CHANAKYA NATIONAL LAW UNIVERSITY

Final draft for fulfilment of project of Economics

On
“Structure of GST”

Submitted to: Asst. Prof. Shivani Mohan Submitted By: Aastha Singh
(Faculty of Economics) Roll No: 1903
2nd Year

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Contents
DECLARATION ...................................................................................................................... 3
ACKNOLEDGEMENT .......................................................................................................... 4
RESEARCH METHODOLOGY ................................................................................................. 5
Aims & Objectives ............................................................................................................ 5
Hypothesis ......................................................................................................................... 5
Scope And Limitation ........................................................................................................ 5
Method of research ............................................................................................................ 5
Sources Of Data................................................................................................................. 5
Introduction .......................................................................................................................... 6
Chapter 1: Journey of GST in India ....................................................................................... 7
Chapter 2: Benefits of GST ................................................................................................... 9
Chapter 3: Impacts of GST .................................................................................................. 11
Impact of Goods and Services Tax on the Agricultural Sector ............................................. 12
Impact of Goods and Services Tax on Startups .................................................................... 12
Chapter 4: Taxes Before GST.............................................................................................. 15
Difference between GST ..................................................................................................... 15
CONCLUSION ................................................................................................................... 17

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 DECLARATION

I hereby declare that the work reported in the BA LL.B (Hons.) Project Report entitled
“Structure of GST” submitted at Chanakya National Law University, Patna is an authentic
record of my work carried out under the supervision of D. Shivani Mohan. I have not
submitted this work elsewhere for any other degree or diploma. I am fully responsible for the
contents of my Project Report.

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 ACKNOLEDGEMENT

Writing a project is one of the most difficult academic challenges I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who
gave their support and helped me to complete this project.

First of all I am very grateful to my subject teacher Dr. Shivani Mohan without the kind
support of whom and help the completion of the project would have been a herculean task for
me. He took out time from his busy schedule to help me to complete this project and
suggested me from where and how to collect data.

I acknowledge my family and friends who gave their valuable and meticulous advice which
was very useful and could not be ignored in writing the project. I want to convey most sincere
thanks to my faculties for helping me throughout the project.

Thereafter, I would also like to express my gratitude towards our seniors who played a vital
role in the compilation of this research work.

I would also like to express my gratitude towards the library staff of my college which
assisted me in acquiring the sources necessary for the compilation of my project.

Last, but not the least, I would like to thank the Almighty for obvious reasons.

AASTHA SINGH

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 RESEARCH METHODOLOGY

Aims & Objectives

1. To understand the rationale for contract farming.

2. To study about different Contract Farming Models.
3. To study about examples of success of contract farming (i) In India (ii) in developed
country
4. Problems in Contract Farming

Hypothesis
1. GST is beneficial for Startups and agriculture.
2. GST has brought problems in understanding of genral public

Scope And Limitation

 The resources on which the researcher resorts for data & information collection is
limited.
 There is a time restraint which bounds the researcher
 And, this research is limited to a particular area which revolves around general
structure of GST .

Method of research

 The methodology adopted for this research work is traditional i.e., doctrinal and non-
doctrinal too.

Sources Of Data

 The researcher focuses on obtaining information from both the available sources; they
are (1) primary sources of data, (2) secondary sources of data.
 Primary sources of data include first-hand information available, like case laws,
journals, district plan goals, etc. and secondary sources include magazines, journals,
etc.

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 INTRODUCTION

Goods and service tax is a form of Indirect tax introduced in the year 2017replacimg all the
other indirect taxes 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 ,therefore, is one indirect tax for the entire country. More than 150 nations have
implemented GST so far. Goods and Service Tax or GST as it is known is a game changer in Indian
Economy. In middle of economic crisis across the globe India has poised a ray of hope with ambitious
growth targets, supported by a bunch of strategic undertakings such as the Make in India and Digital
India campaigns. The Goods and Services Tax (GST) is another such undertaking that is expected to
provide the much needed Stimulant for economic growth in India by transforming the existing base of
indirect taxation towards the free flow of goods and services. GST is also expected to eliminate the
cascading effect of taxes. India is expected to play an important role in the world economy in the
years to come. The expectation of GST being introduced is high not only within the country, but also
within neighbouring countries and developed economies of the world.

