No.
0 Project summary 05
1 Introduction to GST 07
2 Literature Review 19
3 Objective of the 22
study
4 Research 24
Methodology
5 Data Collection 27
Entry And Analysis
6 Findings of the 61
Project
7 Concluding remark 64
8 References 68
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PROJECT SUMMARY

Goods and Service Tax or GST as it is known is all set to be a

game changer for the Indian economy. The Finance Minister in his budget
speech of Budget 2015 has announced time and again that the tax will be
introduced on 1 April, 2016.

Thus the GST is expected to reduce the concept of ‘tax on tax’,

increase the gross domestic product of the economy and reduce prices.
Overall it is known to be beneficial to both the consumer, business and the
Government.

In India, there are different indirect taxes applied on goods and

services by central and state government. GST is intended to include all
these taxes into one tax with seamless ITC and charged on both goods and
services.

Thus excise duty, special additional duty, service tax, VAT to

name a few will get repealed and will be added into GST. For this, GST
will have 3 parts – CGST, SGST and IGST. The central taxes like excise
duty will be subsumed into CGST and state taxes like VAT into SGST.

For the introduction of GST in the above form, the Government

needs to get the Constitution Amendment Bill passed so that the proposed
objective of subsuming all taxes and allowing states to tax subjects in Union
list and vice versa is achieved. Without these powers it is not legally
possible to move towards GST.

Thus going forward on all transactions of both goods and

services, only one tax will apply which is GST comprising of CGST and
SGST. IGST would be applied instead of SGST for interstate
transactions. Input credit of all these taxes will be available against all the
respective outputs.
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Conceptually GST is expected to have numerous benefits like

reduction in compliances in the long run since multiple taxes will be
replaced with one tax. It is expected to bring down prices and hence the
inflation since it will remove the impact of tax on tax and enable seamless
credit.

Thus the research paper starts with understanding the concept of

Goods and Services Tax impact of GST in India on different sectors.

Further the paper has analyzed data collected from research

articles and information for global practices for similar issues. Based on
this analysis, the paper goes on to suggest changes in few concepts and
system of GST.

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CHAPTER-1

Introduction to goods and

Service tax

 INTRODUCTION
 SALIENT FEATURES OF
GOODS AND SERVICE
TAX
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INTRODUCTION TO GOODS AND

SERVICE TAX

1) Introduction to gst :–
GST is a tax on supply of goods and services. Under GST no
distinction is made between goods and service for levying of tax .It will
mostly substitute all indirect taxes levied on goods and services by the state
and central governments in India.

GST is a single tax at a national level to be levied at all stages right

from manufacture up to final consumption. Under GST every person is
liable to pay tax on his output and entitled to get input tax credit (ITC) on
the tax paid on its inputs.

Therefore, it is a tax on value addition only. Ultimately the final

consumer shall bear the burden of tax under GST.

It is a comprehensive, multistage, destination-based tax:

comprehensive because it has subsumed almost all the indirect taxes except
a few state taxes.

The main objective of introducing GST in India is to outplace a lot

of indirect taxes and direct taxes. Taxes like VAT, service tax, luxury tax
etc.GST aimed at eliminating the cascading effect of tax on tax. GST aimed
at improving the GDP rate by improving the competition of some of the
original goods and services.

The GST is imposed at variable rates on variable items. The rate

of GST is 18% for soaps and 28% on washing detergents. GST on movie
tickets is based on slabs, with 18% GST for tickets that cost less than Rs.
100 and 28% GST on tickets costing more than Rs.100 and 28% on
commercial vehicle and private and 5% on readymade clothes. The rate on
under-construction property booking is 12%.

Some industries and products were exempted by the government

and remain untaxed under GST, such as dairy products, products of
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milling industries, fresh vegetables and fruits, meat products, and other
groceries and necessities.

The central government had proposed to insulate the revenues of

the states from the impact of GST, with the expectation that in due course,
GST will be levied on petroleum and petroleum products.

The central government had assured states of compensation for

any revenue loss incurred by them from the date of GST for a period of 5
years. However, no concrete lows have yet been made to support such
action.

Pre-GST, the statutory tax rate for most goods was about 26.5%,
Post-GST, most goods are expected to be in the 18% tax range.

The GST comes into effect from 1 July 2017 through the
implementation of the One Hundred and First Amendment of the
constitution of India by the Indian government. The GST replaced with
existing multiple taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST
Council which consists of the finance ministers of the central government
and all the states.

GST Council is the governing body of GST having 33 members,

out of which 2 members are of centre and 31 members are from 28 state
and 3 Union territories with legislation.

GST Council is an apex number committee to modify, reconcile or

to procure any low or regulation based on the context of goods and service
tax in India. The council is headed by the union finance minister Nirmala
Sitharaman assisted with the finance minister of all the states of India. The
GST Council is responsible for any revision or enactment of rule or any
rate changes of the goods and service in India.

The GST Council consists of the following

members---

 Union Finance Minister (as chairperson)

 Union Minister of States in charge of revenue or finance
(as member)
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 The Ministers of states in charge of finance or taxation

or other ministers as nominated by each states
government (as member)

2) IMPLEMENTATION OF GST IN INDIA —

The main objective of introducing GST in India is to outplace a
lot of indirect taxes and direct taxes. Taxes like VAT, service tax, luxury
tax etc.GST aimed at eliminating the cascading effect of tax on tax. GST
aimed at improving the GDP rate by improving the competition of some of
the original goods and services.

For the implementation of GST in India following steps were

taken:

1. Amendments in the constitution :-

The fiscal powers between the centre and the states are clearly
demarcated in the Constitution. The centre has the powers to levy tax on
the manufacture of Goods.

Further, the states have the powers to levy tax on sale of

Goods. In case of interstate sales, the centre has power to levy a tax (the
central sales tax) but, the tax is collected and retained by the states.
 4

As for services, it is the centre alone that is empowered to levy

service tax.

Introduction of the GST required amendments in the

constitution to simultaneously empower the centre and the states to levy
and collect GST.

The Constitution of India has been amended by the

constitution (one hundred and first amendment) Act, 2016 recently for this
purpose. Article 246A of the Constitution empowers the Centre and the
States to levy and collect the GST.

The Constitution Amendment bill was passed by the Lok

Sabha in May, 2015. The Bill wih certain amendments was finally passed in
the Rajya Sabha and thereafter by Lok Sabha in August, 2016.

A 22-members select committee was formed to look into the

proposed GST low. State and Union Territory GST lows ware passed by all
the states and Union Territories of India except Jammu and Kashmir,
paving the way for smooth rollout of the tax from 1 July 2017.

The Jammu and Kashmir state legislature passed in GST act

on 7 July 2017, thereby ensuring that the entire nation is brought under
unified indirect taxation system.

2. Providing legislative framework for GST:

Five Lows namely as below are enacted for implementation of

GST:

1) CGST Act: enacted by the central Government

3) UTGST Act: enacted by the central Government
4) IGST Act: : enacted by the central Government
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Goods and service tax council (g s t c):

A GST Council would be constituted comprising the Union

Finance Minister (who will be the Chairman of the Council), the Minister
of State (Revenue) and the State Finance/ Taxation Ministers to make
recommendations to the Union and the States on the matters such as GST
rate, exemption and thresholds, taxes to be subsumed and other features.

It has been provided in the Constitution (one hundred and first

amendment) Act, 2016 that the GST council, in its discharge of various
functions, shall be guided by the need for a harmonized structure of GST
and for the development of a harmonized national market for Goods and
Services.

