JAMIA MILLIA ISLAMIA

TAX LAW

ANALYSIS OF
GST
[Document subtitle]

SHARDENDU PANDEY
BALLB 4TH YEAR
[Date]

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TABLE OF CONTENTS

AKNOWLEDGEMENT 3

INTRODUCTION 4

SALIENT FEATURES OF GST 5

GST-WHAT IT M,EANS TO COMMON 6

MAN

CRITICAL ANALYSIS OF GST 8

ACT,2017

OVERALL IMPACT ON INDIAN 13

ECONOMY

CONCLUSION 14

REFERENCES 15

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ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Mr. Ekramuddin Malik who gave me

the golden opportunity to make an assignment on an instrumental topic of Goods and services tax being

“Critical Appraisal of Goods and services Tax”, which also helped me in doing a lot of Research and I came

to know about so many new things I am really thankful to him. Secondly I would also like to thank my

parents and friends who helped me a lot in finalizing this assignment within the limited time frame.

-SHARDENDU PANDEY

I. INTRODUCTION

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It is very difficult to accept change but it is the law of nature so a person cannot spare himself from
change. The introduction of goods and services tax (GST) in Indian Taxation System was a huge
step taken by the Indian government. Its advent caused a lot of hue and cry in the country. GST is
described as an action without application of mind. Many people allege that it is a complex, vague
and ambiguous. It is often argued that the procedure and implementation of GST are difficult for
Chartered Accountants and other people from commerce, so expecting an individual to understand
this would not only be inappropriate but also be unjust. The introduction of GST, even after
getting criticised by academicians, scholars and, laymen has benefited some states.

In India, GST was first time introduced on 28th February 2006 in the Budget Speech of the year
2006-07 by Finance Minister Sh. P. Chidambaram. A message was left by the Finance Minister in
the Union Budget 2007-08 that GST will be introduced with effect from 1st April 2010. Central
and State Governments will be work together to prepare a roadmap for the introduction of GST in
India. They planned to introduce GST or “replacing the previous VAT and Service Tax” on 1st
April 2010, but some of the States were not ready to implement the GST. After that on 1st April
2012, again Government was going to introduce GST, but due to some management and
infrastructure problems it was not introduced. Finance Minister Arun Jaitley introduced the 122nd
Constitution Amendment Bill in Parliament and intends to implement GST reform by 1st April
2016.

1.1] Conceptual Understanding of GST in India

The advent of GST is the end result of the step taken by Atal Bihari Vajpayee Government in
2000. After one and a half decade struggle finally on 1st July 2017 India had joined the league of
countries that have GST. The One Hundred and Twenty-Second Amendment Bill of the
Constitution of India, officially known as The Constitution (One Hundred and First Amendment)
Act, 2016, finally introduced a national Goods and Services Tax in India from 1 July 2017.

GST is an indirect tax levied by both the Center and the State governments on the goods and
services. It is levied from all the stakeholders starting from the manufacturer to final consumer.

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Types of GST: In India goods and services tax is divided into four part as follows: -

1.Center Goods and Services Tax (CGST)- It is levied by the central government.
2. State Goods and Services Tax (SGST)- It is levied by the state government.
3. Integrated Goods and Services Tax (IGST)- It is levied on inter-state trade or import and
equivalent to both CGST and IGST.
4. Union Territory goods and Services Tax (UTGST)- It is levied when the supply of goods and
services take place in any of the 5 territories except Delhi and Pondicherry as they have been
given the status of semi-state.

II. SALIENT FEATURES OF GOODS AND SERVICES ACT 2017

1. GST is applicable on “supply” of goods or services. Earlier the provisions stated that tax was
applicable on the manufacture of goods or on sale of goods or on provision of services; GST is
based on the principle of “destination-based consumption” taxation vis-a-vis the existing
originbased taxation.

2. GST is a dual charge, with the Centre and the States simultaneously levying it on a common
base. Centre would levy Central GST (CGST) and States (including Union territories with
legislature) would levy State GST (SGST). Union territories without legislature would levy
Union territory GST (UTGST).

3. In place of CST, Integrated GST (IGST) would be levied on inter-State supply of goods or
services. IGST would be collected by the Centre. This is to ensure that the credit chain is not
disrupted.

4. Import of goods would be treated as inter-State supplies and therefore, IGST will be applicable
on it. Additionally, applicable customs duties will also be leviable; import of services would be
treated as inter-State supplies and will attract IGST.

5. Taxes that are currently levied by the Center which GST would replace areCentral Excise Duty,
CVD, Special Additional Duty of Customs(SAD), Service Tax, All cess and surcharge.