Despite these and a number of other implementation challenges, the GST is expected to
produce substantial benefits over time. Most notably Finance Minister has predicted that
GST will increase the country‟s economic growth by two percent, external economists and
investment professionals place the growth impact in a wider range of 0.5 percent to more than
two percent. Additionally, the GST should increase the ease of conducting business within
India and between India-based companies and companies based in other countries. From a
government perspective, “the GST is expected to improve tax compliance and draw more
people into the tax net in a country where tax evasion is common. It will also make India
more attractive for foreign investors by simplifying rules for a huge and increasingly
attractive market.”

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 CHAPTER 1: JOURNEY OF GST IN INDIA

The Goods and Services Tax came to force in India on 1 July, 2017. However, the process of
implementing the new tax regime commenced in 2000, Atal Bihari Vajpayee, then Prime
Minister of India, set up a committee to draft the GST law. It took 17 years from then for the
Law to evolve. In 2004, a task force came to the conclusion that the new tax structure should
be implemented to enhance the tax regime at the time which recommended to replace the
existing tax scheme by introducing a comprehensive tax on all goods and services replacing
Central level VAT and State level VATs. It recommended replacing all indirect taxes except
the customs duty with value added tax on all goods and services with complete set off in all
stages of the value chain. 1

While in the year 2006, P. Chidambaram, then Finance Minister of India, proposed the
introduction of GST on 1st April 2010 and thus the movement towards GST was articulated
by the then Union Finance Minister in his Budget speech for 2006-07 for which the
Constitution Amendment Bill was passed in 2011 to enable the introduction of the GST law.
Joint Working Groups were set up which consisted of of officials having representatives of
the States as well as the Centre to examine various aspects of GST and submit a report
specifically on exemptions and thresholds, taxation of services and taxation of inter-State
supplies. Based on discussions within and between it and the Central Government, the EC
released its First Discussion Paper (FDP) on the GST in November, 2009. This spelt out
features of the proposed GST and has formed the basis for discussion between the Centre and
the States so far.

In 2012, the Standing Committee started discussions the structure of GST, and presented its
report after one year. In 2014, the new Finance Minister at the time, Arun Jaitley, re-
introduced the GST Bill in Parliament, and the bill was passed in Lok Sabha in 2015.
However, the implementation of the law was delayed as it was not passed in Rajya Sabha. By
amalgamating a large number of Central and State taxes into a single tax, GSt would improve
theill effect of double taxation in India and give relaxation to the consuers. With the aim that
from the consumers point of view,2 the biggest advantage would be in terms of reduction in
the overall tax burden on goods, which is currently estimated to be around 25%-30%. It also
implied that the burden of indirect taxes would become more transparent and create a

1
http://gstcouncil.gov.in, accessed on 1.2.2020.
2
https://cleartax.in/accessed oon 5.2.2020.

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common national market for all the consumers. Introduction of GST would also make Indian
products competitive in the domestic and international markets owing to the full
neutralization of input taxes across the value chain of production and distribution. This tax,
because of its transparent and self-policing character, would be easier to administer. It would
also encourage a shift from the informal to formal economy. 3

GSTN went live in 2016, and the amended model GST law was passed in both the Lok Sabha
as well as the Rajya Sabha. The President of India also gave his assent to the law in 2016. In
2017 four supplementary GST Bills were passed in Lok Sabha as well as the approval of the
same was obtained by the Cabinet. Rajya Sabha then passed 4 supplementary GST Bills and
the new tax regime was implemented on 1 July, 2017.