Thus, this mechanism would ensure some degree of

harmonization on different aspects of GST between the Centre and the
States as well as across States. It is working as follows:
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 Chairperson - Union Finance Minister

 Vice Chairperson – to be chosen amongst the Minister of State
Government.
 Members – MOS (Finance) and all Ministers of Finance / Taxation of
each state.
 Quorum in meetings – One half of the total number of members of
GSTC would form quorum in meetings of GSTC.
 Decision by majority – Decision in GSTC would be taken by a majority
of not less than three-fourth of weighted votes cast.
 Weightage – Centre would have one third weightage of the total votes
cast and all the States taken together would have two-third of weightage
of the total votes cast. The GSTC has been notified with the effect from
12th September, 2016.
 Guiding principle of GST Council – The mechanism of GST Council
would ensure harmonization on different aspects of GST between the
Centre and the States as well as among States.
 Role of GST Council – A GST council play important role on following
matters:
 4

a) Taxes subsumed under GST:

GST Council makes recommendations to the central and state

Government on the taxes, cesses and surcharges levied by the centre, the state
and the local bodies which may be subsumed under GST.

b) Exemption from the GST:

GST Council makes recommendations to the central and state

Governments on the goods and services that may be subjected to or exempted
from the GST.

c) Effective date of imposing GST on petroleum product:

GST Council makes recommendations to the central and state

Governments on the date on which the GST shall be levied on petroleum crude,
high speed diesel, and petrol, natural gas and aviation turbine fuel.
 4

d) Model GST lows principles:

GST Council makes recommendations to the central and state

Governments on model GST lows, principles of levy, apportionment of IGST
and principles that govern the place of supply.

e) Threshold limits:

GST Council makes recommendations to the central and state

Governments on the threshold limit of turnover below which the goods and
services may be exempted from GST.

f) GST Rates:

GST Council makes recommendations to the central and state

Governments on the rates including floor rates which bands of GST.

g) Special rate:

GST Council makes recommendations to the central and state

Governments on any special rate or rates for a special period to raise additional
resources during any natural calamity or disaster.

h) Special provision:

GST Council makes recommendations to the central and state

Governments on special provision with respect to the North-East States, J&K,
Himachal Pradesh and Uttarakhand.

i) GST Rules:

GST Council makes rules on Input Tax Credit, composition levy,

transitional provisions and valuation have been recommended.

Further five rules on registration, invoice, payments, returns and

refund, finalized in September, 2016 and as amended in light of the GST bills
introduced in the Parliament, have also been recommended.

4. Redefining the role of c b e c :-

CBEC is playing an active role in the drafting of GST low and

procedures, particularly the CGST and IGST low, which will be exclusive
domain of the Centre.
 4

This part, the CBEC would need to prepare, in advance, for

meeting the implementation challenges, which are quite formidable.

The existing IT infrastructure of CBEC would also need to be

suitably scaled up to handle such large volumes of data.

5. Goods and service tax network {gstn}:-

Goods and Service Tax Network (GSTN) is a Section 25 (not

for profit), non-Government, private limited company set up mainly to
provide IT infrastructure, systems and services to the Central and State
Government, tax payers and other stakeholders for supporting
implementation and administration of GST in India.

It will manage the entire IT system of the GST portal. This

will provide taxpayers with all services from registration to filing taxes and
maintaining all tax details.

GSTN is a special purpose vehicle (SPV). It establishes,

develops and manages the required infrastructure, systems, technology,
partnerships and eco-system for implementation of GST.

GSTN is the backbone of the common portal which is the

interface between the taxpayers and the Government. The entire process of
GST is online starting from registration to filing of returns.

Services rendered by GSTN:-

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GSTN will render the following services through the common

GST portal:

1. Registration
2. Payment management
3. Return filing and processing
4. Tax payer management
5. Tax authority account
6. Ledger management
7. Provide training to stakeholders
8. Provide analytics and business intelligence to tax authorities
9. Carry out research and study based practices

The main motive of implementation of GST is to reduce the

cascading effect of tax on the cost of Goods and Services and create a
common, cooperative and undivided Indian market to make economy
stronger and powerful.

----***----
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CHAPTER-2

literature review

 Agogo Mawuli studied (May 2014)

 According to S. Thowseaf (2016)
 Pinki, Supriya kamma and Richa
Verma studied (2014)
 According to Nishitha Guptha
(2014)
 According to Dr. D. Amutha (2018)
etc.
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LITERATURE REVIEW

The proposed GST is likely to change the whole scenario of

current indirect tax system. It is considered as biggest tax reform since
1947. Currently, in India complicated indirect tax system is followed with
imbrications of taxes imposed by unions and states separately.GST will
unify all the indirect taxes under as umbrella and will create a smooth
national market.

Expert says that GST will help the economy to grow in more
efficient manner by improving the tax collection and it will disrupt all the
tax barriers between states and integrate country by single tax rate.

GST was first introduced by France in 1954 and now it is

followed by 140 countries. Most of the countries followed unified GST
while some countries like Brazil, Canada follow a dual GST system where
tax imposed by central and state both. In India also dual system of GST is
proposed including CGST and SGST.

 According to Djawady and Fahr (2013) :-

This study is pointed out that knowledge about tax is important

to increase the trust of authorities and also the citizens. The researcher
used structure equation modelling to examine the relationship between tax
awareness and tax knowledge and researcher found that tax knowledge has
positive relationship with tax awareness.

Hence, taxpayers will be more aware about tax system when

they have knowledge and understanding towards the tax system.

 Pinki, Supriya kamma and Richa Verma studied (2014) :-

Goods and Service Tax, Panacea for indirect tax system in India
and concluded that the new NDA government in India is positive towards
implementation of GST and it is beneficial for central government, state
government and as well as for consumers in long run if its implementation
is backed by strong it infrastructure.
 4

 Agogo Mawuli studied (May 2014) :-

In “Goods and Service Tax An Appraisal“ and found that GST

is not good for low income countries and does not provide broad based
growth to poor countries. If still countries want to implement GST then the
rate of GST should be less than 10% for growth.

 According to Nishitha Guptha (2014) :-

In her study stated that implementation of GST in Indian

framework will lead to commercial benefits which were untouched by the
VAT system and would essentially lead to economic development.

 According to Sehrawat (2015) :-

The research paper aims on to know advantages of GST and

challenges faced by India in execution. It also highlights that its
implementation stands for a coherent tax system which will subsume most
of current indirect taxes which in long term will lead to higher output,
more employment opportunities and flourish GDP.

 According to Adhana (2015) :-

The research paper concluded that Government should be

very clear with the fact that for smooth working of GST, the Information
Technology/Infrastructure should also be properly developed throughout
India.

Government should take the state government into assurance

to implement the GST. Furthermore all effort should be made to include all
the items under GST so that no item will left outside the preview of GST
otherwise the main purpose of introducing GST will defeat.

 Pradeep Chaurasia et. al., (2016)

Pointed out that, in India, the unified tax will take the form of
a Dual GST, to be levied concurrently by both the Centre and States. They
concluded that, GST will be helpful for the development of Indian economy
as well it will be very much helpful in improving the GDP of our country
higher than 2 percent.
 4

 According to S. Thowseaf (2016) :-

The research paper study the benefit of Goods and Services

Tax on the economy, business, industry and consumer and analyze the
implementation strategy of GST in India.

If GST properly implemented it will result in increasing

revenue at the Centre as the tax collection system becomes clear and
making tax avoidance problem vanish and leading to economic growth,
helping Indian people regain the wealth lost within country.

