“A Study of Impact of GST on Small Scale

Industries”
Bachelor of Management Studies
Semester V
Submitted
In Partial Fulfillment of the requirements for the
Award of Degree of
Bachelor of Management Studies
By
Nirvi Upadhyay
66
V. K. Krishna Menon College of Commerce
Bhandup East
 DECLARATION
I, Nirvi Upadhyay the student of T.Y.B.M.S Semester V
(2019-2020) hereby declare that I have completed the
project on 14th February, 2020.

The information submitted is true and original to the best

of my knowledge.

________________

(Signature of Student)

Nirvi Upadhyay

66

V.K. Krishna Menon College of Commerce

Bhandup East
 CERTIFICATE
This is to certify that Miss Nirvi Upadhyay, Roll. No. 66 of
Third Year B.M.S., Semester V (2019-20) has successfully
completed the project on The Impact of GST on small scale
Industry under the guidance of.

Course Coordinator Principal

Project Guide/Internal Examiner

External Examiner
 ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Sharda Phadnis for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator _________, for his moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide

_____________ whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.
 Introduction
GST is ‘The Goods and Service Tax’ implemented by Government of
India on 1st July 2017, through the implementation of ‘One Hundred and
First Amendment’ of the Constitution of India. It was launched at
midnight by the then President of India, Shri. Pranab Mukherjee and the
Prime Minister of India Shri. Narendra Modi. It is an indirect tax system
that relieved the various other taxes i.e. VAT, excise duty, service taxes
etc. which were applicable before on goods and services. According to the
Government, GST is a well-structured& simplified taxation system,
wherein the authoritative segregation of central government and the state
government has been done. Every enterprise has dual GST model
applicable, i.e. Central Goods and Services Tax (CGST) and the State
Good and Services Tax (SGST). The various percentages applicable to
various sectors and businesses are 0%, 5%, 12%, 18% and 28%. The GST
is applicable on various transactions such as procurement, deals,
transference, barter, rent and import of goods and/or services. MSMEs in
accordance with the establishment of Micro Small Medium Enterprises
Development (MSMED) Act, 2006, is classified under 2 categories i.e.
manufacturing sector & service sector, according to the investments for
plant & machinery, equipment respectively.
GST is an Indirect Tax which has replaced many Indirect Taxes in India.
The Goods and Service Tax Act was passed in the Parliament on 29th
March 2017. The Act came into effect on 1st July 2017; Goods & Services
Tax Law in India is a comprehensive, multi-stage, destination-based
tax that is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied
on the supply of goods and services. This law has replaced many indirect
tax laws that previously existed in India.

GST is one indirect tax for the entire country.

So, before Goods and Service Tax, the pattern of tax levy was as follows:
Under the GST regime, the tax is levied at every point of sale. In the case
of intra-state sales, Central GST and State GST are charged. Inter-state
sales are chargeable to Integrated GST.

Now let us try to understand the definition of Goods and Service Tax –
“GST is a comprehensive, multi-stage, destination-based tax that is
levied on every value addition.”

Multi-stage

There are multiple change-of-hands an item goes through along its supply
chain: from manufacture to final sale to the consumer.

Let us consider the following case:

 Purchase of raw materials

 Production or manufacture

 Warehousing of finished goods

 Sale to wholesaler

 Sale of the product to the retailer

 Sale to the end consumer

Goods and Services Tax is levied on each of these stages which makes it
a multi-stage tax.

Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to
draft law. It took 17 years from then for the Law to evolve. In 2017
the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July
2017 the GST Law came into force.

Components of GST
There are 3 taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale

(Eg: transaction happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg:
transaction happening within Maharashtra)
  IGST: Collected by the Central Government for inter-state sale (Eg:
Maharashtra to Tamil Nadu)

Illustration 1: Let us assume that a dealer in Gujarat had

sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is
18% comprising of only IGST. In such case, the dealer has to charge
Rs. 9,000 as IGST. This revenue will go to the Central Government.

Illustration 2: The same dealer sells goods to a consumer in

Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate
comprises of CGST at 6% and SGST at 6%. The dealer has to collect
Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central
Government and Rs. 3,000 will go to the Gujarat government as the sale
is within the state.

