International Review of Business and Economics

11. A COMPREHENSIVE ANALYSIS OF

GOODS AND SERVICES TAX (GST) IN INDIA
MARUTHI M V, Assistant Professor, K.L.E.Society’s S.Nijalinganppa
College, Rajajinagar, Bangalre-560010

ABSTRACT INTRODUCTION

T he Goods and Services Tax (GST),

implemented on July 1, 2017, is
regarded as a major taxation reform
The word “tax” is derived from Latin
word “taxare” meaning to estimate.
A tax is not a voluntary payment or
till date implemented in India since donation, but enforced contribution,
independence in 1947. GST was exacted pursuant to legislative
planned to be implemented in April authority and is contribution imposed
2010, but was postponed due to by the government, whether under
political issues and conflicting interest the name of toll, tribute, impost, duty,
of stakeholders. It is a comprehensive custom, excise, subsidy, aid, supply, or
tax system that will subsume all any other name
indirect taxes of states and central Taxation was first imposed in Ancient
governments and unified economy Egypt around 3000 B.C.- 2800 B.C.
into a seamless national market. The during the first dynasty of the old
primary objective behind development kingdom. Records indicate from that
of GST is to subsume all sorts of indirect period that the Pharaoh would conduct a
taxes in India like Central Excise Tax, biennial tour of the kingdom, collecting
VAT/Sales Tax, Service tax, etc. and tax revenues from the people. Other
implement one taxation system in data indications are granary receipts
India. The GST based taxation system on limestone flakes and papyrus.
brings more transparency in taxation Taxes are the only way for financing
system and increases GDP rate from the public goods because of their
1% to 2% and reduces tax theft and inappropriate pricing in the market. It
corruption in country. The paper can only be levied by the government,
highlighted the background of the via funds collected from taxes. It is
taxation system, the GST concept along highly important that the taxation
with significant working, comparison system is designed in such an
of Indian GST taxation system rates appropriate manner that it doesn’t lead
with other world economies, and also to any sort of market distortions and
presented in-depth coverage regarding failures in the economy. The taxation
advantages to various sectors of the laws should be highly competitive so
Indian economy after levying GST that revenue can be raised in a highly
and outlined some challenges of GST efficient and effective manner.
implementation.
KEYWORDS THE INDIAN TAXATION SYSTEM -
tax, indirect tax, goods and services SCENARIO BEFORE GST
tax (GST), taxation reforms, Indian Tax policies play a vital role in any
taxation system, GST Council. country’s progress and have a direct
impact on any country’s economy in

Volume 4, Special Issue No.1, July 2020 62

 ISSN: 2474-5146 (Online) 2474-5138 (Print)

terms of efficiency and equity. A good The taxation system varies from
taxation policy is that which takes manufacturer to manufacturer on point
care of the entire income distribution of sale or level of imports or exports.
and also generates tax revenues in Indirect taxation based collection
such a manner for Central and State systems are based on origin, and are
Governments, which can lead to overall designed to impose tax and collect the
benefit in the nation’s infrastructure, same at the event of happening of any
defense, public amenities, people’s taxable activity.
security, and a country’s exports. The Figure 1 depicts a tabular
The entire framework to impose indirect representation of Indian indirect
taxes comes under Constitutional taxation system as per Article 246
provisions of India. Article 246, Seventh of the Indian Constitution System.
Schedule gives the right to Central The following Table 1 gives a tabular
and State Governments to levy taxes representation of taxes imposed
and collect indirect taxes on the basis and collected by Central and State
of goods and services transactions. Governments of India.

Figure: 1. Indian Indirect Taxation System as per Article 246

Source: Reproduced from Jain (n.d.) from https://www.caclubindia.com

RESEARCH METHODOLOGY and many more; literature review from
This paper is based on exploratory research journal papers; annual reports; newspaper
technique and data cited in this paper were reports; and wide collection of magazine
collected via secondary sources available like based articles on GST. Based on the analysis
statistical data available on various websites of above mentioned data collection sources,
of Indian Government like Finance Ministry the objectives of the study are defined and
(finmin.gov.in), GST Council (gstcouncil.gov. research design is drafted which is highly
in), GST Council Archives (gstindia.com), descriptive in nature.
One Day Online International Conference Organised by IRBE Publications, Denver, USA 63
 International Review of Business and Economics

