MBA- 401

SYNOPSIS
ON
“GST- FUTURE OF INDIRECT
TAXES”
Not simply VAT plus service tax but an improvement over VAT

Submitted for the partial fulfillment of Master of Business Administration Degree

in department of Management
Under guidance of Submitted by:
Dr. Surat pyari Kanchan Khushlani
Roll no. 137660
MBA 4th semester
Faculty Of Social Science
Dayalbagh Educational Institute, Deemed University, Agra
GST- Future of indirect taxes

Acknowledgement
At the honest we must bow down in reverence to the
Almighty who blessed us with the understanding and
perseverance that is needed in this kind of project.
We take the privilege of conveying our heartiest
gratitude to all those, who directly or indirectly
enable us to complete our project.

In this first place I would like to record my gratitude

to my project supervisor Dr. Surat pyari for her
supervision, advice and guidance for the early stage
of this project. Above all and the most needed, she
provided me unflinching encouragement and support
in various ways. Her truly knowledge and skills has
made me as constant oasis of ideas and passion in
commerce, with exceptionally inspire and enrich my
growth as a student and as a researcher, want to
be. .
I hope this synopsis will result into a project which
will be a true contribution on the present state of
knowledge

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GST- Future of indirect taxes

CONTENTS
Problem statement…………………………..……………………………..…4
Background of the study
 Introduction………………………………………………..………...……
4-5
 Sales tax……………………………..…………………………….
………..5
 VAT……………………………………………………………………….... 5
 GST………………………………………………………………………... 5
 Problems in Existing VAT
structure…………………………………….6
 Comparison of the 2014 Bill with the 2011 Bill on
introduction of GST:……………..
……………………………………………………….6-7
 Comparison of the recommendations of various bodies
……….……7-8
 GST model………………………………..…………………….…………
8-10
Need of the study…………………………………………………..….
…………10
Objective of the study………………………………………………….….
……..10
Review of literature………………………………………………………….…
10-13

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GST- Future of indirect taxes

Research methodology………………………………………………..….
……..13-14
Proposed plan of study………………………………………………….
………..14
References……………………….…………………………………….…………
14-15
Bibliography………………………..……………………………….………….…
15

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GST- Future of indirect taxes

PROBLEM STATEMENT
Ever since the liberalization India is moving towards to get the simpler, rational and easy to administer tax
structure. The concept of Value Added Tax (VAT) was introduced for central excise duty in 1986 (first as
MODVAT and then as CENVAT). Prior to this, excise duty was levied on both inputs used and the output
produced. This meant that an amount paid as tax on the input was subject to taxation again at the output level
(with limited set offs). This was applicable to each intermediate good in the manufacturing process. This tax on
tax‟ led to cascading of taxes.
This problem was sought to be addressed by the VAT regime under which tax paid on the inputs is deducted
from the tax payable on the output produced. Similarly, sales tax also had a cascading effect through the
distribution chain. All states have now adopted the concept of VAT for state sales tax. The issue of cascading
taxation was partly addressed through the VAT regime. However, certain problems remained. For example,
several central and state taxes were excluded from VAT. Sectors such as real estate, oil and gas production etc.
were exempt from VAT. Further, goods and services were taxed differently, thereby making the taxation of
products complex. Some of these challenges are sought to be overcome with the introduction of the Goods and
Services Tax (GST).
The GST regime intends to subsume most indirect taxes under a single taxation regime. GST is a value added
tax levied across goods and services. This is expected to help broaden the tax base, increase tax compliance, and
reduce economic distortions caused by inter-state variations in taxes. In 2011, the Constitution (115th
Amendment) Bill, 2011 was introduced in Parliament to enable the levy of GST. However, the Bill lapsed with
the dissolution of the 15th Lok Sabha. Subsequently, in December 2014, the Constitution (122nd Amendment)
Bill, 2014 was introduced in Lok Sabha. The Bill was passed by Lok Sabha in May 2015 and referred to a
Select Committee of Rajya Sabha for examination.
INTRODUCTION
The Empowered Committee describes the GST as “a further significant improvement –the next logical step -
towards a comprehensive indirect tax reforms in the country. Introduction of GST will be a major improvement
over the existing VAT system in India. VAT was introduced as an improvement over the sales tax system where
the tax was levied on every stage on the sale of goods. Sales tax had limitation of ‘Tax on Tax’. The inputs
which were already taxed at manufacturing stage, taxed again when it converted into final product. With the
introduction of VAT credit allowed to the seller for the tax he paid on the purchases of raw material. In case of
inter-state transactions, CST (Central Sales Tax) is applicable. For CST no credit is available to the seller. Thus
if a buyer is of Gujarat and seller is of Mumbai then buyer will have to pay CST to seller for which he’ll get no
credit and if both are from Gujarat, buyer will pay VAT to the seller then on selling the product to customer he’ll

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GST- Future of indirect taxes

charge VAT or CST whatever it is, but he’ll definitely get credit for the VAT paid by him. These all collected
VAT & CST then paid to the respective state & central government.
About 150 countries have introduced GST in some form. While countries such as Singapore and New Zealand
tax virtually everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of
exemptions.
In China, GST applies only to goods and the provision of repairs, replacement and processing services. GST
rates of some countries are given below.