 According to Nisa (2017) :-

The research paper study the impact of GST on India’s

foreign trade. It highlights that GST will make life easier for businesses in
India due to development of common national market.

With even taxation and cost effectiveness owing to reduced

time and costs in transportation, one obvious effect would be that ‘Made in
India’ products would now be more cost competitive in the global markets.

 According to Dr. D. Amutha (2018) :-

The research paper study the economic consequences on

Indian economy due to introduction of GST. The paper also discusses the
future predictions and obstacles for GST implementation. It states that
GST is enormous concept which simplifies current tax system in India.

 According to Nayyar (2018) :-

The research paper concluded that all sectors in India -

manufacturing, service, telecom, automobile and small SMEs will bear the
impact of GST. One of the biggest taxation reform- GST will bind the
entire country under a single taxation system rate. As predicted by experts,
GST will improve tax collections and boost up India’s economic
development and discontinue all tax barriers between State and Central
Government.

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CHAPTER-3

OBJECTIVE OF THE STUDY

 OBJECTIVE OF STUDY
 scope of the study


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OBJECTIVE OF THE STUDY

1. OBJECTIVE OF STUDY:-
The objective of introducing GST in India is to outplace a lot of
indirect taxes and direct taxes. Taxes like VAT, Service Tax, Luxury Tax
etc. GST aims at eliminating the complications of tax administration and
compliance.

The main objective of the study is to analyze the concept of

new introduced tax GST and to know the advantages of implementation of
GST in India.

The other sub objectives are as follows:-

 Sub-Objective:-

 To study the impact of GST on different sectors.

2. Scope of the study :-

This paper provides a detailed insight regarding
implementation of GST tax among various sectors of the country.
GST after implementation will bring uniformity with tax rates
and will also overcome lots of shortcomings in the Indian taxation
system with regard to indirect taxation.
The Good and Services Tax would surely be highly
advantageous for major areas of the India economy.

----***----
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CHAPTER-4

Research methodology

 base of the topic

 time period
 place

RESEARCH METHODOLOGY
 4

Research methodology adopted is descriptive and a secondary

source of data is used. Secondary data is sourced from different newspaper,
publications, journals and websites. Being an explanatory research it is
based on the secondary data. The data collection is done through various
sources like newspapers, articles from different journals and from different
websites.

1. BASE OF THE TOPIC :-

The topic of the project is based on study about the advantages
of implementation of GST and understanding about the concept of GST.

Considering the objectives, the descriptive research design is

adopted for the study.

2. TIME PERIOD :-
This study is not based on any specific time, the study is done
from the date of implication of GST in India and now on for knowing the
advantages of implementation of GST and understand about the concept of
GST.

3. Place :-
The place of study is limited in India. The study is done in the
country India for the purpose of study about the advantages of
implementation of GST and understanding about the concept of GST in
India.

This paper is based on exploratory research technique and data

cited in this paper were collected via secondary sources available like
statistical data available on various websites of Indian Government like
Finance Ministry (finmin.gov.in), GST Council (gstcouncil.gov.in), GST
Council Archives (gstindia.com), and many more; literature review from
journal papers; annual reports; newspaper reports; and wide collection of
magazine based articles on GST.
 4

Based on the analysis of above mentioned data collection

sources, the objectives of the study are defined and research design is
drafted which is highly descriptive in nature.

----***----
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CHAPTER-5

Data collection, entry and analysis

 Data collection
 Data entry & analysis

DATA COLLECTION, ENTRY AND

ANALYSIS
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1. DATA COLLECTION :-
Being an explanatory research it is based on the secondary
data. The data collection is done through various sources like newspapers,
articles from different journals and from different websites.

The data cited in this paper were collected via secondary

sources available like statistical data available on various websites of
Indian Government like Finance Ministry (finmin.gov.in), GST Council
(gstcouncil.gov.in), GST Council Archives (gstindia.com), and many more;
literature review from journal papers; annual reports; newspaper reports;
and wide collection of magazine based articles on GST.

2. Data entry & analysis :-

Based on the analysis of above mentioned data collection
sources, the objectives of the study are defined and research design is
drafted which is highly descriptive in nature.

 GOODS AND SERVICE TAX & CONCEPT OF GOODS AND

SERVICE TAX:-

GST is a comprehensive tax levied on the manufacture, sale, and

consumption of goods and services. The GST is a destination based
consumption made on value addition. It is collected on value added goods
and services at each transactional stage of the supply chain or process.

The main concept of GST was under GST every person is liable to
pay tax on his output and entitled to get input tax credit (ITC) on the tax
paid on its inputs.

 GOODS AND SERVICE TAX :-

GST is a tax on supply of goods and services. Under GST no

distinction is made between goods and service for levying of tax .It will
mostly substitute all indirect taxes levied on goods and services by the state
and central governments in India.
 4

GST is a single tax at a national level to be levied at all stages right

from manufacture up to final consumption. Under GST every person is
liable to pay tax on his output and entitled to get input tax credit (ITC) on
the tax paid on its inputs.

Therefore, it is a tax on value addition only. Ultimately the final

consumer shall bear the burden of tax under GST.

The main objective of introducing GST in India is to outplace a lot

of indirect taxes and direct taxes. Taxes like VAT, service tax, luxury tax
etc.GST aimed at eliminating the cascading effect of tax on tax. GST aimed
at improving the GDP rate by improving the competition of some of the
original goods and services.

Goods and Services Tax (GST) is one of the most debated Indirect
Taxation reforms. GST is a comprehensive tax regime levied on
manufacture, sales and consumption of goods and services. It is expected to
bring about 2% incremental GDP growth of the country.

Therefore, the introduction of GST might be a vast step within the

reform of indirect taxation in India. Merging several Central and State
taxes into a single tax could lessen cascading or double taxation, facilitating
a commonplace countrywide market. The simplicity of the tax might lead
to less difficult management and enforcement.

A single shape of tax called GST might be implemented all

through the use of a, changing a number of other oblique taxes like VAT,
Service tax, CST, CAD and so forth. Therefore, GST shall be the largest
indirect tax reform imparting a uniform and simplified manner of oblique
taxation in India.

 CONCEPT OF GOODS AND SERVICE TAX :-

The introduction of Goods and Service Tax (GST) would a very

significant step in the field of indirect tax reforms in India. By
amalgamating a large number of central and state taxes into a single tax, it
 4

would mitigate cascading or double taxation in a major way and pave the
way for a common national market.

From the consumer point of view, the biggest advantage would be

in terms of a reduction in the overall tax burden on goods. The important
elements and concepts related with GST are explained as below:

 COMPREHENSIVE TAX LEVY ON SUPPLY:-

Goods and Service Tax (GST) is a comprehensive tax levy on

manufacture, sale and consumption of goods and service at a national level.

GST is a single tax at a national level to be levied at all stages right

from manufacture up to final consumption.

 MOSTLY SUBSTITUTE ALL INDIRECT TAXES:-

GST will substitute all indirect taxes levied on goods and services
by the central and state governments in India.

By amalgamating a large number of central and state taxes into

a single tax, it would mitigate cascading or double taxation in a major way
and pave the way for a common national market.
 4

 SINGILE TAX LEVIED AT ALL STAGES:-

GST is a single tax at a national level to be levied at all stages

right from manufacture up to final consumption.

GST is a tax on supply of goods and services. Under GST no

distinction is made between goods and service for levying of tax .It will
mostly substitute all indirect taxes levied on goods and services by the state
and central governments in India.

 TAX ON VALUE ADDITION ONLY :-

Under GST only value addition will be taxed and burden of tax is
to be borne by the final consumer.