3
ibid.

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 CHAPTER 2: BENEFITS OF GST

The following are the benefits of the Goods and Services Tax:
1. Eliminating Cascading tax effect :- Since GST has brought all te taxes under one
roof its main effectcan be seen on the cascading taxes. For example, before the GST
law was introduced, if a consultant offered his services for an amount of Rs.40,000
and levied a service tax of 14% (Rs.5,600), and then purchased office supplies worth
Rs.15,000 and paid VAT at 5% (Rs.750), his total outflow would be Rs.5,600 +
Rs.750 = Rs.6,350.

Following the implementation of GST, the GST rate applicable to the service would
be 18%. If the service was offered for Rs.40,000, the GST on it would be Rs.7,200.
The Rs.750 spent on office supplies would be deductible, which makes the total
outflow Rs.7,200 – Rs.750 = Rs.6,450.

2. Higher Threshold:- In the previous tax structure business that made a turn over of 5
lakh rupees had to pay VAT while service providers who made a turnover f 10 lakh
rupees were exempted from Service Tax. However, the threshold for registration
under GST is Rs.20 lakh, which means that many small service providers and traders
need not register.
3. Simple Procedure:- The whole procedure of GST is done online i.e from registration
to filing returns which is a simple procedure that vcan be followed even by
individuals with minimum technical knowledge. Since there is no ru around for a
number oftimes for registration like Excise Duty, Service Tax, VAT etc, it makes GSt
very simple andeffective.
4. Composition Scheme :- The composition schelme helps in lowering taxes of the
small businesses that earn turnovers between Rs.20 lakh and Rs.75 lakh. The
compliance as well as tax burden on small businesses has significantly reduced thanks
to the implementation of GST.4
5. Fewer Complications:- The previous tax regime had Service Tax and Value Added
Tax, and each of these taxes had their own compliances and returns. For instance,
Excise Duty return filing had to be done on a monthly basis, while Service Tax return
filing had to be done on a monthly basis for companies and LLPs, and on a quarterly
basis for partnerships and proprietorships. Value Added Tax was different in different
4
https://economictimes.indiatimes.com/ accessed on 5.2.2020.

9
 states, which resulted in inconsistencies across the country. The implementation of
GST has ensured that all businesses pay a uniform tax for the supply of goods and
services.
6. E-Commerce operators no longer suffer from differential treatment:- Prior to the
implementation of the Goods and Services Tax, there was no proper definition for the
supply of good through an e-commerce portal. There were multiple VAT laws. For
instance, deliveries though online portals such as Amazon and Flipkart to states like
Uttar Pradesh required the filing of a VAT declaration. The registration number of the
vehicle that was delivering the product would also have to be mentioned, and tax
authorities had the power to seize products in case proper documents were not
produced. GST has effectively done away with such confusing complications and
differential treatments. The e-commerce sector now has clearly defined provisions
that make it easier to engage in the supply of products across states.