Sales tax:
Sales Tax in India is that form of tax which is imposed by the government on sale/purchase of a particular
commodity within the country. It is imposed under Central Government (Central Sales Tax) and the State
Government (Sales Tax) Legislation. Normally, each state has its own sales tax act and levies the tax at various
rates. Apart from sales tax, certain states also impose extra charges such as works contracts tax, turnover tax and
purchaser tax. Thus, sales tax plays a major role in acting as a major generator of revenue for the various State
Governments.
VAT:
VAT is a multi-point sales tax with set-off for tax paid on purchases. It is collected in installments at each
transaction stage in the production distribution system. It does not have cascading effect due to the system of
distribution or credit mechanism. VAT is a tax on consumption. The final and total burden of the tax is fully and
exclusively borne by the domestic consumer of goods and services
GST:-
GST means tax on goods and services. Under the GST system, no difference is made between goods and
services for levying of tax. In other words, goods and services attract the same rate of tax. GST is a multi-tier
tax where ultimate burden of tax fall on the consumer of goods/ services. It is called as value added tax because
at every stage, tax is being paid on the value addition. Under the GST scheme, a person who was liable to pay
tax on his output, whether for provision of service or sale of goods, is entitled to get input tax credit (ITC) on
the tax paid on its inputs.

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GST- Future of indirect taxes

Problems in Existing VAT structure

 Several taxes which are in the nature of indirect tax on goods and services, such as luxury tax, entertainment
tax, etc., and yet not subsumed in the VAT.
 CENVAT load on the goods remains included in the value of goods to be taxed under State VAT, and
contributing to that extent a cascading effect on account of CENVAT element.
 Service tax set off is out of reach to the manufacturer and dealers.
 non-inclusion of several Central taxes in the overall framework of CENVAT, such as additional customs
duty, surcharges, etc., and thus keeping the benefits of comprehensive input tax and service tax setoff
 out of reach for manufacturers/dealers no step has yet been taken to capture the value added chain in the
distribution trade below the manufacturing level in the existing scheme of CENVAT
This is the essence of GST, and this is why GST is not simply VAT plus service tax but an improvement over the
previous system of VAT and disjointed service tax. The GST at the State-level is, therefore, justified for
(a) Additional power of levy of taxation of services for the States,
(b) System of comprehensive set-off relief, including set-off for cascading burden of CENVAT and service
taxes,
(c) Subsuming of several taxes in the GST and
(d) Removal of burden of CST. Because of the removal of cascading effect, the burden of tax under GST on
goods will, in general, fall.

Comparison of the 2014 Bill with the 2011 Bill on introduction of GST:-
The Table below compares the provisions of the 2014 Bill with the 2011 Bill and the recommendations of the
Standing Committee on the 2011 Bill.

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GST- Future of indirect taxes

Comparison of the recommendations of various bodies

A proposal for introduction of GST has been under consideration since 2007. The Empowered Committee of
State Finance Ministers presented its views in 2009.2 The 13th and 14th Finance Commission also made
recommendations in relation to the introduction of GST, in 2009 and 2015 respectively

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GST- Future of indirect taxes

GST Model
Generally, GST consist three prime models:-
1. Central GST-(CGST)
2. States GST-(SGST)
3. Dual GST
• Non concurrent dual GST
• Concurrent dual GST

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GST- Future of indirect taxes