GST stands for Goods and Service Tax. It was first initiated in 1986
by Vishwanath Pratap Singh 7th Prime Minister of India. After that in
2007, the current government proposed to implement GST and presented
the same in Lok Sabha in 2011. In Dec 2014 GST again presented in
Lok Sabha and in same is passed in 2015. After approval of Rajya Sabha
same is called as 101th amendment of the Constitution and is rolling out
from 1 July 2017. After the passage of 25 years of economic reforms in
the indirect taxes is going for a revolutionary change in the form of
GST.
In India, there are different kinds of taxes that are levied in the form of
indirect taxes. For example, the manufacturer procures the raw material
and transform the same into final goods and pay excise duty on the
manufacturing of goods. Further, the traders like wholesaler and retailer
pay sales tax or VAT on the same. In the case of inter-state sale and
purchase Central Sales Tax is levied on trading of goods. The octroi is
also paid on transportation of goods from one state to another. The credit
passes on from trader to trader and lastly, all these taxes indirectly
collected from the customer at the last resort under the umbrella of MRP
(Maximum Retail Price).

ALL these taxes trap finally come to an end with only one indirect tax in
the country called GST. Now you only need to register your business for
GST as it is a collaboration of all taxes with a new name which is
replacing all indirect taxes with a new and single tax.
 Literature Review
Shefali Dani in her research paper on ‘An impact of GST on Indian
Economy’,2016 stated that the proposed GST is a weak attempt to
rationalize indirect tax structure. According to Dani, the Government of
India should study the GST regimen set-up by various other countries and
their dropouts before its application. No doubt, GST will make taxation
system easy compared to the previously existing heterogeneous tax
system, but during that period, the Government must make an effort to
protect mainly the poor population of the country, which would be
affected due to the enactment of GST. The Hindu date 24thSeptember
2017 article titled ‘GST: MSMEs to gain via better competitiveness’
mentioned that the application of GST enhances the competitiveness of
MSMEs. Further, they stated that the key benefits of MSMEs are lower
fright cost, lower cost of raw material, lower tax burden and ease of doing
business by reliving the complexities in registration.

Rani Jacob in her research paper ‘The Impact of GST on MSMEs’ stated
the positive and negative impacts of GST on MSMEs, the positive were
easier to start business, facilitates expansion of business, lesser tax
burden, online compliance procedures. According to her, the negative
impacts were selective tax levying, compliance cost, technological
dependency, monthly financial preparedness. In an interview by Adi
Godrej to business line, published on 24 June 2017, it favors GST and
considers GST as a boon for Indian Economy in various aspects. It is also
mentioned that once GST is executed there will not be opportunities to
evade taxes and that the rates have been analyzed in a manner that will
add value to the economy. This would mean much less paper work and
thus, automated simplified procedures.

The Hindu business line16May, 2017 in article titled ‘How will GST
impact MSMEs’ by R. Vasudevan mentioned about the unorganized
MSMEs (turnover less than 1.5cr), which were advancing faster than the
organized peers because of the initial tax avoidance. After the enactment
of GST, even these unorganized MSMEs are liable for tax payment, as the
Government has decreased the threshold from 1.5 cr. to 20 lakhs.

In SME Times - Mr. Rajeev Dimri stated that GST gives array of
opportunities and challenges for SMEs to explore. The government’s
motive behind GST is to increase the number of taxpayers’ base and not
to inflate tax burden on business/individual taxpayers. He further said that
the GST regime launched by ministry of finance seeks to bring each
citizen with an aggregate turnover of above Rs 10lakhs within the
coverage of GST.

Mr. Shakdwipee, P (2017) in the research paper titled ‘Measuring

Awareness about Implementation of GST: A survey of small business
owners in Rajasthan’ analysed the perception of small business owner in
Rajasthan about GST, and found out that their main area of focus was
computer software availability and handling of the same.
There are three kinds of taxes under the GST.

SGST, CGST, and IGST

1. SGST
STATE GOODS AND SERVICE TAX is the part of tax diverted to the
state government which is credited to revenue department of state
government. This is generally equivalent to CGST. This compensates
the loss of existing VAT or Sales Tax revenue to state government. In
the case of local sales, 50% quantum of tax amount under GST is
diverted to SGST TAX.

2. CGST
CENTRAL GOODS AND SERVICE TAX is the share of GST TAX
diverted to revenue department of central government and is also
equivalent to SGST. This share of tax compensates the loss of existing
excise duty and service tax to the central government. In the case of
local sales, balance 50% quantum of GST is transferred to CGST.