OBJECTIVES OF THE RESEARCH and services to attain the following

UNDERTAKEN objectives (Roychowdhury, 2012)

The research has been undertaken and (a) The tax incidence fell primarily
presented considering the following on domestic consumption.
foremost objectives: (b) The optimization of efficiency
●● To gain an in-depth understanding and equity of the Indian system is
of GST taxation system evolution. desired.
●● Understanding in - depth the (c) There should be no export of
concept of new taxation system taxes across the taxing jurisdiction.
introduced - Goods and Services Tax (d) The Indian market should be
(GST) in India. brought under a single umbrella of
●● Understanding the features, common market.
working, and differentiating the current (e) Enhancement to the cause of
taxation system in India v/s GST. cooperative federalism.
●● To evaluate the advantages and
challenges surrounding GST. (2).Introduction to the Goods and
●● To evaluate the prospects of Services Tax (GST) : New Article 366
taxation position of various goods and (12A) of the Indian Constitution (GST
services in India. India.com, 2016) defined Goods and
●● To furnish the information for Services Tax (GST) to mean any tax
future research on GST based taxation on supply of goods or services or both
system. except taxes on the supply of alcoholic
liquor for human consumption. New
SCOPE OF THE STUDY Article 366(26A) defines service to
This paper provides a detailed insight mean anything other than goods.
regarding implementation of GST tax Existing Article 366(12) defines goods
among various sectors of the country. to include all materials, commodities,
GST after implementation will bring and articles.
uniformity with tax rates and will also
overcome lots of shortcomings in the As per the government, the Goods
Indian taxation system with regard and Services Tax (GST) is regarded
to indirect taxation. The Good and as a ‘Reform’ rather than amendment
Services Tax would surely be highly in the existing Indian taxation system
advantageous for major areas of the to sort out all backdoors and cons of
India economy. the indirect taxation system. India was
one of the 123 countries in the world
GOODS AND SERVICES TAX (GST) following the VAT taxation system.
– CURRENT SCENARIO VAT was designed and introduced on
January 17, 2005 at the Centre and
(1).Need for GST- Goods and Services State levels by finance minister P.
Tax: As per the reports of Task Force Chidambaram. VAT replaced Central
on Goods and Services Tax (2009), Excise Duty Taxation at the national
the Indian taxation system led to level and Sales Tax System at the
misallocation of resources and lower state level, bringing major reform in
productivity in terms of economic the taxation system.
growth, international trade, and overall
development of the Indian economy. Goods and Services Tax (GST) was
Therefore, there was an emergent proposed in 2014 to be implemented
need to replace the existing tax system with effect from (w.e.f) June 2016. The
with a new engine of taxation of goods GST implementation is “dual” in nature

Volume 4, Special Issue No.1, July 2020 64

 ISSN: 2474-5146 (Online) 2474-5138 (Print)

one component is implemented by supplies made to the final consumer.

Centre (CGST) and another Component
by State (SGST). The base of tax would GST Reforms will play a crucial role for
be the same by Centre and State trade, government, and consumers in
governments. GST came into effect in the following manner:
India on July 1, 2017. With some major
modifications, the GST would now have (i) Trade: In order to harmonize
three prime models: trade and bring significant reforms to
boost up development, GST will act
(i) Central GST: GST to be levied by as a stepping stone for the following
the Centre. parameters:
(ii) State GST: GST to be levied by the (a) multiplicity of taxes will be reduced,
States. (b) tax neutrality, especially for exports
(iii) Dual GST: GST to be levied by the goods, (c) development of one nation
Centre and the States concurrently. or one common economic market,
(d) simpler tax with fewer rates and
GST is regarded as a comprehensive exemptions, (e) effectiveness in
and one tax system on manufacture, reducing cost for domestic industries.
sale, and consumption of goods and
services at the national level. As GST is (ii) The Government: GST promises
implemented, all other taxes have been a lot for transparent working system
discontinued. There is now one tax, that for the government in the following
too at the national level, strictly under manner: (a) Easy and simple taxation
the control of the Central Government. system - one common tax across the
Under GST, there is one tax for both country. (b) Tax base broadening,
goods and services, which is a clear tax (c) Great improvements towards
policy and this will improvise collections collections of revenues. (d) Resource
of tax. It would also lead to a clear utilization would be more effective.
system and abolish tax based theft and (e) investments out of savings by
corruption at the national level. GST consumers - due to mitigation of
being a friendly taxation system for the cascading effect, which contributes to
corporate sector will provide easiness increase in availability of funds out of
in tax policies, reduce inflation levels, savings of consumer - which may be
and make the overall system more used for development.
transparent.
(iii) The Consumer: For a normal
(3) Importance of the GST Taxation Indian citizen, GST promises a lot in
System - Trade, Government, and terms of better taxation system as
Consumer: GST will overcome various follows:
issues of development via greater (a) reduction in the cost of goods and
interactions between VAT/GST systems services due to significant elimination
along with overcoming the potential of cascading effect on taxes, (b)
risks of double taxation and unintended increase in household income and
non-taxation systems. GST will lay a purchasing power , (c) increase in
strong foundation of collecting tax at savings of common man, (d) high
early stage of value addition. Every increase towards investment potential.
business/tax payer would be a part
of controlling and collecting the tax
and remitting the proportion of tax (4) GST Council (GST Council,
corresponding to its margin. GST will 2017): In order to implement GST
thereby flow through thebusiness to tax taxation effectively in India, the