For example:-

Stages of supply Manufacture to Wholesaler to Retailer to

chain Wholesaler Retailer consumer

Value of input 1000 1200 1500

Value addition 200 300 400
Total 1200 1500 1900
GST (10%) on 120 150 190
output
Input tax credit Nil 120 150
Net GST payable 120 30 40

Here –

 Output tax : the GST paid on output

 Value of input : not to include input tax paid in value
 4

 Input tax : Already paid tax on input

 Input Tax Credit (ITC) : use of input tax to set off output
tax
 Net tax payable :- Output tax – ITC

Under GST every person is liable to pay tax on his output and
entitled to get input tax credit (ITC) on the tax paid on its inputs.
Ultimately the final consumer shall bear the burden of tax under GST.

 REMOVE CASCADING EFFECT :-

The introduction of Goods and Service Tax (GST) would be a

very significant step in the field of indirect tax reforms in India as it will be
eliminate cascading effect. Cascading effect means tax on tax that is double
taxation.

Cascading effect can be cleared with the help of following

example:-

Manufacture Old indirect tax GST

Price 10000 10000
Add: Excise duty (12%) 1250 -------
Total 11250 10000
Add: CST (2%) 225 ----
Add: GST (assumed ------ 1450
14.5%)
Tax to be paid to the 11,475 11450
Government

Note:- Difference of 11,475-11,450 = 25 is due to cascading effect

which means tax on tax and it is eliminated by the GST.

 SAIENT FEATURES OF GST :-

GST is a comprehensive tax levied on the manufacture, sale, and
consumption of goods and services. The GST is a destination based
 4

consumption made on value addition. It is collected on value added goods

and services at each transactional stage of the supply chain or process.

The main feature of GST was under GST every person is liable to
pay tax on his output and entitled to get input tax credit (ITC) on the tax
paid on its inputs.

The salient features of GST are as under.

1) Taxable Event Under GST : -

Taxable event is an event on happening of which tax liability

arise. The taxable event in the GST would be supply of goods or service or
both. As per Article 366(1A) of Constitution of India Goods and Service
Tax means a tax on supply of goods or services or both except taxes on
supply of alcoholic liquor for human consumption and five petroleum
product.

GST means any tax on supply of goods and services except taxes
on supply of liquor for human consumption and five petroleum products.

2) Applicable on Supply :-

GST would be applicable on supply of goods or services as against

the earlier concept of tax on the manufacture of goods or on sale of goods
or on provision of services. Supply is wide term includes all forms of supply
of goods or services or both such as sale, transfer, barter, exchange, licence,
rental, lease or disposal.

GST is a destination based tax that is the goods or service will be

taxed at the place where they are consumed and not at the origin.

3) Nature of Supply :-

GST is levied on supply of goods or services and nature of

supply helps in determination which tax to levy and there is important
relation between both. Nature of supply and place of supply are two of the
most important concepts under GST.

Determination of nature of supply is very important to

determine whether a supply is inter-state or intra-state. CGST and SGST
 4

will be levied on intra-state supply while inter-state supplies will be

charged to IGST.

The BSD (basic custom duty) and IGST will be levied on import
of goods and service, where export of goods and services is zero rated in
GST.

4) Based on the principle of destination :-

GST would be based on the principle of destination based

consumption taxation as against the present principle of origin based
taxation. According to principle of destination all goods and services are
taxed if they are consumed within the country.

Due to this principle export are exempted and imports are

subject to tax. Further, in federal set up like India, destination principle is
preferred for taxation of supply consumed with in the various states of the
country.

Goods and Service Tax is a destination based tax on consumption of

goods and service. It means that the tax would accrue to the taxing
authority which has jurisdiction over the place of consumption which is
also termed as place of supply

5) Dual GST Model :-

In India a Dual GST model has been adopted. Centre Government

and State Government will simultaneously levy GST on every supply of
goods or service or both which, takes place within a state or Union
Territory. Thus, tax under the GST laws would be imposed in the following
manner:
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Intra-state supply of Goods or Services is when the location of the

supplier and the place of supply that is location of the buyer are in the
same state.

In case Intra-state transactions, a seller has to collect both CGST

and SGST from the buyer.

 Interstate supplies:-

Centre shall impose IGST on Interstate transaction. Interstate

supply of goods or services is when the location of the supplier and the
place of supply are in different states.

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Also, in cases of export or import of goods or service or when the

supply of goods or services is made to or by a special economic zone unit,
the transaction is assumed to be interstate.

In an interstate transaction, a seller has to collect IGST from the

6) Treatment of Export:-
 4

Exports will be treated as zero rated supplies. No tax will be payable

on exports of goods or services, however credit of input tax credit will be
available and same will be available as refund to the exporters.

7) Treatment of Import:-

Import of goods would be treated as interstate supplies and would

be subject to IGST in addition to the applicable customs duties.

The incidence of tax will follow the destination principle and the tax
revenue in case of SGST will accrue to the state where the imported goods
and services are consumed.

Full and complete set-off will be available on the GST paid on

import of goods and services.

8) GST rates in India:-

CGST, SGST/UTGST and IGST would be levied at rates to be

mutually agreed upon by the centre and the States under the aegis of the
GSTC. The tax under GST system will be collected at the prescribed rates
not exceeding 20%.

Presently, GST rates have been announced on various goods and

Services by the Government through various communications indicated
that the tax rates would be in 4 slabs of 5%, 12%, 18%, and 28% apart
from the nil rate.

The maximum rate announced of GST is 28% (i.e.

14%CGST+14%SGST) but it can be increased up to 40%(i.e.
20%CGST+20%SGST).
 4

Note:- So maximum rate announced of GST is 28% {i.e.

14%CGST+14%SGST}

9) Supply of alcoholic liquor for human consumption:-

GST would apply to all goods and services except Alcohol for
human consumption.

Supply of alcoholic liquor for human consumption, is kept out of

the purview of the CGST Act, 2017 and the power to levy taxes on supply
of alcoholic liquor for human consumption under Entry No. 51 remains
with the State Governments.

10) Existing taxes to be subsumed under GST:-

The Goods and Service Tax (GST) was introduced in India to

remove the multiplicity of taxes levied, thereby reducing the complexity
and tax cascading.

GST will substitute all indirect taxes levied on goods and services
by the central and state governments in India.

By amalgamating a large number of central and state taxes into a

single tax, it would mitigate cascading or double taxation in a major way
and pave the way for a common national market.

Following taxes would be subsumed under GST:

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Items temporarily out of GST:-

CGST is levied with on all intrastate supply with immediate effect

but CGST on supply of the following items has not been levied

Petroleum crude
High speed diesel
Petrol
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Aviation turbine fuel
Supply of electricity also outside the ambit of GST
4
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Continue to levy central Excise duty:-

Tobacco and tobacco products would be subject to GST. In

addition, the centre would have the power to levy Central excise duty on

Threshold limit for exemption from Registration:-

In GST low, a common threshold exemption for registration

would apply to both CGST and SGST.

Tax payers with an annual turnover of Rs-40/20/10lakh would be

exempt from GST registration.
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Small taxpayers with an aggregate turnover in a financial year up

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The composition levy is an alternative method of levy of tax

designed for small taxpayers with turnover is up to Rs. 75 lakhs. The
scheme can be availed by manufacturers and restaurants.
 4

The objective of the optional Composition Scheme is to bring

simplicity and to reduce the compliance cost for the small taxpayers.
Eligible persons opting to pay tax under this scheme can pay tax at a
prescribed percentage of the turnover every quarter, instead of paying tax
at normal rate.