CGST: - Under this option, the two levels of government would combine their levies in the form of a single
National GST, with appropriate revenue sharing arrangements among them. In the case of a Central GST (where
all goods and services are taxed by the Central government only), the Centre will collect most of the country’s
total tax revenue, leaving very little for the sub national Governments.
SGST: - The second model is to have a State GST in which the States alone levy GST and the Centre withdraws
from the field of GST or VAT completely. In this case, the
State GST will work as the redistributing mechanism. The loss to the Centre from vacating this tax field could
be offset by a suitable compensating reduction in fiscal transfers to the States. This would significantly enhance
the revenue capacity of the States and reduce their dependence on the Centre.
Dual GST: -
Non-Concurrent Dual GST: -Under this model, GST on goods can be levied by the States only and on
services by the Centre only. The States already have the power to levy the tax on the sale and purchase of goods
(and also on immovable property), and the Centre for taxation of services. No special effort would be needed
for levying a unified Centre tax on interstate services. This model of dual GST would not be acceptable to the
Centre as well as the States. Hence, the Government has already announced its intention to follow the
Concurrent Dual GST.
Indian Model of GST – Concurrent Dual GST
Indian GST model would be Concurrent Dual GST consisting both the Central GST and State GST levied on
same base. Under this model, GST will be levied by both tiers of Governments concurrently. There will be
Central GST to be administered by the
Central Government and there will be State GST to be administered by State Governments. In this model, both
goods and services would be subject to concurrent taxation by the Centre and the States. All types of goods and
services will be brought under this proposed GST structure except few exceptions.

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GST- Future of indirect taxes

For Example, if a product have levy at a base price of Rs. 10,000 and rate of CGST and SGST are 8% then in
such case both CGST and SGST will be charged on Rs. 10,000 i.e. CGST will be Rs 800 and SGST will be
Rs.800.

NEED OF THE STUDY

The Goods and Services Tax (GST) is a value added tax to be implemented in India, the decision on which is
pending. GST is the only indirect tax that directly or indirectly going to affects all sectors and sections of our
economy. Government revenue will increase due to increased tax base, customer will get commodity at lower
price due to ending of cascading effect, states will get the compensation for revenue loss, industry as a whole
will get benefited due to end of CST, cascading effect of taxes & simper tax procedure. Introduction of GST
will result into end of all other indirect taxes only CGST & SGST will remain into existence. Hence there arise
a need to study the impact of GST on present system & comparing it with existing VAT model.
OBJECTIVES OF THE STUDY
 To get the detail knowledge of GST (proposed) in India as well as in other countries
 To know the impact of proposed GST model on the different stakeholders including centre & state
government, industry, company & economy as a whole.
 To compare proposed GST model with existing VAT model in India.
REVIEW OF LITERATURE
1. Garg, G. (2014). Basic Concepts and Features of Good and Service Tax in India
This paper is an analysis of what the impact of GST (Goods and Services Tax) will be on Indian Tax Scenario.
Here stated with a brief description of the historical scenario of Indian taxation and its tax structure. Then the
need arose for the change in tax structure from traditional to GST model. GST has be detailed discuss in this
paper as the background, silent features and the impact of GST in the present tax scenario in India. The Goods
and Services Tax (GST) is a value added tax to be implemented in India, the decision on which is pending. GST
is the only indirect tax that directly affects all sectors and sections of our economy. Ignorance of law is no
excuse but is liable to panel provisions, hence why not start learning
The goods and services tax (GST) is aimed at creating a single, unified market that will benefit both corporate
and the economy. The changed indirect tax system GST-Goods and service tax is planned to execute in India.
Several countries implemented this tax system followed by France, the first country introduced GST. Goods and
service tax is a new story of VAT which gives a widespread setoff for input tax credit and subsuming many
indirect taxes from state and national level. The GST
Implementation is not yet declared by government and the drafting of GST law is still under process and a clear
picture will be available only after announcement of Implementation. India is a centralized democratic and
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GST- Future of indirect taxes

therefore the GST will be implemented parallel by the central and state governments as CGST and SGST
respectively. The objective will be to maintain a commonality between the basic structure and design of the
CGST, SGST and SGST between states .In this article, researcher have started with the introduction, in general
of GST and have tried to highlight the objectives the proposed GST is trying to achieve. Thereafter, he has
discussed the possible challenges and threats; and then, opportunities that GST brings before us to strengthen
our free market economy.