One Day Online International Conference Organised by IRBE Publications, Denver, USA 65
 International Review of Business and Economics

Constitutional (122nd Amendment Service Tax, and VAT into one common
Bill) was introduced and passed by tax. According to the model, GST can
Rajya Sabha on August 3, 2016 and be implemented as per the following
by Lok Sabha on August 8, 2016. The four stages:
GST council was framed officially on Stage 1: Establishing information
September 8, 2016 after clearance technology systems.
from the Honorable President of India. Stage 2: Building Central GST.
As per Article 279A (1) of Amended Stage 3: Political effort of agreeing on
Constitution, the GST Council was “Grand Bargain”.
created by the President within 60 Stage 4: Interaction with States.
days of the commencement of Article (ii) The Bagchi - Poddar Model: It
279A. The GST Council comprises of is similar to the Kelkar - Shah Model,
the following members: (a) Union which envisions the combination of
Finance Minister- Chairperson, (b) The Central Excise, Service Tax, and VAT
Union Minister of State, In - Charge into one common umbrella of VAT. The
Revenue of Finance - Member, (c) difference between Kelkar-Shah and
The Minister In-Charge or Taxation or Bagchi-Poddar model is that Kelkar-
any other minister nominated by each Shah model proposes tax collection
State Government - Members. at Central and State levels, while the
The GST Council was setup to perform Bagchi-Poddar model stresses only on
the following duties: the Centre. The Kelkar - Shah model is
(a) Taxes, surcharges, cess of Central like the Canadian Model, while the
and States which will be integrated in Bagchi - Poddar Model is like the
GST, Quebec model.
(b) Goods and services to be exempted (iii) Australian Model: The Australian
from GST, GST model is federal tax collected
(c) Interstate commerce -IGST – by the Central government and then
distribution between State and Central distributed to the State government.
governments, But as India is a heterogeneous country,
(d) Registration threshold limit for GST, this model is not applicable in India.
(e) GST floor rates, (iv) Canadian Model: The GST in
(f) Calamities special rates, Canada is dual between the Centre and
(g) Provision with regard to special the States and has three varieties:
category rates, especially North- (a) Federal GST and provincial
Eastern states. retail sales taxes (PST) administered
separately - followed by the largest
(5) GST Models: Considering the majority,
importance of taxation reforms (b) Joint federal and provincial VATs
and other countries’ based GST administered federally (Harmonious
implementations, the following are the Sales Tax - HST),
various GST models that are designed (c) Separate federal and provincial
and proposed by experts for successful VAT administered provincially (QST) -
implementation of GST: only for Quebec as it is like a breakaway
province.
(i) The Kelkar - Shah Model (v) GST Models - Adopted by Foreign
(ii) The Bagchi - Poddar Model Countries: Among various countries
(iii) The Australian Model which have adopted GST, France was
(iv) The Canadian Model the first country to adopt GST in the
(i) The Kelkar - Shah Model: It is year 1960.
based on “Grand Bargain” to merge
various taxes like Central Excise,