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6. These taxes were collected by the Centre:

• State taxes that would be subsumed within the GST wereState VAT, Central Sales Tax,
Purchase Tax, Luxury Tax, Entry Tax (All forms), Entertainment Tax; Taxes on
advertisements, lotteries, betting and gambling, Cess and surcharge that are related to
supply of goods or services.
• Exports would be exempted, that is zero-rated.

7. Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit
of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST. In other words,
the two streams of input tax credit (ITC) cannot be cross utilized, except in specified
circumstances of inter-State supplies for payment of IGST. The credit would be permitted to be
utilized in the following manner:

• ITC of CGST allowed for payment of CGST first and then IGST;
• ITC of SGST allowed for payment of SGST first and then IGST;
• ITC of UTGST allowed for payment of UTGST first and then IGST;
• ITC of IGST allowed for payment of first IGST, then CGST and then can be adjusted for
SGST/UTGST.
• ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.

The Input Tax Credit (ITC) will be made on a broader base; it will be made available in respect of
taxes paid on any supply of goods or services or both used or intended to be used in the course or
furtherance of business.

III. GST – WHAT IT MEANS FOR THE COMMON MAN?

One of the benefits of GST is that there are no more hidden taxes, and a consumer is being made
more aware of what all taxes he is actually bearing. Instead of just the sales tax or the service tax
that he sees in the invoices that he gets in his hands for the restaurants or malls, what are the other
taxes that are making way out of his pocket, without him realizing the same!

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However, the more basic questions which are still cropping in the minds of common man is
whether GST good for the economy; whether it is going be good for a common man? How does it
affect the common man, what difference does it make for him? Why is it that everyone seems to
be scared of GST? Will it lead to inflation?

“Change” is something which we try to avoid as long as possible, which is why there is a study to
that effect as well, which is more popularly known as “Change Management”.With India moving
towards GST, what the entire industry is facing is effect of Change Management. We are all very
comfortable and used to the idea of “Excisable Goods” / VAT / octroi; and here we have another
tax to capture – a new tax to adhere to. So, there are bound to be hiccoughs in the same.

IV. WHETHER THE GST HAS SIMPLIFIED THE TAX SYSTEM IN INDIA?

The Goods and Services Tax commonly known as GST was introduced in India on 1 st July 2017.
The basic idea to introduce GST in India to remove the multiple tax system which was a part of
central and state government and to provide uniform tax system throughout the country. The
present GST tax model is inspired from the Canadian GST model and is divided into different tax
slabs ranging from 0% to 28%.After implementation of GST, India became one of the 160
countries to introduce a unified tax regime at midnight. And by unified, we mean four slabs (5%,
12%, 18%, and 28%) and an additional ‘sin tax’ of 40% to be implemented on rare occasions.

A comparative look at the rates in Asia and Europe shows, not only does India have the highest tax
rates, but also by splintering a so-called unified structure, we have made it a whole lot more
confusing. Therefore, by the present model of GST we cannot conclude the system just by seeing
its few advantages but we should also consider its disadvantages and the wrongful decision of
implementing GST on Indian phase which is recovering from death phase after demonetization.

The present GST tax system is full of flaws and lacks economic vision as the present GST bill has
various loopholes which are laying adverse effects on Indian economy and the people of the
country either from working or business class.

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• Firstly, the principle on which GST works i.e. one nation, one tax is not suitable for India.
Previously we had 32 taxes which included 29 state VAT taxes, 1 sales tax, 1 excise duty
and 1 service tax and after implementation of GST we have now 31 taxes including 29
SGST taxes, 1 CGST and 1 IGST which again gives complicated tax structure to the
country and contradicts the principle of single tax in nation.
• Secondly, the Constitutional Provisions and Judgments on GST. If we want to impose a
single GST tax system in India it is not possible due to, o According to the 101st
amendment in the constitution, Article 246 A states that parliament and state can levy taxes
on supply on goods & services. So not only parliament but state can have its own GST. o
Article 279 A of the constitution says that GST council has only recommendatory powers.
So, it’s up to state governments to implement its ideas. In this way state government levies
its own GST and distorts the entire GST system of the country. On 11 thNovember 2016, 9
judges on behalf of the Supreme Court of India gave its judgment regarding entry tax case
that every state is as sovereign as parliament in its powers to levy taxes. So, it gives
freehand to state by which they can levy their own GST.