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 CHAPTER 3: IMPACTS OF GST

Following are some of the major impacts that the new GST could have on NBFCs and banks:
1. Problems with registration as there will be an increase in the number of
branchres:- Banks and NBFC who previously had the ability to discharge their
service tax compliances using just one central registration but now they have to attain
a difrent registration for every state where they operate. Apart from registration, the
burden of compliance with regards to the filing of returns will also rise substantially
so far as the number of return formats, the periodicity of returns and the level of
information needed in these returns is concerned.5
2. Leveraging and De-Levereging of Input Tax Credit:- NBFCs and banks are
currently choosing the reversal option which allows them to reverse 50% of the
CENVAT credit that has been taken against input services and input. On the other
hand, CENVAT credit on capital goods can be taken without any reversal conditions.
The cost of capital is expected to increase under GST as 50% of the CENVAT credit
taken against capital goods, input services and input can be reversed, thereby leaving
NBFCs and banks with lowered credit of 50% on capital goods.
3. Harder Assessment as well as adjudication:- Branches of NBFCs and banks now
functioning under state regulators are assessed by the state regulators in which branch
has registered. Each bank now has to give its own justifictation for proving ts position
on chargibility along with a reason for making use of input tax credit on various states
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making it difficult and compkex to understand.
4. Account Linked and Non- Linked Financial Sevices:- India now becoming a
degitalized India under the centre, it has become difficult to identify the state in which
the service recipient is located. Moreover, service recipients such as traders,
manufacturers, professionals and other workers transfer or move temporarily to
different places when they seek better opportunities, their addresses may be different
in the books of the service providers. Details such as current address, permanent
address, KYC address and address of communication could be misrepresented in case
of account linked financial services, in which case the place from which the goods or
services were supplied will serve as the location in which the services is received. In
case of non-account linked financial services, the location of the service provider will

5
www.deskera.in, accessed on 6.2.2020.
6
Impacts of progressive tax reform in india: goods and services tax (gst) - an approach by Nabendu Basak.

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 serve as the place in which the service is supplied. Companies that have established a
widespread presence in remote areas may be hard-hit by GST as their operations and
transactions will have to be carried out from offices situated in some other state.
5. Actionable Claims:- Previously actionable claims were not treated as services
however with the implementation of GST actionable claims are now treated as in the
same manner as supply of goods. Services offered between bills discounted and
securitisation will all be taxed as they are considered as B2C and B2B services.
financial sectors are in for tough times so far as the manner of conducting business,
services matrix, customer profiles, IT systems, etc. are concerned. GST is set to have
a major impact on NBFCs and banks in a manner such that they will have to
reconsider their entire accounting, operations, compliance and transactions platforms.7

IMPACT OF GOODS AND SERVICES TAX ON THE AGRICULTURAL SECTOR

The Goods and Services Tax is a crucial law to enhance the timeline, the reliability, and the
transparency of supply chain mechanism. With the implementation of GST the cost incurred
by the retailers and farmers would be reduced through the implementation of superior supply
chain mechanism by which there will also be reduction in wastage. With GST the cost of
heavy machinery needed for production is lowered. Agriculture under the new tax regime
does not include stock breeding, poultry farms and dairy farming and shall not attract any tax.
The GST aims at increasing the rate to 12%, which means that there will be an increase on
the price of milk. Even the cost of tea, which is among the most common household
commodities in India, is expected to increase from the present VAT rate which stands
between 5% and 6% in most states. Production of milk in India over Financial Year 2015-16
was recorded at 160.35 million tonnes, marking an increase of over 14 million tonnes from
the previous fiscal year. At the moment, milk and a number of milk products are charged at
2% under VAT.

IMPACT OF GOODS AND SERVICES TAX ON STARTUPS

With the implementation of GST all the taxes levied on startups will be subsumed. Start-ups
are under the ambit of benificieries of GST and with it the economic development shall be
pushed forward.

7
Devi, S. (2016). Goods and services tax in India: A SWOT analysis. International Journal of Research -
Granthaalayah - A Knowledge Repository, 4(12), 188-195.