Volume 4, Special Issue No.1, July 2020 66

 ISSN: 2474-5146 (Online) 2474-5138 (Print)

IMPACT OF GST ON THE INDIAN ECONOMY:

ADVANTAGES AND CHALLENGES OF GST (2) IMPACT OF GST ON VARIOUS
IMPLEMENTATION SECTORS: Goods and Services Tax
will unite the Indian economy into one
(1) IMPACT OF GST ON THE common market under a single umbrella
INDIAN ECONOMY: GST will impact of taxation rates, leading to easiness
the overall taxation system of the of starting and doing businesses,
Indian economy. It will improvise the leading to increase in savings and
country’s GDP ratio and also control cost reduction among various sectors.
inflation to a certain extent. However, Some industries will be empowered by
the reform will mainly be advantageous GST because of reduction in tax rates,
to the manufacturing industry, but will while some will lose because of higher
make some things challenging for the rate of GST interests.
service sector industry.
In this section, we discuss various
GST is expected to raise the GDP sectors and elaborate the impact of
growth from 1% to 2%, but these GST on them:
figures can only be analyzed after
successful implementation. Some (i) IT Companies: GST will allow more
countries have faced a mixed response implementation of digital systems and
in growth like New Zealand saw a services. GST will increase the rate of
higher GDP as compared to countries tax from 14 -15% to 18%, which will
like China, Thailand, Australia, and increase the cost of electronic products
Canada (Shokeen, Banwari, & Singh, like mobile phones, laptops, etc.
2017). (ii) FMCG Industry: GST will have a
The GST rate is implemented in various significant impact on the FMCG sector.
slabs like 5%, 12%, 18%, and 28%, Some food items are exempted under
which will automatically provide great GST like grains and cereals, milt, meat,
tax increments to the government fish, fruits and vegetables, candy etc.
and the manufacturing sector will face Before GST, FMCG companies paid 24-
immense growth with reduction in tax 25% tax including Excise Duty etc.
rate. There is definitely something good With GST, the rate of return would be
for everyone. Various unorganized 17-19% leading to strong impact in
sectors which enjoy the cost advantage production and consumption.
equal to tax rate which will be brought (iii)Online Shopping: With the
under GST. This will make various introduction of GST, various Ecommerce
sectors like Hardware, Paint, Electronics companies will face much burden of
etc. under the tax slab. GST requires work in rate of filling taxes and cost
everything to be planned meticulously will be increased.
for organized rate of taxation. There (iv) Telecom Sector: With the current
are still lots of sectors which are to be VAT charges of 15% being replaced
discussed under GST and this requires by18% GST rate, the price of mobile
proper planning. For the common man calling, SMS, and broadband services
and different companies, the collection would be impacted. This will have a
of Central and State taxes will be done negative impact for big telecom giants
at point of time when sales originate, like Airtel, Vodafone, Idea, etc.
both components will be charged (v) Automobiles: GST will provide
on manufacturing costs and price reduction on on-road price of vehicles
of the product will downgrade and to max by 8% as per the latest report.
consumption will thereby increase Lower prices mean various automobile
(Shokeen et al., 2017). companies can boost up volumes

One Day Online International Conference Organised by IRBE Publications, Denver, USA 67
 International Review of Business and Economics