The GST rate under the composition scheme is 1% for

manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of
turnover. There will not be any input tax credit under the scheme. Instead
of filing 3-4 returns monthly, taxpayers registered under this scheme will
be required to file returns once every quarter.

15) Input tax credit under GST :-

The meaning of ITC includes two words ‘input’ and ‘tax credit’.
Inputs are materials or services that a supplier acquires in order to
manufacture or provide his product or services which is his output.

Example:-

ABC Ltd readymade garment firm buys polyester (input) from Mr X

supplier at Rs-400 and a CGST of Rs-40 is also has to paid (CGST rate of
10%). The price of polyester input will be Rs 440.

Now the garment manufacturer sells the product at Rs-800 plus tax
(means his value addition is Rs-400). Imagine that the GST rate of readymade
shirt is 10%. Here,

 Output tax: the manufacturer must pay a tax of Rs-80.

 Input tax: Already paid tax on input: But he has previously
paid a tax of Rs-40 while purchasing the input of polyester.
 Input Tax Credit: he can claim his Rs-40 as input tax credit.
 Net tax payable: He has to pay only the remaining Rs-40 (that
is total Rs 80-ITC 40).

There Rs-40 that the manufacturer claimed is the Input Tax Credit
and tax is paid on value added.

16) Sequence and Restriction for the utilisation of

ITC:-
 4

The amount of input tax credit available in the electronic credit

ledger of the registered person is utilised in following manner:

Amount of ITC on Utilised towards Order of utilisation

account of payment
IGST IGST,CGST,SGST &  First to pay = IGST
UTGST  Secondly = CGST or
SGST/UTGST (in
any order)
CGST IGST & CGST  First to pay = IGST
 Secondly = CGST
SGST IGST & SGST  First to pay = IGST
 Secondly = SGST
UTGST IGST & UTGST  First to pay = IGST
 Secondly = UTGST

Further, the amount of ITC available on account of CGST shall not

be utilised towards payment of SGST and UTGST.

In similar manner, the amount of ITC available on account of SGST

or UTGST shall not be utilised towards payment of CGST.

17) Registration under GST:-

Under GST low, all persons or entities involved in buying or selling

goods or providing services or both are required to register for GST.

Any business in India that supplies goods or service with turnover

exceeding Rs-40 /20 /10 lakh have to get registered under GST.

Following persons liable for registration under GST:

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 4

18) Filing of returns:-

The one of the important feature of GST system is electronic filling

of returns.

In GST system returns mechanism helps the taxpayer to file

returns and avail ITC.

Followings are the return forms available in electronic mode for

filing of returns with their description and due date of filing:

Return Description Due date of filing

GSTR-1 Monthly statement of outward 10th of next month
supplies
GSTR-2 Monthly statement of inward 15th of next month
supplies
GSTR-3 Monthly return for a normal 20th of next month
taxpayer
GST- Quarterly Statement for 18th of the month next to
CMP-08 Composition Taxpayer Quarter
GSTR-5 Monthly return for Non 20th of the month succeeding
Resident Taxpayer the tax period or within 7 days
after expiry of registration
whichever is earlier
GSTR-6 Monthly return for ISD 13th of next month
GSTR-7 Monthly return for TDS 10th of next month
GSTR-8 Monthly Statement of return for 10th of next month
TCS
GSTR-9 Annual Return 31st December of next FY
GSTR-10 Final Return Within 3 months from date of
Cancellation /order whichever
is later.

19) Liability to pay GST:-

Following persons are liable to pay GST to the Government:

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In general, a supplier of goods or service is liable to pay Goods and

Service Tax to the Government.

In any other case:-

In other case following persons are responsible to pay Goods and

Service Tax to Government:

 Recipient under Reverse Charge Mechanism

 Deductor in case of Tax Deducted at Source
 E-commerce operators in case of Tax Collected at Source

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20)

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Payment of tax:-

Various modes of payment of tax available to the taxpayers can be

divided into following two modes:

E
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 Electronic Payment (E-Payment) Mode:-

 4

Following Electronic Payment (E-Payment) mode is used for

making deposit in electronic cash ledger in GST low:

 Over the counter (OTC) Payment:-

Over the Counter Payment (OTC) through authorized bank for

deposit up to 10,000 rupees per challan per tax period, by cash, cheque or
demand draft.

21) Tax Deduct at Source:-

Obligation on certain person including Government departments,
local authorities and government agencies, who are recipients of supply, to
deduct tax at the rate of 1% from the payment made or credited to the
supplier where total value of supply, under a contract, exceeds two lakh
and fifty thousand rupees (Rs- 2.5 lakh).

Following are the provisions related with Tax deduction at source:

Particulars Description
1. Liability to deduct tax at source Government department, local
[Sec 51 (1) ] authority, Governmental agencies,
other person
2. Rate of TDS 1% of the value of supply
[ Sec 51(1) ]
3. Threshold limit for tax deduction value of supply= exceeds rupees 2.5
at source Lakh
[ sec 51 (1) ]
4. Time limits to deposit TDS 10th of the next month
[ Sec 51 (2) ]
5. Failure to deposit TDS Have to pay interest in accordance
[ Sec 51 (6) ] with the provision of sec 50(1)
 4

22) Refund of tax:-

Refund arises in a situation when the GST paid is more than the
GST liability.

Under GST the process of claiming refund is standardized to

avoid confusion. The process is online and time limits have also been set for
the same for making it effective.

23) Tax Collected at Source:-

Obligation on electronic commerce operators to ‘collect tax at

source’ at such rate not exceeding 2% of net value of taxable supplies, out
of payment to suppliers supplying goods or service through their portals.

Following are the provisions related with Tax deduction at

source:

Particulars Description
1) Liability of collection of tax at Electronic commerce operator
source
[ sec 52(1) ]
2) Rate of TCS Up to 1% of net taxable supplies
[ Sec 52(1) ]
3) Time limit to deposit TDS 10th of the next month
[ Sec 52(3) ]

24) Self-assessment:-

GST have system of self assessment of the taxes payable by the

registered person.

25) Classification of Goods and Services under GST:-

HNS (Harmonised System of Nomenclature) code shall be used

for classifying the Goods under the GST regime:

 2 Digit code: Taxpayers whose turnover is above 1.5 crores but below 5
crores shall use 2 digit code.
 4

 4 Digit code: Taxpayers whose turnover is 5 crores and above shall use 4
digit code.
 Not required to mention HSN: Taxpayers whose turnover is below 1.5
crores are not required to mention HSN code in their voices.
 Services Accounting Code (SAC): The services will be classified as per
the Services Accounting Code.

26) Recovery of Arrears of tax:-

Arrears of Tax to be recovered using various modes including

detaining and sale of goods, movable and immovable property of defaulting
taxable person.

27) Powers of inspection, search, seizure and arrest:-

For the proper implementation of GST low various powers are

given to GST officers.

In any tax administration the powers are provided to GST

officers for Inspection, Search, Seizure and Arrest to protect the interest of
genuine taxpayers (as the Tax evaders, by evading the tax, get an unfair
advantage over the genuine taxpayers) and as a deterrent for tax evasion.

These are also required to safeguard Government’s legitimate

dues.

28) Appeals:-

In some cases, the taxpayer or the department might not agree

with the adjudication order passed by the tax officer. Thus, a dispute arises
between them.

To solve these kinds of disputes proper channels of appeals are

provided by the CGST Act. Steps of appeals under GST are shown as
below in figure:
 4

29) Provision for penalties:-

Under GST authorities have power to impose penalties. The

penalties will be in forms of fines, confiscation of goods, etc.