3. IGST
INTEGRATED GOODS AND SERVICES TAX is levied when inter-
state sales and purchase is made. One part of this tax transferred to
central government and another to state government to whom goods and
services belong. The IGST is charged only in case of inter-state sales or
when transactions between two states involved.

GST is destination-based consumption tax levied at multiple stages of

production and distribution of goods and services. It combines various
other taxes such as state and local tax, entertainment tax, excise duty,
surcharges, octroi and others. The tax is applicable on transaction value
which includes packaging, commission and other expenses incurred
during sales. It allows full tax credit from inputs and capital goods on
procurement which can later be set off against the GST output liability.
A salient feature of GST would be that goods and services are
considered alike and within the supply chain, they are taxed at a flat
single rate till the customers can access them. The tax reform thus gives
equal footing to large enterprises and SMEs and taxes the stock transfers
uniformly.
Another salient feature of the GST rollout in India is that it will be dual
based—that is, both center and various state governments will levy GST
separately. The central government will levy CGST and the state
governments will levy SGST respectively. However, the basis for
classification of taxes, measure of levy and chargeability of taxes will be
same for both. This is necessary keeping in mind the federal structure of
the government, provided the governments at both levels have the liberty
to administer their own taxes. In addition, GST will be levied on import
of goods and services into India.
Another key feature of GST that needs mention is the elimination of the
cascading effect of various state and central taxes. State taxes that will
be subsumed within the GST are VAT, entertainment tax, entry tax,
luxury tax, tax on betting and gambling. Various central taxes that will
be subsumed are Central Excise Duty, Additional Excise Duty, Service
tax, Additional Custom Duty, Special Additional Duty and Central Sales
tax.
Small and Medium Enterprises (SMEs) have been considered as the
primary growth driver of the Indian economy for decades. It is further
evident from the fact that today we have around 3 million SMEs in India
contributing almost 50% of the industrial output and 42% of India’s total
export. For a developing country like India and its demographic
diversity, SMEs have emerged as the leading employment-generating
sector and has provided balanced development across sectors. Let’s
examine what would be the impact of GST on Small & Medium
Enterprises.
 Positive Impact of GST on SMEs and Startups
As per industry experts, SMEs and startups will be affected the most
with the rollout of the GST and the impact will be favorable in ways
more than one. Some of the ways GST will benefit SMEs and startups
are:
 Ease of starting business: A business having operations across
different state needs VAT registration. Different tax rules in different
states only add to the complications and incur a high procedural fee.
GST enables a centralized registration that will make starting a
business easier and the consequent expansion an added advantage for
SMEs.
 Reduction of tax burden on new business: As per the current tax
structure, businesses with a turnover of more than rupees 5 lakh need
to pay a VAT registration fee. The government mulls the exemption
limit under GST to twenty-five lakh giving relief to over 60% of small
dealers and traders.
 Improved logistics and faster delivery of services: Under the GST bill,
no entry tax will be charged for goods manufactured or sold in any
part of India. As a result, delivery of goods at interstate points and toll
check posts will be expedited. According to an estimate by CRISIL,
the logistics cost for manufacturers of bulk goods will get reduced
significantly—by about 20%. This is expected to boost ecommerce
across the nation.
 Elimination of distinction between goods and services: GST ensures
that there is no ambiguity between goods and services. This will
simplify various legal proceedings related to the packaged products.
As a result, there will no longer be a distinction between the material
and the service component, which will greatly reduce tax evasion.

Impact on Manufacturing Sector

According to Deskera, a leading cloud-based business management
software provider catering to SMEs in South East Asia, the GST will
enhance competitiveness of enterprises in the manufacturing sector by
mainly mitigating the cascading effect of various taxes. Headquartered
in Singapore, the company offers GST ready Enterprise Resource
Planning software to global SME markets, with small and medium
enterprises contributing over 70% of the company’s business across the
world. A prominent provider of cloud ERP solutions, Deskera has been
extensively working with various organizations in countries such as
Singapore and Malaysia with their GST requirements. The company
offers Deskera MRP, a fully GST compliant MRP solution in India to
help manufacturers and traders to seamlessly migrate to the new regime
once the GST law is implemented across the nation.
India is a global manufacturing hub and SMEs form around 90% of the
industrial units in the country, according to IBEF. The ‘Make In India’
campaign promoted by the Indian government will get a boost with the
rollout of the GST. Currently, excise duty on pre-packaged products for
retail consumption is levied not on the transaction value at the ex-factory
but on a fixed percentage of the maximum retail price (MRP) on the
package. This leads to a higher MRP, which indicates a higher cost
burden for the consumers. Under the GST regime, tax is paid by the
manufacturers while purchasing raw materials for the products. The
amount can be credited for subsequent resellers till the product reaches
the final consumer. This will ease the tax burden significantly.
Read Deskera becomes the first GST compliant cloud-based enterprise
in India to know more about GST impact on manufacturing sector.
 Research Methodology