and sales and have tremendous few years back, but implementation
opportunities for expansion in India. has been done by Indian government
(vi) Small Scale Enterprises: There under the able leadership of Prime
are three categories: (a) below Minister Shri Narendra Modi on July
threshold, need not register for GST, 1, 2017. The new government was in
(b) between threshold and composition strong favor for the implementation
turnovers will have the option to pay a of GST in India by seeing many
turnover based tax or opt to join the positive implications as discussed
GST regime, (c) above threshold level, above in the paper. All sectors in India
will be within the GST framework. - manufacturing, service, telecom,
Manufacturers and traders will pay automobile and small SMEs will bear
less tax after GST Implementation. the impact of GST. One of the biggest
(vii) Entertainment: With GST, taxes taxation reform- GST will bind the
can do down by 2 - 4%, but the rate of entire nation under a single taxation
tax for cinema lovers will be increased. system rate. As forecasted by experts,
GST will soon comprehend with GST will improvise tax collections and
demands and bring best for boosting boost up India’s economic development
up the film industry’s business. and break all tax barriers between
Central and State Governments. No
(3)CHALLENGES OF GST IMPLEMENTATION: doubt, GST will give India a clear and
The following are some of the major transparent taxation system, but it is
challenges for GST implementation in also surrounded by various challenges
India: as discussed in this paper. There is need
(i) Nature of Taxes: In India, there for more analytical based research for
are various taxes like Central Excise, successful implementation.
VAT, CESS, and other state level taxes
which will all be removed and come LIMITATIONS OF THE STUDY AND
under one tax, that is, GST, but still SCOPE FOR FUTURE RESEARCH
lots of states and union territories
have other taxes out from GST which The following are the limitations of
has to be worked upon. the study: (a) GST is still in maturity
(ii) Types of GST: As GST would be of phase, so tax reforms can occur from
two types : Central GST and State GST time to time via GST council meetings
and further division is required on the regarding finalization of tax rates and
basis of utmost necessity and property even imposition of new rates and even
based like need, location, geography, deduction of existing rates, (b) most
and resources which has to be worked of the data cited in the paper was
upon. speculatively exploratory in nature as
(iii) Rates of Tax: Still the tax rate is GST meetings are going and still, a
not fully finalized and lots more has lot more needs to be done, (c) final
to be worked upon considering the conclusions may vary considering
standard of living of people, etc. differentperceptions.
(iv) Tax Management and Technology After GST implementation, there is
Infrastructure: It is utmost necessary emergent requirement of modern
that proper management of tax and technology based infrastructure like
infrastructure is required to implement GSTNET for successful monitoring of
proper policies and plans. taxation system as well as the GST
Council should regularly conduct
CONCLUSION meetings for change in tax reflections.
Primarily, the concept of GST was These areas can be covered by
introduced and proposed in India a researchers in future studies.

Volume 4, Special Issue No.1, July 2020 68

 ISSN: 2474-5146 (Online) 2474-5138 (Print)

REFERENCES
1.Adhana, D.K. (2015). Goods and services
tax (GST): A panacea for Indian economy.
International Journal ofEngineering &
Management Research, 5 (4), 332 - 338.
2.Central Board of Excise and Customs,
Ministry of Finance. (2017). Revised GST
rate for certain goods. Retrievedf rom http://
www.cbec.gov.in/resources//htdocs-cbec/
gst/gst_rates_approved%20_by_gst_
council%20_11.06.2017.pdf
3.Chakraborty,P.,& Rao, P.K. (2010,
January 2). Goods and services tax in India:
An assessment of the base. Economicand
Political Weekly, 45 (1), 49 - 54.
4.Garg, G. (2014). Basic concepts and
features of goods and services tax in
India. International Journal of Scientific
Research and Management (IJSRM), 2 (2),
542 - 549.
5.Goods and Services Tax Council. (2017).
Retrieved from http://www.gstcouncil.gov.
in/GST India.com (2016, March 21). Basic
concepts of GST (Part - 13) – Constitutional
amendment for GST. Retrieved from http://
www.gstindia.com/basic-concepts-of-gst-
part-13-constitutional-amendment-for-
gst/
6.Jain, A. (2013). An empirical analysis on
goods and service tax in India: Possible
impacts, implications and policies.
International Journal of Reviews, Surveys
and Research (IJRSR), 2 (1). Retrieved from
https://www.ijrsr.com/January2013/5.pdf
Jain, J. K. (n.d.). Goods and service tax.
Retrieved from https://www.caclubindia.
com/articles/goods-and-st-basics- 25424.
asp
7.Kelkar,V. (2009,July 01). A tax for
economic growth. Retreived from
http://www.livemint.com/Opinion/
S0hlNhimkhl9OhAiYwnbYJ/A-tax-for-
economic-growth.html
8.Panda, A., & Patel, A. (2010). The
impact of GST (goods and services tax) on
the Indian tax scene. DOI : https://dx.doi.
org/10.2139/ssrn.1868621
9.Poddar, S., & Ahmad, E. (2009).
GST reforms and intergovernmental
consideration in India (Working Paper No.1/
2009-DEA). Retrieved fromhttp://dea.gov.
in/sites/default/files/GST%20Reforms%20
and%20Intergovernmental%20
Considerations%20in%20India.pdf

One Day Online International Conference Organised by IRBE Publications, Denver, USA 69