V. CRITICAL ANALYSIS OF GOODS AND SERVICES TAX ACT 2016

1. GST purged Indian economy by framing the compliance bar high

GST is described to be a technology-driven and a self-policing system. The only interface between
the authorities and the taxpayer is the technology, which is ushered by a new paradigm variation in
the taxation system. But how so ever, the difficulties which arise during the process of catering to
this new tax regime by the taxpayers cannot be solely blamed upon the technology glitches.
During the previous tax regime, the tax credits were made available merely by the existence of
invoices issued by the supplier, though the supplier himself has not submitted the tax to the
government which he received from his customer. This process involved huge risk of fraud during
transactions. Such fraud risks are substantially reduced under the new tax regime, as GST is
described to be the ‘watchdog and game changer of the Indian economy’. The significant features
of GST are as follows,

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• It involves the acquiescence of details of all the transaction at a more advanced level
the
• The learning curve of tax practitioners and assesses are taken up to a steep level thereby
ensuring a level of complete discipline under the regime of GST.

GST benefits are apparently visible in sectors like that of logistics in terms of effectiveness which
enhance the economic growth rate in the entire nation. GST had largely eradicated the
inefficiencies of the tax system which exists in the nation. It has been seen as the biggest tax
reform in independent India by bringing together the entirety of India’s 1.3 billion population into
a common market in one stroke by demolishing the interstate tariff barriers. The tax slabs of
0%,0.25%,3%,5%,12%,18%,28%,31% have subsumed the central, state and the local taxes into
the line of ‘One nation, one market and one tax’ system. The businesses have also acquired a
rebate for the taxes paid on the raw materials and services which makes them more competitive in
the market. The severance in the GST is directed towards the informal sector of the economy and
has enabled the informal sector to be integrated with the formal sector by way of tax rebates to the
registered assesses. This process has left small firms with two options, i.e., either sign to the GST
or to lose the competitiveness.

2. Indian economy has fallen prey to the elegance of GST

GST has eroded the circulation of black money in the economy by imposing a mandatory check on
each and every trader and manufacturer, thereby acting as a frequent inspector for the payment of
taxes. There is a thin line of demarcation between the organized and unorganized sector. The
organized sector is described by the Central Statistics Office, by taking the instances of the
manufacturing sector, as an enterprise in which the same will employ 10 workers if they involve
electricity and 20 workers if the electricity is not involved by the enterprise. The other is depicted
as an unorganized sector in the natural sense. Thus the interrelation between the Indian economy
and the GST can be understood by the famous words which read as “All that is solid that melts
into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real
conditions of life, and his relations with his kind”

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There have been serious implications in the Indian economy by the implementations of GST which
has brought the entire informal sector into the universe of the formal sector, thereby corroding
away the flexibility of the economy and consequently killing off what is left behind. Small
producers in the market render big credit to the large producers by way of accepting the delayed
payment for their supplies. Large companies in this scenario sidestep the law on minimum wages
and working conditions by involving the method of outsourcing their larger amount of their work
to the small informal sector which is beyond the scrutiny of the state. But, due to the
implementation of GST, there is a compulsion of every unit to be registered with the GST network
and to file the returns, thus, drastically reducing instances of bending the law. Compliance of
norms arising due to the implementation of GST is necessary in order to curb the appraisal of
fraudulent activities in the society. Thus, GST is posed to rip apart any concealing veil in the
economy.

3. GST – Disruptive v. Developmental

GST is considered as a boon for one section of people in the society and, a bane for other sections,
as GST is not just a tax collection system but it is also a regime which brings about changes in the
core of the national value system. The motto behind this new tax regime is to clean the society
from all the evil tendencies. Hence, it creates a compulsory sphere for all businesses and traders to
comply with it, and get registered under this new tax regime. Under GST, the MRP is more likely
than not to create retail price collusion, as it becomes the de facto uniform price in the market.
There have been many objections and strong disagreements regarding the implementation of GST.
This is because of the fact that many socially wrong and habitual activities like liquor drinking are
taxed at 0% slabs in the new tax regime but taxes on hotels and restaurants’ were at higher slab at
the beginning of this new tax regime, though it has reduced at present. Therefore, an added
confusion exists regarding whether GST is disruptive or it is developmental to the whole economy.
[iv]The solution for this can be obtained only by day by day improvement in the Indian economy
by the impact of GST. It is developmental in the sense that it clearly and completely eradicates the
tax discrimination between every state in the same country by introducing ‘One nation, One
market, One tax’ in a country like India.

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4. Impact of GST on Insurance sector

On one hand the government is pushing every citizen of the country to open a bank account by
initiating ‘PradhanMantri Jan DhanYojna’ and on the other hand GST has made financial services
expensive. Transactions fees in financial services have become more expensive as these services
are put under 18% tax bracket in the new goods and services tax (GST) regime. Previously these
services were so taxed at 15% and the hike in the tax rate means that individuals will have to pay 3
rupees more for every 100 rupees paid for banking transactions. (Economic times: you will have to
shell out more from banking transactions from July).