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1. Greater registration threshold: previously the business which earned a turnover of
Rs. 5 lakh were liable to ensure VAT registration however the threshold with the
introduction os GST at the centre Is increased to Rs. 20 lakh. Consequentially startups
and other small businesses are exempted under the present tax reforms. Another
scheme called the „composition scheme‟ is expected to reduce taxes for small
businesses that have a turnover from Rs.20 lakh to Rs. 50 lakhs. Newly set-up
businesses will thereby find respite from tax burdens.
2. Tax credit on purchase made by Startups: Large number of startups have focussed
on Srvice Industry such as OLA, Uber, Swiggy etc. and paid service taxes , however,
presently GST ensures that VAT paid on suppies purchase can be setoff with service
tax on sales. For instance, in case a startup purchases supplies worth Rs.10,000 and
pays 5% towards VAT, after which it levies a 15% service tax on services of
Rs.30,000. It will have to pay Rs.30,000 x 15% = Rs.4,000, and no deductions can be
claimed on the VAT of Rs.500 paid towards the purchase of supplies.
If the GST rate is set at 18%, the GST on the service offered will be Rs.5,400, and the
deduction on the supplies purchased will be Rs.1800, and the net GST payable will be
Rs.3,600. As a result, GST will benefit the startup industry to a great extent,
especially to companies that primarily offer services.
3. More convenient online procedure: Since the whole regime is managed and
maintained online therefore right from registration o filing returns, all processes are
done online which makes it a lot easier than before. Statups no longer has to travel to
tax offices for registration in their efforts to get different registrations done under
service tax, VAT or excise duty.
4. Easier Taxation : Since the budget of the startups are limited therefore, they do not
have the bandwidth to allocate a separate budget for tax compliance with regard to
service tax, CST, VAT, etc. GST brings all these taxes under the same roof and
lowers the time taken for such issues. moreover, startups that deal with goods as well
as services find some leeway in paying one tax rather than a number of different
taxes.
5. Enhanced efficiency in logistics: Within different states, India‟s logistics has to use
diffirent warehouses in an effort to avoid the present state entry taxes and CST. These
warehouses have also been made to operate at lower capacities which increase their
operating costs. Under GST, the restrictions on goods being transferred from one state

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 to another will be removed, thereby brining about warehouse consolidation.8 E-
Commerce players and warehouse operators, as a result of GST, have already
expressed interest in establishing their warehouses in strategic cities like Nagpur.
Startups will benefit through lower logistics costs, thereby increasing their profits.

8
www.livemint.com, accessed on 15.2.2020.s

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 CHAPTER 4: TAXES BEFORE GST
In the earlier indirect tax regime, there were many indirect taxes levied by both state and
center. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had
a different set of rules and regulations for levying taxes which related confusion in the mind
of businessmen and transportation businesses. 9

Interstate sale of goods was taxed by the Center. CST (Central State Tax) was applicable in
case of interstate sale of goods. Other than above there were many indirect taxes like
entertainment tax, octroi and local tax that was levied by state and center. This lead to a lot of
overlapping of taxes levied by both state and center.

For example, when goods were manufactured and sold Excise Duty charged by the center
was charged by the center. Over and above Excise Duty, VAT was also charged by the State.
This lead to a tax on tax also known as cascading effect of taxes. 10

The following is the list of indirect taxes in the pre-GST regime:

· Central Excise Duty

· Customs
· Cess
· State VAT
· Central Sales Tax
· Purchase Tax
· Luxury Tax
· Entertainment Tax
· Entry Tax
· Taxes on advertisements
· Taxes on lotteries, betting, and gambling
Indirect Taxes that still do not come under GST:-
· Customs
· Stamp Duty
· Petroleum
· Electricity Tax
· Alcohol

DIFFERENCE BETWEEN GST

1. Structure
Under the old taxation system, the central taxes applicable were custom duty/central
excise duty, central sales tax on commodities and services, surcharge and cesses. The

9
https://cleartax.in/
10
Goods and service tax in India: problems and prospects

15
 state taxes included state VAT, WCT, entertainment tax, luxury tax, tax on gambling,
betting and lottery, sales tax deducted at source, and surcharge and cesses.
Under GST, all the central and state taxes will be subsumed and a single tax will be
levied on all commodities and services apart from motor spirit, petroleum, natural gas
and high-speed
2. Basis of Levy
Under VAT, tax will be levied at the place where goods are manufactured or sold, or
the place at which services are rendered.
Under GST, tax will be levied at the place of consumption, like a destination-based
tax
3. Registration
Under VAT, the registration is decentralised under state and central authorities.
Under GST, there will be uniform e-registration depending upon the PAN of the
entity
4. Validation
Under VAT, system will partly validate the returns, and full verification will be
subject to assessments by state or central authorities.
Under GST, the validation will take place on the system, and consistency checks will
be carried out on input credit availed, tax payments, and utilisation.
5. Filing of Returns and Collection of Tax
Under the old scenario, service tax and central excise were uniform, but VAT varied
from state to state.
Under GST, the process is uniform and the dates for collecting or depositing tax and
filing returns are com