Officers can impose a penalty for violation of low, confiscate the

goods, and give option to pay fine in lieu of confiscation.

30) Administrative control:-

In order to ensure single interface, administrative control will be

as follows:

 If turnover below Rs- 1.5 crore:-

All administrative control over 90% of taxpayers having turnover

below Rs- 1.5 crore would vest with state tax administration and over 10%
with the central tax administration.

 If turnover above Rs- 1.5 crore:

Further all administrative control over tax payers having turnover

above Rs- 1.5 crore shall be divided equally in the ratio of 50% each for the
central and state tax.

 IMPACT OF GST ON DIFFERENT SECTORS IN

INDIA:-
Introduction of GST will greatly improve the quality of
the indirect tax system and, therefore, make it possible to have
higher resources on a sustainable basis, which will make the fiscal
 4

situation more sustainable. This reform will solve many critical

issues in the long run.

According to a recent study on the impact of GST, India

could gain as much as $15 billion annually once the GST is in place.
Discounting these flows at a modest 3 per cent per annum, the
present value of the GST will work out to about half a trillion
dollars.

GST will give more relief to industry, trade and

agriculture through a more comprehensive and wider coverage of
input tax set-off and service tax set-off, subsuming of several Central
and State taxes in the GST and phasing out of CST.

The transparent and complete chain of set-offs which will

result in widening of tax base and better tax compliance may also
lead to lowering of tax burden on an average dealer in industry,
trade and agriculture.

The subsuming of major Central and State taxes in GST,

complete and comprehensive setoff of input goods and services and phasing
out of Central Sales Tax (CST) would reduce the cost of locally
manufactured goods and services.

This will increase the competitiveness of Indian goods and services

in the international market and give boost to Indian exports.

The impact of Goods and Services Tax on certain sectors are

discussed hereunder.

Food Industry :-

The application of GST to food items will have a significant impact

on those living under subsistence levels. It would have a major impact on
the poor. But at the same time, a complete exemption for food items would
drastically shrink the tax base.

Food includes a variety of items, including grains and cereals,

meat, fish, and poultry, milk and dairy products, fruits and vegetables,
candy and confectionary, snacks, prepared meals for home consumption,
restaurant meals, and beverages.
 4

In India while food as such is exempt from the CENVAT, many of

the food items including food grains and cereals attract the state VAT at
the rate of 4%. Exemption under the state VAT is restricted to unprocessed
food, e.g., fresh fruits and vegetables, meat and eggs, and coarse grains.

Beverages are generally taxable, with the exception of milk. Even

if food is within the scope of GST, such sales would largely remain exempt
due to small business registration threshold. Given the exemption of food
from CENVAT and 4% VAT on food items, the GST under a single rate
would lead to a doubling of tax burden on food. Hence certain measures
need to be taken in this regard.

Housing and Construction industry:-

In some countries in Europe, supply of land and real property are

excluded from the scope of tax whereas in Australia, New Zealand, Canada
and South Africa, housing and construction services are treated like any
other commodity.

When a real estate developer builds and sells a home, it is subject

to VAT on the full selling price, which would include the cost of land,
building materials, and construction services. Commercial buildings and
factory sales are also taxable in the same way, as are rental charges for
leasing of industrial and commercial buildings.

There are only two exceptions: (1) resale of used homes and
private dwellings, and (2) rental of dwellings. A sale of used homes and
dwellings is exempted because the tax is already collected at the time of
their first purchase.

Residential rentals are also exempted for the same reason. If rents
were to be made taxable, then credit would need to be allowed on the
purchase of the dwelling and on repairs and maintenance.

In India the construction and housing sector need to be included

in the GST tax base because construction sector is a significant contributor
to the national economy.

F M C G sector :-
 4

Despite the economic slowdown, India’s Fast Moving Consumer

Goods (FMCG) sector has grown consistently during the past three to four
years, reaching a size of $25 billion (Rs 120,000 crore) at retail sales in
2008.

Implementation of the proposed Goods and Services Tax (GST)

and opening of Foreign Direct Investment (FDI) are expected to fuel
growth further and raise the industry’s size to $47 billion (Rs 225,000
crore) by 2013 and $95 billion (Rs 456,000 crore) by 2018, according to a
new FICCI-Technopak report. The FMCG sector is also one of the major
contributors to the exchequer with $6.5 billion (Rs 31,000 crore) paid
through direct and indirect taxes.

Implementation of GST will have several benefits for the FMCG

sector including uniform, simplified and single point taxation and thereby
reduced prices.

Rail sector:-

There have been suggestions for including the rail sector under the
GST umbrella to bring about significant tax gains and widen the tax net so
as to keep the overall GST rate low. The inclusion of the rail sector in the
tax regime which will do away with most of the indirect taxes should be
done if the government wants to provide a level playing field to road and
air transportation sector.

This will have the added benefit of ensuring that all inter-state
transportation of goods can be tracked through the proposed information
technology (IT) network.

Financial services sector:-

In most of the countries Goods and Services Tax is not charged on

financial services. For example in New Zealand, almost all goods and
services are covered under the GST except that of financial services.

The reason behind this is that the charge for services provided by
financial intermediaries like banks and insurance companies is generally
not precise, i.e. the fee is taken as a margin that is hidden in interest,
dividends, annuity payments or such other financial flows from the
 4

transactions. If the fee was not a hidden one, then it would be easy to
charge the service to tax.

In China, financial services are taxable under their business tax,

which is a tax on turnover with no tax credits allowed on inputs. Because it
is a turnover tax, it can be applied to the total spread for margin services,
with no need to allocate the spread between borrowers and depositors.
Israel and Korea also apply tax in such alternative forms.

Under the Service Tax, India has followed the approach of bringing
virtually all financial services within the ambit of tax where the
consideration for them is in the form of an explicit fee. It has gone beyond
this by bringing selected margin services (where the consideration is the
spread between two financial inflows and outflows) within the Service Tax
net.

The following are principal examples of such taxable margin

services:

 Merchant discounts on credit/debit card transactions are taxable as a

consideration for credit card services, as are any explicit fees or late
payment charges collected from the card member.
 In foreign currency conversion transactions without an explicit fee,
tax applies to a deemed amount of consideration equal to 2% of the
amount converted. The tax applies to that portion of life insurance
premiums that represents a cover for risks.

In some countries, transactions in gold, silver and other precious

metals are also treated as part of the financial sector, given that these
metals are often bought as investments, and not for consumption and hence
they are exempted from tax.

As there are no compelling reasons to exempt financial services

from the purview of GST, it would be advisable to continue the same
approach as followed under the Service Tax provisions.

Information Technology Enabled Services :-

For the purpose of taxing e-commerce or software, it is essential to

define the kind of property. Intangible property means property that can
be moved but cannot be touched and felt. It can be further divided into
 4

Intellectual Property Rights and Others like Goodwill, Interest, and

Receivables.

The medium through which the software is transmitted determines

the nature of goods. If it is through electronic form, then it is considered as
intangible property, but if it is any other type of medium, then it would be
tangible property.

Depending on the type of goods and their place of supply, the tax
implications vary in the countries that already have GST. E-commerce and
other such transactions are the toughest to tax and need the highest
probability of tax planning. India has been struggling with the taxation of
e-commerce.

In spite of various judicial pronouncements and laws, the tax

implications are still not very clear. Presently, the packaged and
customized software is taxed on the basis of the intent of the parties. To be
in sync with the best international practices, domestic supply of software
should also attract GST on the basis of mode of transaction.