The intension of this research is to analyses & study the perception,

attitudes & apprehensions of traders belonging to MSME sector. The
primary research with a sample size of 25 traders was collected through a
structured questionnaire. Secondary data collected is based on official
websites ministry of MSMEs, government reports, journals, books and
published research papers. Data Analysis The impact of GST has been
analyzed in two main categories i.e. long-term benefits to the country and
the operational efficiency/ease of use. Here 80% of the enterprises agree
that GST implementation was a good step by the Government. 57%
mentioned that GST has made the tax payment easy for their business.
48% stated that GST will help in the growth of new/ micro enterprises,
66% states that it has brought down the prices of goods & service,69%
agree to ease of tax filling, 61% agree to the increase of sales after GST
came into action, it has brought down the logistic overheads for 43% ,26%
agree that this has been a profit for the new starters of a business,70%
stated that it has brought an increase in the technology dependency for
every enterprises & 47% of them has a view that due to GST, the
unorganized enterprises experienced tax burden.
 Impact of GST on Small Business
80
70
60
50
40
30
20
10
0

80

While interacting with the entrepreneurs during the survey, the reviews &
suggestions received were regarding the system technology used for filing
GST& working process of the government. According to them, they faced
many problems with the technical software; they were also of the view
that the Government should also support them in other ways in terms of
subsidies and easy funds and trainings as they are paying their taxes duly.
 Questionnaire
1. Are you satisfied with the time given to assess to implement the GST councils’
decisions (such as changes in rate structure, rules, process)?
 Yes
 No

2. What could the Government have done better?

 More transparency of the findings of the sectorial groups formed by
GST council.
 Proper training of GST officer and making the help desk more effective.

3. Are you satisfied with the deadlines given for GST compliances?
 Yes
 No

4. Can the GSTN return filling portal be made more effective?

 Yes
 No

5. What could the Government do to make the GSTN portal more effective?
 Increase the response time of the GSTN site, and reduce the downtime.
 Make utilities available, and enable the return filling tab, much in
advance, instead of making it available at a date closer to the deadline.
 While filling on the GSTN returns, the error report should be generated
instantly, and error reporting should be clearer and easier to understand.
 The excel utility should be expanded to chapter all the details required
in the GSTN return, rather than some information being filled from
Excel utility, and some information being manually in the GSTN site.

6. How has GST impacted the pricing of your products/ services?

 Price to customer has increased
 Price to customer has decreased
 Price to customer has remained neutral.
7. What was the main reason influencing the pricing decision?
 GST rate
 Supply chain efficiency
 Vendors not passing on tax credits
 None of the above

8. Has GST increased the burden on compliances?

 Yes
 No

9. Are you satisfied with your company IT system readiness to comply with GST
requirement?
 Yes
 No

10. Does the GST regime provide enough incentive to exporters of goods and
services?
 Yes
 N.A.
 No

11. As we have different GST rates on various products and it has become
variable in nature. So, what is more favorable GST or Service tax?
 GST
 Service tax