2. Jain, A. (2013). An Empirical Analysis on Goods and Service Tax in India: Possible Impacts,
Implications and Policies
Goods and Services Tax is a broad based and a single comprehensive tax levied on goods and services
consumed in an economy. GST is levied at every stage of the production-distribution chain with applicable set
offs in respect of the tax remitted at previous stages. It is basically a tax on final consumption. In simple terms,
GST may be defined as a tax on goods and services, which is leviable at each point of sale or provision of
service, in which at the time of sale of goods or providing the services the seller or service provider may claim
the input credit of tax which he has paid while purchasing the goods or procuring the service. India, being one
of the largest democracies in the world, has to follow the convention of welfare state. The federal structure of
the country provides a relatively powerful government at the centre accompanied by28 state governments. All
of them require finance to govern the country and the states. After introduction of Value Added Tax (VAT) from
2005, the country is going to experiment with Goods and Services Tax (GST) from April 1, 2013. This paper
puts an attempt to explore the impacts, implications and policies of introduction of GST in India.
3. Sharma, N., & Sharma, M. (2014). A Study on Goods and Services Tax in India
In this paper researchers try to attempt to see the benefits of GST & its current status in India. Paper gives
knowledge about GST. In India currently we are having service tax & VAT for collection indirect tax. On central
level service tax is charged services provided on central level & VAT is charged for sale of goods on state level
But current system which we are using are not able to minimize the tax evasion, distortion & cascading effect
therefore we wants to move to goods & service tax. Current system of indirect taxes is not able to increase the
competitiveness of industry, exports and company so we are moving to GST. This paper shows how a goods and
service tax is an improvement over VAT and Service Tax.
4. Poddar, S., & Ahmad, E. (2009). GST reforms and intergovernmental considerations in India
The Empowered Committee describes the GST as “a further significant improvement –the next logical step -
towards a comprehensive indirect tax reforms in the country.”Indeed, it has the potential to be the single most
important initiative in the fiscal history of India. It can pave the way for modernization of tax administration -
make it simpler and more transparent – and significant enhancement in voluntary compliance. For example,
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GST- Future of indirect taxes

when the GST was introduced in New Zealand in 1987, it yielded revenues that were 45% higher than
anticipated, in large part due to improved compliance. Its more neutral and efficient structure could yield
significant dividends to the economy in increased output and productivity. The Canadian experience is
suggestive of the potential benefits to the Indian economy. The GST in Canada replaced the federal
manufacturers’ sales tax which was then levied at the rate of 13% and was similar in design and structure as the
CENVAT in India. It is estimated that this replacement resulted in an increase in potential GDP by 1.4%,
consisting of 0.9% increase in national income from higher factor productivity and 0.5% increase from a larger
capital stock (due to elimination of tax cascading)
5. S, Shiva. Raman. (2010). Migration to GST: Preparedness and level of Knowledge, Understanding,
Application and Skills of Human Resources in the Government and the Industry
In the Union budget 2007-08, the then finance minister proposed that India should move towards a national
level GST, with the Centre and the States sharing revenue. He had further proposed to set April 1, 2010 as the
date for introducing GST1. There was much disappointment for everyone who expected Budget 2010 to lay out
the plan for goods and services tax (GST) rollout. GST was postponed to April 1, 2010. The earlier deadline of
April1, 2010 was missed because of disagreement between the Centre and the states on many areas of GST.
Some of the areas of differences include threshold limit, exemption list, revenue neutral rate and constitutional
amendments. In his budget speech (2010), the Union Finance Minister said that the indirect tax administrations
at the Centre and the States needed to revamp their internal work processes based on the use of Information
Technology
6. Dhond, S. Shashank. (2010). Impact of sales tax, VAT & GST on the profitability of organizations
India has witnessed substantial reforms in Indirect taxes over the past two decades and is on the verge of
another major reform initiative which will bring this process to a culmination. As a Progressive and welfare
oriented Country India should balance the requirements of direct and indirect taxes in a fair manner. Therefore
too much dependence on direct taxes will be repressive but at the same time passing a heavy burden to the
general public by way of indirect taxes and will constitute hardships to the common citizen.
The objective of this study is to find out the impact of tax systems on the profitability of the organization and
growth of the revenue in India and the state of Maharashtra. The past experience in Maharashtra and elsewhere
have shown that half baked reforms in the name of VAT have done more harm than good in evolving a tax
system required for a competitive environment. It is important to assess how this scenario changes from Sales
tax to VAT and VAT to GST

7. Chadha, Rajesh. (2009), Moving to Goods and Services Tax in India: Impact on India’s Growth and
International Trade
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GST- Future of indirect taxes

The broad objectives of the study refer to analysing the impact of introducing comprehensive goods and
services tax (GST) on economic growth and international trade; changes in rewards to the factors of production;
and output, prices, capital, employment, efficiency and international trade at the sectoral level.
Analysis in this study indicates that implementation of a comprehensive GST in India is expected to lead to
efficient allocation of factors of production thus leading to gains in GDP and exports. This would translate into
enhanced economic welfare and returns to the factors of production, viz. land, labor and capital.
8. Taqvi, S. M. A., Srivastava, A. K., & Srivastava, R. K. (2013). Challenges and Opportunities of Goods
and Service Tax (GST) in India