Hence, if the software is transferred though electronic form, it

should be considered as Intellectual Property and regarded as a service. If
the software is transferred on media or any other tangible property, then it
should be treated as goods and subject to GST.

Impact on small enterprises:-

The impact of GST on small enterprises is of great concern. There

will be three categories of small enterprises in the GST regime.

Those below the threshold need not register for the GST. Those
between the threshold and composition turnovers will have the option to
pay a turnover based tax or opt to join the GST regime.

Given the possibilities of input tax credit, not all small enterprise
may seek the turnover tax option. The third category of small enterprises
above the turnover threshold will need to be within the GST framework.
Possible downward changes in the threshold in some States consequent to
the introduction of GST may result in obligations being created for some
dealers.
 4

In such cases suitable provisions could be made to provide direct

assistance to the affected small enterprises if considered desirable. In
respect of Central GST, the position is slightly more complex.

Small scale units manufacturing specified goods are allowed

exemption of excise up to a turnover of Rs 1.5 crores. These units, which
may be required to register for payment of GST, may see this as an
additional cost.

Impact on Agricultural Sector:-

The effect of GST on agricultural sector is anticipated to be

optimistic. The agricultural segment has the largest contribution in the
total GDP of India. It contributes around 16% of the total GDP.

GST is important to improve the trustworthiness, transparency and

timely delivery under supply chain system. Transport of agriculture
products across all states within India is one of the big issue faced by the
Agricultural industry today.

The enhanced supply chain system would reduce the cost and
wastage of agriculture products for the farmers/retailers. GST would also
help in dropping the cost of heavy machinery which are required for
production of agricultural products.

Under the GST, poultry farming, dairy farming and stock breeding
are kept outside of the purview of agriculture therefore these are not
taxable. Fertilizers which is an essential component of agriculture was
earlier taxed around 6% (5% VAT and 1% Excise duty). Whereas under
GST, the tax rate on fertilizers is 12% which is almost double the previous
tax rate.

The same impact is on Tractor industry. The wavier on Tractors

manufacturing has been removed and 12% GST rate has been imposed on
it. It is helpful to manufacturers as now they will be able to claim Input
Tax Credit.

India’s milk production in 2014-15 was 146.31 million ton which

increased to 160.35 million ton in 2015-16. Previously, rate of VAT was 2%
on milk and certain milk products but now there is no GST on Fresh milk.
 4

Skimmed milk is added under 5% tax slab and condensed milk is added
under 18% slab.

Tea is undoubtedly one of the key item in each and every household
in India. Under GST tax rate on tea is 5% against earlier average VAT rate
of 4-5% with Assam and West Bengal with the exception of 0.5 and 1%
which resulted into increase in tea price.

Based on above it is clear that rise in the cost of some agricultural

produce is expected due to the rise in inflation index for a short time
period. Implementation of GST would help a lot to the farmers/distributors
in the long run as single unified national agriculture market would be
created.

GST will help those farmers in India who contribute greatest to the
GDP, would be able to sell their product for the best available prices.

 ADVANTAGES OF IMPLIMENTATION OF GST:-

GST subsumes a number of existing indirect taxes which were
earlier levied by the Centre and State Governments including Central
Excise duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry
Tax, Local Body Taxes, Octroi, Luxury Tax, etc.

It brings benefits to all the stakeholders’ viz. industry, government

and the citizens. It is expected to lower the cost of goods and services, boost
the economy and make our products and services globally competitive.

GST prevents cascading of taxes by providing a comprehensive

input tax credit mechanism across the entire supply chain.

GST benefits in India will assist the Government as well as the

consumers in the long run in creating a win-win situation for both. Some of
the advantages of GST in India are enlisted as follows:

  Mitigation of Cascading effect :

Under the GST administration, the final tax would be paid by the
consumer for the goods and services purchased. However, there would be
 4

an input tax credit structure in place to ensure that there is no slumping of

taxes. GST is levied only on the value of the good or service.

 Abolition of Multiple Layers of Taxation :

One of the advantages of GST is that it integrated different tax

lines such as Central Excise, Service Tax, Sales Tax, Luxury Tax, Special
Additional Duty of Customs, etc. into one consolidated tax. It prevents
multiple tax layers imposed on goods and services.

 Resourceful Administration by Government :

Previously, the management of indirect taxes was a complicated

task for the Government. However, under the GST establishment, the
integrated tax rate, simple input of tax credit mechanism and a merged
GST Network, where information is available, and administration of
resources are well-organised and straightforward for the Government.

 Enhanced Productivity of Logistics:

  The restriction on inter statement movement of goods has reduced.
Earlier logistic companies had to maintain multiple warehouses across the
country to avoid state entry taxed on interstate movements.
 Creation of a Common National Market: 
GST gave a boost to India’s tax to Gross Domestic Product ratio
that aids in promoting economic efficiency and sustainable long – term
growth. It led to a uniform tax law among different sectors concerning
indirect taxes. It facilitates in eliminating economic distortion and forms a
common national market.
 Ease of Doing Business:
  With the implementation of GST, the difficulties in indirect tax
compliance have been reduced. Earlier companies faced significant
problems concerning registration of VAT, excise customs, dealing with tax
authorities, etc. The benefits of GST have aided companies to carry out
their business with ease.

 Regulation of the Unorganized Sector under GST:

 4

 It has created provisions to bring unregulated and unorganised

sectors such as the textile and construction industries to name a few under
regulation with continuous accountability.
 Reduction of Litigation: 
GST aids in reducing litigation as it establishes clarity towards the
jurisdiction of taxation between the Central and State Governments.GST
provide a smooth assessment of tax.
 Tackling Corruption and Tax Leakages:
With the GST online network portal, the taxpayer can directly
register, file returns and make payments of the taxes without having to
interact with tax authorities. A mechanism has been devised to match the
invoices of the supplier and buyer. This will not only keep a check on tax
frauds and evasion but also bring in more businesses into the formal
economy.

 IMPACT OF GST ON INDIAN ECONOMY:-

GST will have a multiplier effect on the economy with benefits
accruing to various sectors as discussed below.

 Benefits to the exporters:-

The subsuming of major Central and State taxes in GST,

complete and comprehensive setoff of input goods and services and phasing
out of Central Sales Tax (CST) would reduce the cost of locally
manufactured goods and services.

This will increase the competitiveness of Indian goods and

services in the international market and give boost to Indian exports. The
uniformity in tax rates and procedures across the country will also go a
long way in reducing the compliance cost.

 Benefits to small traders and entrepreneurs:-

GST has increased the threshold for GST registration for small
businesses. Those units having aggregate annual turnover more than Rs 20
lakhs (Rs. 10 lakhs in certain cases) in case of supplier of services and Rs.
40 lakhs (Rs. 20 lakhs in certain cases) in case of supplier of goods have be
 4

registered under GST. Unlike multiple registrations under different tax

regimes earlier, a single registration is needed under GST in one State.

An additional benefit under Composition scheme has also been

provided for businesses with aggregate annual turnover up to Rs 1.5 crore
(Rs. 75 lakhs in certain cases) in case of supplier of goods and restaurant
services and Rs. 50 lakhs in case of supplier of services.

With the creation of a seamless national market across the country,

small enterprises will have an opportunity to expand their national
footprint with minimal investment.

 Benefits to agriculture and Industry:-

GST will give more relief to industry, trade and agriculture

through a more comprehensive and wider coverage of input tax set-off and
service tax set-off, subsuming of several Central and State taxes in the GST
and phasing out of CST.