12. On overall basis do you think we have positive impact of GST on India?
 Yes
 No

13. Which features of GST are likely to have positive impact despite of many
obstacles faced by us?
 Requirement to match purchase and sale date between the seller and
purchaser for claiming GST credits
 Allowing credits on interstate purchase and stock transfer.
 Reduction in list of exception.
 Requirement to file transaction level details in GST returns.
 None of the above.
Challenges for SMEs
A sizeable portion of SMEs are of the opinion that GST is not all good
for the sector and their fears may not be totally vacuous. The tax
neutrality that the SMEs enjoy may be one of the prominent benefits.
However, reduction in duty threshold is one of the key concerns that has
led them to be wary of the GST bill. Under the existing excise tax, no
duty is paid by a manufacturer having a turnover of less than rupees 1.50
crores. But, post GST implementation, the exemption limit will get
significantly lowered. During a speech at a news conference, Finance
Minister, Arun Jaitley estimate said, the limit can be as low as rupees 25
lakh. As a result, a large number of SMEs and startups will be mandated
to come under the tax net and will have to pay a large chunk of their
earnings towards tax. Furthermore, there are other flipsides to the
proposed tax neutrality. GST regime won’t differentiate between luxury
goods and normal goods; this will it hard for the SMEs to compete
against large enterprises. GST that is ultimately levied on supply will not
be available for input credit. This will lead to an increase in the cost of
the products for businesses that supply directly to end users.
Small and Medium Enterprises (SMEs) have been considered as the
primary growth driver of the Indian economy for decades. It is further
evident from the fact that today we have around 3 million SMEs in India
contributing almost 50% of the industrial output and 42% of India’s total
export. For a developing country like India and its demographic
diversity, SMEs have emerged as the leading employment-generating
sector and has provided balanced development across sectors. Let’s
examine what would be the impact of GST on Small & Medium
Enterprises.

All the compliance procedures under GST — Registration, Payments,

Refunds and Returns will now be carried out through online portals only
and thus SMEs need not worry about interacting with department
officers for carrying out these compliances, which are considered as a
headache in the current tax regime.

HYPOTHESIS
Null hypothesis: There Is no significant impact of GST on the small-
scale industries in Tamil Nadu.

Alternative hypothesis: There is a significant impact of GST on the

small-scale industries in Tamil Nadu.
 Analysis & Interpretation of Data
Questionnaire’s responses

1. Are you satisfied with the time given to assess to implement the GST
councils’ decisions (such as changes in rate structure, rules,
process)?

45 Yes
55 No

It has been interrupted that 55 % of people has selected No and the 45

% of people has selected has Yes for the above question.
2. What could the Government have done better?

0 0

40

60

• More tranceperncy of the findings of the sectorial groups

formed by GST council.
· Proper training of GST officer and making the help
desk more effective.

It has been interrupted that 60 % of people has been have

selected the option “More transparency of the findings of
the sectorial groups formed by GST council” and 40 % of
people have selected the option “Proper training of GST
officer and making the help desk more effective”
3. Are you satisfied with the deadlines given for GST
compliances?

0 0

49
51

Yes No

It has been interrupted that 51 % people has selected Yes

and 49 % of people has selected No for the above question.
4. Can the GSTN return filling portal be made more effective?

95

Yes No

It has been interrupted that 95 % people has selected Yes

and 5 % of people has selected No for the above question.
5. What could the Government do to make the GSTN portal
more effective?

63 67

71 64

Increase the response time of the GSTN site, and reduce the downtime .

Make utilities available , and enable the return filling tab, much in advance, instead of making it
available at a date closer to the deadline.

While filling on the GSTN returns , the error report should be generated instantly, and error
reporting should be more clear and easy to understand.

The excel utility should be expanded to chapter all the details required in the GSTN return,
rather than some information being filled from Excel utility, and some information being manually in
the GSTN site.

It has been interrupted that 67 % of people has selected “Increase

the response time of the GSTN site, and reduce the downtime ”64
% of people has selected “Make utilities available , and enable the
return filling tab, much in advance, instead of making it available at
a date closer to the deadline”71 % of people has selected “While
 filling on the GSTN returns , the error report should be generated
instantly, and error reporting should be more clear and easy to
understand” and 63 % of people has selected “ The excel utility
should be expanded to chapter all the details required in the GSTN
return, rather than some information being filled from Excel utility,
and some information being manually in the GSTN site” for the
above question

6. How has GST impacted the pricing of your products/ services?

0

33
43

24

Price to customer has increased

Price to customer has decreased
Price to customer has remained neutral

It has been interrupted that 33 % of people has selected “Price to

customer has increased” 24 % of people has selected “Price to
 customer has decreased” and 43 % of people has selected “Price to
customer has remained neutral” for the above question.

7. What was the main reason influencing the pricing decision?

10

25
50

15
GST rate
Supply chain efficiency
Vendors not passing on tax credits
None of the above

It has been interrupted that 50 % of people has selected “GST rate”

15 % of people has selected “Supply chain efficiency” 25 % of
people has selected “Vendors not passing on tax credits” and 10 %
of people has selected “None of the above” for the above question.
8. Has GST increased the burden on compliances?