The goods and services tax (GST) is aimed at creating a single, unified market that will benefit both corporate
and the economy. The changed indirect tax system GST-Goods and service tax is planned to execute in India.
Several countries implemented this tax system followed by France, the first country introduced GST. Goods and
service tax is a new story of VAT which gives a widespread setoff for input tax credit and subsuming many
indirect taxes from state and national level. The GST Implementation is not yet declared by government and the
drafting of GST law is still under process and a clear picture will be available only after announcement of
Implementation.
India is a centralized democratic and therefore the GST will be implemented parallel by the central and state
governments as CGST and SGST respectively. The objective will be to maintain a commonality between the
basic structure and design of the CGST, SGST and SGST between states.
In this article, researcher have started with the introduction, in general of GST and have tried to highlight the
objectives the proposed GST is trying to achieve. Thereafter, he has discussed the possible challenges and
threats; and then, opportunities that GST brings before us to strengthen our free market economy

RESEARCH METHODOLOGY

a) Sources of data collection

Primary as well as Secondary sources will be use for the study:
Primary sources:
Interview from experts will be conducted to know the impact of GST on the centre & state government,
industry, company & economy as a whole.
Secondary sources:
In order to get the deep inside of GST Journals, books, Reports, Conference papers, Referred journals,
Magazines/periodicals of Ministry of Finance; Govt. of India, News, etc. sources will be use.

b) Sample size

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GST- Future of indirect taxes

Interview will be conducted from 3-5 experts having the knowledge & skills in indirect Taxation
c) Sampling method
Sample size will be selected on the bases of Non-probabilistic convenient sampling
d) Tools for study
 For fulfilling 1st Objective Extensive study will be done from existing literatures, Research papers &
notices from Ministry of finance, news etc. this type of study is called as Exploratory Research.
Exploratory research has the goal of formulating problems more precisely, clarifying concepts, gathering
explanations, gaining insight, eliminating impractical ideas, and forming hypotheses. It provides insights into
and comprehension of an issue or situation. The initial phase of the project demanded an exploratory research to
capture the knowledge, understanding, application and skills relating to GST

 To meet the second objective interview will be conducted from the experts
Interview is defined as a conversation with a purpose
 To meet the third objective hypothetical case study will be done
Case studies are analysis of persons, events, decisions, periods, projects, policies, institutions, or other systems
that are studied holistically by one or more methods
PROPOSED PLAN OF THE STUDY

 Chapter 1:- INTRODUCTION

 Chapter 2:- REVIEW OF LITERATURE

 Chapter 3:- RESEARCH METHODOLOGY

 Chapter 4:- THEORETICAL BACKGROUND

 Chapter 5:- DATA ANALYSIS AND INTERPRETATION

 Chapter 6:- FINDINGS, CONCLUSION AND SUGGESTION

REFERENCES

1. Garg, G. (2014). Basic Concepts and Features of Good and Service Tax in India. International Journal of
scientific research and management (IJSRM), 2(2).

2. 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, 2(1).

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GST- Future of indirect taxes

3. Sharma, N., & Sharma, M. (2014). A Study on Goods and Services Tax in India. Research journal of social
science & management, 3(10).

4. Poddar, S., & Ahmad, E. (2009). GST reforms and intergovernmental considerations in India. Government of
India, Ministry of Finance, Department of Economic Affairs, Working Paper, 1, 2009.

5. S, Shiva. Raman. (2010). Migration to GST: Preparedness and level of Knowledge, Understanding,
Application and Skills of Human Resources in the Government and the Industry. Indian Institute of
Management Lucknow, Fiscal Policy Institute
6. Dhond, S. Shashank. (2010). Impact of sales tax, VAT & GST on the profitability of organizations.
Padmashree Dr. D.Y. Patil university, Department of Business Management
7. Chadha, Rajesh. (2009), Moving to Goods and Services Tax in India: Impact on India’s Growth and
International Trade. National council of applied Economic Research (NCAER)

8. Taqvi, S. M. A., Srivastava, A. K., & Srivastava, R. K. (2013). Challenges and Opportunities of Goods and
Service Tax (GST) in India. Indian Journal of Applied Research, 3(5).

BIBLIOGRAPHY
cbec.gov.in
www.prsindia.org
www.theglobaljournals.com
www.fincomindia.nic.in
www.fpibangalore.gov.in
www.lse.ac.uk
www.ijrsr.com
www.indiainfoline.com
www.hindustantimes.com
finmin.nic.in
www.moneycontrol.com
www.thehindubusinessline.com
www.livemint.com
www.caclubindai.com
dor.gov.in
www.economictimes.indiatimes.in
www.taxguru.in
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