The transparent and complete chain of set-offs which will result in

widening of tax base and better tax compliance may also lead to lowering of
tax burden on an average dealer in industry, trade and agriculture.

 Benefits for common consumers:-

With the introduction of GST, the cascading effects of CENVAT,

State VAT and service tax will be more comprehensively removed with a
continuous chain of set-off from the producer‘s point to the retailer‘s point
than what was possible under the prevailing CENVAT and VAT regime.

Certain major Central and State taxes will also be subsumed in

GST and CST will be phased out. Other things remaining the same, the
burden of tax on goods would, in general, fall under GST and that would
benefit the consumers.

 Promote –“Make in India” :-

GST will help to create a unified common national market for

India, giving a boost to foreign investment and –“Make in India”
campaign.
 4

It will prevent cascading of taxes and make products cheaper,

thus boosting aggregate demand. It will result in harmonization of laws,
procedures and rates of tax.

It will boost export and manufacturing activity, generate more

employment and thus increase GDP with gainful employment leading to
substantive economic growth. Ultimately it will help in poverty eradication
by generating more employment and more financial resources.

More efficient neutralization of taxes especially for exports

thereby making our products more competitive in the international market
and give boost to Indian Exports. It will also improve the overall
investment climate in the country which will naturally benefit the
development in the states.

Uniform CGST & SGST and IGST rates will reduce the
incentive for evasion by eliminating rate arbitrage between neighbour
States and that between intra and inter-State supplies. Average tax burden
on companies is likely to come down which is expected to reduce prices and
lower prices mean more consumption, which in turn means more
production thereby helping in the growth of the industries. This will create
India as a ―Manufacturing hub.

 Ease of Doing Business:-

Simpler tax regime with fewer exemptions along with reduction in

multiplicity of taxes that are at present governing our indirect tax system
will lead to simplification and uniformity. Reduction in compliance costs as
multiple record-keeping for a variety of taxes will not be needed, therefore,
lesser investment of resources and manpower in maintaining records.

It will result in simplified and automated procedures for various

processes such as registration, returns, refunds, tax payments.

All interaction shall be through the common GSTN portal,

therefore, less public interface between the taxpayer and the tax
administration. It will improve environment of compliance as all returns to
be filed online, input credits to be verified online, encouraging more paper
trail of transactions.
 4

Common procedures for registration of taxpayers, refund of

taxes, uniform formats of tax return, common tax base, common system of
classification of goods and services will lend greater certainty to taxation
system.

-----****-----
 4

CHAPTER-6

FINDINGS OF THE PROJECT

 KEY FINDINGS
 LIMITATION OF THE STUDY

FINDINGS OF THE PROJECT

1) KEY FINDINGS OF THE STUDY:-

 4

The findings are emerged out from analysis of secondary data

collected from research article, news papers and other secondary sources
are given below:

 A unified tax device getting rid of a package of indirect taxes like

VAT, CST, Service tax, CAD, Excise and many others.
 A simplified tax policy in comparison to earlier tax structure.
 Removes cascading effect of taxes (i.e.) gets rid of tax on tax.
 Due to decrease burden of taxes on the manufacturing zone, the
manufacturing prices may be decreased, consequently fees of
purchaser goods probably to come back down.
 This will help in reducing the burden at the common guy (i.e.) you
may should spend less money to shop for the same products which
have been in advance highly priced.
 It is right for export orientated corporations. Because it is not
always applied for goods or services which are exported out of
India.
 Procedure of GST registration would also be made simple,
thereby improving the ease of starting a business in India.
  GST gave a boost to India’s tax to Gross Domestic Product ratio
that aids in promoting economic efficiency and sustainable long –
term growth.
 Price of the goods is expected to be lower due to seamless flow of
input tax credit between the manufacturer, retailer and service
supplier.

As mentioned above, GST will work effectively and efficiently,

which will enhance production and it will increase country’s GDP. It will
be a game changer for nation and all the stakeholders will unite and
develop something which beneficial to Indian Industry.

2) Limitation of the study:-

 4

The limitation of a study is its flaws or shortcomings which could be

the result of unavailability of resources, small sample size etc.

In the above study the limitation of the study is the limited time
period and the data collection is particularly based on secondary data.

Due to these limitation the study is faced so many difficulties in

collection of data.

----***----
 4

CHAPTER-7

Concluding remark

 conclusion
 suggestion and recommendation

Concluding remark

1) conclusion:-

  Goods and Service Tax, with end-to-end IT-enabled tax mechanism,

is likely to bring buoyancy to government revenue.
 4

It is expected that the malicious activity of tax theft will go away

under Goods and Service Tax regime in order to benefit both governments
as well as the consumer.

It requires rational use and effective implementation of GST in a

nation like India.

GST is the most logical steps towards the comprehensive indirect

tax reform in our country since independence. GST is levied on all supply
of goods and provision of services as well combination thereof.

All sectors of economy whether the industry, business including

Govt. departments and service sector shall have to bear impact of GST.

GST will create a single, unified Indian market to make the

economy stronger. Experts say that GST is likely to improve tax collections
and Boost India’s economic development by breaking tax barriers between
States and integrating India through a uniform tax rate.

Under GST, the taxation burden will be divided equitably between

manufacturing and services, through a lower tax rate by increasing the tax
base and minimizing exemptions.

India is all set to introduce Goods and services tax after crossing
the various hurdles in its way.

GST is a long-time period method deliberate by using the

Government and its effective impact will be seen ultimately most effective.
Also, this will manifest if GST is introduced at a nominal charge to reduce
the overall tax burden of the final customers.

Let us desire GST will leave a positive effect and will assist to
enhance-up the Indian economy and could convert India right into a
unified national marketplace with simplified tax regime.

A rising Indian economic system will in any case help inside the
financial boom of the not normal person. Let us hope this ‘One Nation -
One Tax’ proves to be a game changer in a high quality manner and proves
to be beneficial no longer best to the common place man however to the use
of as a whole.
 4

There are various challenges in way of GST implementation as

discussed above in paper. They need more analytical research to resolve
the fighting interest of various stake-holders and accomplish the
commitment for a fundamental reform of tax structure in India.

2) Suggestion and recommendation:-

While GST is a bold and pragmatic move to reform the tax

structure and will benefit industry across sectors, there are also widespread
concerns with regard to its structure and implementation.

This paper seeks to highlights some of the lacunae in the GST

system which is need to be addressed to allay the fears of trade and
industry.

 Inclusion of all goods under GST: -

The proposed GST regime excludes certain goods such as

alcoholic liquor, petroleum products and electricity. These goods would
continue to be taxed under the existing tax regime. The non-inclusion of
these goods has rendered the aim of GST ‘to create a unified market’ an
unfinished agenda.

Suggestion:

The government must bring these goods under the proposed

GST regime.

 Reconsider threshold limit:

The GST Council has decided the threshold turnover limit of Rs

20 lakh for applicability of GST. In case of North Eastern States, the
threshold limit is Rs 10 lakh.

This is far lower than the present threshold limit of Rs 1.50 crore
under the Central Excise Law. The far lower threshold limit would
increase the tax burden of MSMEs and raise their working capital
requirement.
 4

More importantly, the turnover, under the proposed GST regime,

would be calculated by including all taxable and non-taxable supplies,
exports of goods and or services and so on.

Suggestion:

The government must reconsider this threshold limit to reduce

the tax burden of MSMEs. Further, the government should not consider
non-taxable services and export of goods and services while calculating
aggregate turnover.

----****----

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 4

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