13

87

Yes No

It has been interrupted that 87 % people has selected Yes and

13 % of people has selected No for the above question.
9. Are you satisfied with your company IT system readiness to comply
with GST requirement?

0 0

44
56

Yes No

It has been interrupted that 56 % people has selected Yes and 44 %

of people has selected No for the above question.
10. On overall basis do you think we have positive impact of GST
on India?

93

Yes No

It has been interrupted that 93 % people has selected Yes and 07 %

of people has selected No for the above question.
 Conclusion

MSME is a growing sector where enterprises enter and exit the market
frequently, so the implementation of GST has had a great effect on the
survival in the market. Some enterprises found it beneficial but majority
faced difficulty in accepting it. For existing enterprises, GST simplified
the tax structure, unified the market hence improved the overall
operational efficiencies of MSME, so far, the unorganized MSMEs were
growing fast than the organized ones because of the tax avoidance, with
GST in effect, it has made the taxation system transparent thus making
the entities liable for tax payment. For a new entrepreneur, the application
of GST, made the registration for taxation easy, relieved them from
previous VAT registration. The Government has implemented GST with
a view of long-term better prospect for the country by various aspects.
The goods and services tax (GST) make the tax system easy and thus
contributing in the growth of the country. The Government applied GST
by summing up of various taxes under CGST & SGST, transparent
taxation, reduced raw material cost, to bring down the cost of goods and
services and the ease of doing business in India. Initially there was huge
chaos regarding the enactment of GST, but many successful
businesspersons supported it and considered it as a boon for the long-term
development of the nation.
GST being the big step of Government of India to simplify the previous
tax system has both positive and negative impact on business regulations
of Micro, Medium & Small Enterprises. The fundamental of ‘ONE
NATION, ONE TAX’ was created with an intention to easy tax filing,
ease of doing business in other states, reduction in the prices of goods,
relieving the burden of logistic overhead from small enterprises. On the
contrary, it has increased the technology dependency of every enterprise,
as every transaction is made online. It will take some time for the people
to get used to the new taxation regime, only then will the nation start to
see the fruits of ‘ONE NATION, ONE TAX’ – the GST

Unarguably, GST rollout will open up a can of worms and the impact on
SMEs across various industries will vary greatly. It is quite natural for a
pervasive, country-wide tax reform, as GST is, to have a mixed opinion.
Furthermore, the revolutionary tax regime will have acceptance that will
vary from state to state. Overall, the new tax proposals under GST will
have a mixed verdict. In essence, the GST’s effect on the entire Indian
economy will have to be scrutinized in totality to reach a widely accepted
conclusion.

Implementation of GST is one of the best decisions taken by the Indian

government. For the same reason, July 1 was celebrated as Financial
Independence Day in India when all the Members of Parliament attended
the function in Parliament House. The transition to the GST regime which
is accepted by 159 countries would not be easy. Confusions and
complexities were expected and will happen. India, at some point, had to
comply with such regime. Though the structure might not be a perfect
one but once in place, such a tax structure will make India a better
economy favorable for foreign investments. Until now India was a union
of 29 small tax economies and 7 union territories with different levies
unique to each state. It is a much accepted and appreciated regime because
it does away with multiple tax rates by Centre and States. And if you are
doing any kind of business then you should register for GST as it is not
only going to help Indian government but will help you also to track your
business weekly as in GST you have to make your business activity
statement each week.

GST is one tax in India is not the correct statement as GST only comes on
the replacement of different indirect taxes, However Custom Duty or
Import-Export Duty will remain continued to levy. Further few
amendments have already being made in custom law and same will
remain applicable in India.

In the case of indirect taxes, the burden was on end customer or consumer.
But due to the implementation of one tax in the whole country the overall
cost of production of all goods will be reduced but on the other hand in
case of services, it will increase after the implantation of GST but CST
gets abolished which ultimately reduces the cost of goods. Currently, we
pay 30-35% tax on a commodity. In the case of some goods, direct and
indirect taxes imposed by government raise its cost up to 30%. After the
implementation of GST, it will reduce. The GST also reduces the
cascading effect of tax which helps in making the trade simple and
reduces the tax Burden of Entrepreneurs.

The current structure of taxes in India is a rat trap. The wide powers to
levy and collect taxes provided to states and central government, as a
result, both levy different kinds of taxes which makes the Indian tax
structure very much complex and a complex economy too. The small-
scale industries In India continuously suffering from these problems.