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 CONCLUSION
With the implementation of GST many of the economist and politicians along with general
public of the country has shown their concern regarding the complexity of the said tax and
criticized the proposed model. But however, GST has without any doubt raised economic
development of the country. With respect of the first hypothesis of the researcher it can be
drawn that the start-ups has now become an easy access to the young generation which has a
direct result to the economy in terms of raising employment in the country. it eliminated
double taxation and thus reduces amount of money spent in the registration and payment of
taxation by bringing one centralized tax and generates revenue for both centre and the state. It
also eliminates confusion and thus encourages small businesses and transport businesses as
they do not have to pay tax in two states.

Composition of GST as central goods and services tax (CGST), state goods and services tax
(SGST), and integrated goods and services tax (IGST) projects scientific and transparent
indirect tax system in India. It has reduced tax leakages prevent corruption in pricing of
products.

Impacts of progressive tax reforms in India is although not very satisfactory in other field. It
has been pointed out by Word Blank that India‟s GST model is pne of the most complex GST
model in the world and lessosn learned in India‟s transition to the common GST will be
important to the world. Many changes have been constantly made ensuring simplicity in the
GST tax system. Automobile industry had benefited from the GST tax system and the prices
of automobiles have also reduced. However, with increase in the prise of petroleum is
hindrance to middle class people. Government is likely to provide relief considering the
rising price. This would ultimately result in the development of automobile industries in
India.

The implementation of GST got overwhelming support from agriculture which thus proves the second
hypothesis of the researcher. The small scale industry took this opportunity to redefine the suppy-
chain model, customise IT processes and evaluate internal and external arrangement to safeguard
internal and external arrangement to safeguard interest and minimize their tax costs,

As the journey of GST progressed , there was wide realization of its far fetching impact. Industry
faced a number of challenges , beginning from new and unique concepts, complex documentation,
high tax rates of certain goods and services to unclear laws. The unclear an ambiguous payment on
some transaction also many challenges are imposed by its implementation with concept for claiming

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credits, ambiguity on the aspects relating to Anti- Profiteering, GST refunds etc. Sing hteh whole
process is online people who have lesser idea of its technical knowhow find it difficult.

However, it should also be appreciated that the authorities have been quick to address public
concerns by issuing a series of notifications, clarifications, press releases and FAQs, to
resolve a wide range of issues.

To reduce the friction and put less burden, the government is looking to shore up revenue to
the tune of rs1 lakh crore per month but with the crashing economy of the country the
government does not have enough money to implement another stern measure against tax
evaders and other business firms involved in anti- profiteering activities. The financial
Budget of 2018 has thrown a wide plethora of taxes at India. Increased taxation it seems is
the only way of generating operational revenues for a complex system like GST in the
nonlinear Indian Demographics.

It seems that the roll out of GST was done in a hurry with the flaws and complexity in its
drafting and at operational and technical level. In conclusion, the present GST appears to
deliver little on promises. For the time being, the GST Council needs to pay heed to grow
public as well as taxpayer grievances. It must take note of the fact that policy must be
designed to reduce the compliance burden on the taxpayers. With Compliance strategies must
include compulsory education and assistance programs and risk-based audit programs
compliance startergy can be made strong also it must run a campaign for communication
which highlights the various effects as well as the underlined benefits of GST among te
consumers to reduce the non-compliance and critical approach of them.

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