Vat or sales tax is levied and collected by the state government.

Different state government charge different rate of taxes on different
kind of goods traded within their respective territorial limits under the
extreme power provided to the state under state list of the Constitution.
Whereas CST central sales tax is levied by the central government and
collected by the state government as per the concurrent list of the
Constitution. Same the EXCISE duty as per central excise act 1944 and
service tax as per finance act 1994 is levied and collected by the central
government through the extreme power provided under the union list of
the Constitution.

Due to this distribution of power under the Constitution, no state

government wants to losses the revenue source called VAT or Sales tax.
GST is the subject matter of union list and no state agrees to bifurcate
their income to the central government but now as the same political
party is in majority in the state and central. All state government agreed
to the proposal, as a result, GST Rollout.

No doubt that GST is aimed to increase the taxpayer base, majorly

SMEs into its scope and will put a burden of compliance and associated
costs to them. But in the long run, GST will turn these SMEs more
competitive with a level playing field between large enterprises and
them. Furthermore, these Indian SMEs would be able to compete with
foreign competition coming from cheap cost centers such as China,
Philippines and Bangladesh.

 GST will help and ease the process of starting a business in India.
Earlier, every business in India was required to obtain VAT
registration, which differs in every state, and the rules and regulations
are different. Thus, it was a very confusing procedure. However,
under GST, the businesses have to only register for GST which will
have a centralized process, similar to service tax.
 Currently, for any business, it is mandatory to make a VAT payment
if the annual turnover is more than 5 lakhs in few states and 10 lakhs
in few other states. This difference in various states creates confusion.
Under GST a business does not have to register or collect GST if the
annual turnover is 10 lakhs. This is applicable to every state. This will
allow many small businesses which have a turnover between 5 lakh –
10 lakhs to avoid applying for the GST return.
 GST allows small and medium business to do business with ease in
India, due to the less complexity. The distinction between the services
and goods will be gone, and this will make compliance easier.

GST is meant to bring every indirect form of tax under one roof. For
small and medium sized businesses, owners or manufacturers have to
take care of different taxes and have to run to various departments to
fulfil all the tax-related documentations. Some file different taxes
biannually, annually, half-yearly, etc. The more the departments, the
more is the harassment. Currently, the total tax levied by the central and
the state governments add up to 32%, but with the implementation of
GST, the business owners have to pay a much lower tax of around 18-22
percent. Moreover, they do not have to pay different taxes to various
departments. It makes the job very much easier for every business
owner.

At present, the total tax collection in India is around 14.5 Lakh Crore, of
which 34% is indirect tax. Indirect taxes include service tax, stump
duty, customs duty, VAT, etc. It refers to the collection of tax indirectly
by the Government of India. In most of the developing countries, the
share of indirect tax is higher than the direct tax. However, in the
developed countries the share of indirect tax is much lower. Therefore,
the new GST implementation will allow the government to have a better
grip on the taxpayers. This should be capable of evolving the entire tax
system.

Majority of the respondents were belonging to the age group between

30-35(38.8%) and other respondents were belonging to the age group
between 30-40 (58.5%). And the majority of the respondent’s average
turn over per year is 20 lakhs (41.8%) others average turn over per year
is between 20-40lakhs. Majority of small businessman’s are considering
GST as no different in comparison with VAT (53%) and others are
saying it is complicated (42.4%). Majority of the small businessman’s
(84.1%) don’t have interstate supply in their good and other (15.9%)
have interstate supply in their goods. And these 15.9% businessmen said
that there is “no different” (52.2%) in registering under GST for
interstate supply other 17.9% and 29.9% small businessmen responded
that it is easy and complicated for registering for interstate supply.
Majority of the respondents (53.7%) responded “it is not required” for
filing returns every month under GST and other (46.3%) responded that
“it “is good. Majority of the respondents (41.8%) said that there is “no
different” in the process of filing GST other 32.8% and 25.4%
responded that the process of filing GST is easy and complicated.
Majority of respondents (65.7%) said that VAT is the better form of
taxation than GST and other 34.3% respondents said that GST is better
form of taxation. Majority of the respondents (50.7%) feels that GST is
beneficial to small businesses others (29.9%) and (13.4%) feels GST
May or may not be beneficial to small businesses. Majority of the
respondents (62.7%) are not happy with the present rate of GST on
small manufactured products and other (37.3%) respondents are happy
with the present rate of GST on small manufactured products. Majority
of the respondents (27.1%) who said they are not happy with the present
rate of GST on small manufactured products are expecting GST council
to reduce the tax percent on small manufactured products. Majority of
the respondents (55.2%) said their profit remains the same just like the
previous regime and other 16.4% respondents said it makes profit than
how much it made during VAT and 28.4% respondents said their profit
has been affected to a greater extent. Majority of the small
businessman’s (52.2%) said the consumer consumption of their products
after the implementation of GST has increased and other 14.9% said it
has decreased and 32.8% said it remains the same. Majority of the
respondents (43.3%) are working in retail sectors from 10 to fifteen
years and other respondents were working between 15-20 years.
Majority of the respondents (50.7%) said that GST is a big blunder than
demonetization. Majority of the respondents (50%) said GST won’t
affect any small retail shopkeeper in any way. Many respondents
(52.2%) said that the current economic condition has no effect on small
business. Majority of the respondents (38.8%) said that the current status
of their business is bad and other 31.3% and 29.9% said it is average and
good. Majority of the people (68.7%) are expecting to spend above their
aim in small retail shops. Other 31.3% people are expecting to spend
below their aim in small retail shops. On the overall majority of the
respondents (46.2%) opinion about the implementation of gst on small
business is “it is good form of taxation but needs changes in its structure
and remaining 41.5% respondents said it is a good and better form of
taxation. So, about the implementation of gst on small businesses has
mixed results.

The impact of Goods and Service Tax implemented in India on the small
and medium enterprises in Tamil Nadu is yet to be realized as the
progress made is to be estimated. Yet it has the potential to go a long
way in improving the business condition of the state in small and
medium enterprise sector. This study found out that GST is beneficial to
small scale industries in Tamil Nadu. Majority of the respondents are
happy that GST has been enforced but they opine that it could be
implemented effectively in a way so as to help boost their business
rather focus more on paying exorbitant rate of tax. GST in a way has
increased the consumption capacity of the customers, reported the
respondents. But this hasn’t had an effect on their profit margin. They
seem to be realizing the same level of profit as like in the case of VAT.
In order to realize the benefits of Goods and Services Tax, the
government needs to make modification in the way the tax is realized.
More awareness needs to be created among the tax payers regarding the
procedure in the payment of GST and the GST council needs to take into
consideration the opinion of the businessmen belonging to small and
medium industries as the sector has a huge potential to grow and in
order to help them contribute immensely to the country’s GDP through
the GSDP, the government in order to motivate and encourage such
entrepreneurs to invest more need to lower the GST rates on several
products and commodities that come under small and medium scale
enterprises.

MSME is a growing sector where enterprises enter and exit the market
frequently, so the implementation of GST has had a great effect on the
survival in the market. Some enterprises found it beneficial but majority
faced difficulty in accepting it. For existing enterprises, GST simplified
the tax structure, unified the market hence improved the overall
operational efficiencies of MSME, so far, the unorganized MSMEs were
growing fast than the organized ones because of the tax avoidance, with
GST in effect, it has made the taxation system transparent thus making
the entities liable for tax payment. For a new entrepreneur, the
application of GST, made the registration for taxation easy, relieved
them from previous VAT registration. The Government has
implemented GST with a view of long-term better prospect for the
country by various aspects. The goods and services tax (GST) make the
tax system easy and thus contributing in the growth of the country. The
Government applied GST by summing up of various taxes under CGST
& SGST, transparent taxation, reduced raw material cost, to bring down
the cost of goods and services and the ease of doing business in India.
Initially there was huge chaos regarding the enactment of GST, but
many successful businesspersons supported it and considered it as a
boon for the long-term development of the nation. GST being the big
step of Government of India to simplify the previous tax system has
both positive and negative impact on business regulations of Micro,
Medium & Small Enterprises. The fundamental of ‘ONE NATION,
ONE TAX’ was created with an intention to easy tax filing, ease of
doing business in other states, reduction in the prices of goods, relieving
the burden of logistic overhead from small enterprises. On the contrary,
it has increased the technology dependency of every enterprise, as every
transaction is made online. It will take some time for the people to get
used to the new taxation regime, only then will the nation start to see the
fruits of ‘ONE NATION, ONE TAX’ – the GST.
 Bibliography

 https://cleartax.in/s/gst-law-goods-and-services-tax
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