India is amongst the most under-penetrated Insurance market (less than 10% population of India
has insurance). This was the only reason for the governments launching the ‘Pradhan Mantri
Jeevan Bema Yojna’ however, with the GST, insurance premiums have become expensive which
is proving a roadblock in a price sensitive market like India. Life, health and motor insurance are
increased up by 300 basis points.

5. Impact of GST on telecom sector

The telecom sector is already under server debt and a burden of license fee. The current debt
stands at around 4 lakh crore (Telecom debt unsustainable – TOI). So with the implemented GST
model further taxes in this field will increase definitely. On one hand, government is initiating
‘Digital India’ and on the other hand telecom services (Phones, broadband etc-) is getting costlier
as most of the operators will pass on the increase to the consumers in order to cope up with GST.
Therefore, it contradicts the initiative of Digital India in order to give boost to Digital India
initiative. Government should lower the tax slab in telecom sector. So that the telecom services
can be accessed easily even by the poor sections of the society.

The petroleum sector is not kept under GST slab. Petroleum products like crude, high-speed diesel,
ATF are kept away from tax slabs. So its costs are likely to rise because of dual indirect tax
mechanism.

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6. Impact of GST on agricultural sector

Before and after independence of the India its economy is mainly dependent on primary sector i.e.
agricultural sector and now also agricultural sector is considered the backbone of Indian economy
but due to implementation of GST this backbone is broken and is suffering a lot as tax slabs in
agro sector has been increased without taking initiatives for making the infrastructure and new
irrigation techniques for the betterment of farmers but imposing more tax than before not only lays
adverse effects on agricultural sector but is also responsible for the increase in price in
manufacturing sector too, as cost of production will increase if the primary or raw material is
costly. We can analyze adverse effects on agro sector by following aspects :

1. Fertilizers are considered as key factor of agricultural sector but previously 6%

(1%excise + 5% VAT) tax was levied on that but after GST now it is put under tax slab
of 12%.
2. The same impact is there in tractors, waiver on the manufacture of the tractors is
removed and GST of 12% has been imposed and its spare parts lie under the 28% tax
slab which is considered as luxury category tax slab and kept with the parts of BMW
and AUDI which is totally irrelevant as without tractors agriculture is not possible and
levying 28% tax on tractor parts is a mockery with the poor farmers who spends his
entire life on fields just to fulfill his nation’s demand and needs.
3. India’s milk production in 2015-16 was 160.35 million ton, increased from 146.31
million ton in 2014-15. Previously only 2% VAT tax was charged on milk and certain
milk products but under GST the rate of fresh milk is nil and skimmed milk is kept
under 5% bracket and condensed milk is taxed under 18% tax slab which again is
burden on farmers and cattle farmers.
4. Tea is considered as a crucial item in the Indian household but its prices are also
increased due to imposed 5% GST more than previous VAT rate of 4-5% with Assam

and West Bengal with the exception of 0.5% and 1%. So, imposing heavy taxes on the
agricultural is not justified with the poor section of the society which includes farmers
and peasants, this will not only increase the cost of production for farmers but also
decrease their profit margin which will subsequently result in increase in creditability

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among farmers and instead of giving them support this tax system is increasing
insecurity and due to which suicidal cases among farmers, peasants will take a boost.

VI. OVERALL IMPACT OF GST ON INDIAN ECONOMY

It should be understood that GST is not a tax concession system but a single Revenue Neutral Rate
(RNR) on the goods and services in the society so that the total tax revenue of the central and the
state prevails the same. The previous tax regime was considered as a major impediment to India’s
economic growth and competitiveness. For instance, cascading effect on taxes made indigenous
manufactures less attractive in the market. In this scenario, the implantation of GST is considered
crucial for the growth of Indian economy. GST replaces the tax barriers with seamless credit
which leads India in the common market as an economy which scales in production and efficiency
in supply chain, thereby expanding the trade and commerce in the market. Sectors like organized,
logistics, industry, and modernized warehousing, have received favorable impact by the
introduction of GST in the economy. The integration of multiple taxes into a single tax reduced the
cost of tax compliances and transaction tax. The new tax regime has also facilitated ease of doing
business in the country.

The electronic processing of tax returns and tax payment and tax refunds through GSTNET
without human intervention have curbed corruption and tax evasion activities. The stable,
transparent and predictable tax under GST has encouraged local and foreign investments in India,
thereby creating significant job opportunities for the people of the country. Major beneficiaries
under GST include FMCG [Fast Moving Consumer Goods], pharma, consumer durables,
automobiles, logistics and the warehousing industry. As the previous tax regime was myriad with
tax clauses, the new tax regime has reduced the tax burden on the producers and foster growth
through increasing the scope for production. GST has extended the tax base and provides credit for
the producers on the taxes paid by them during the chain of goods and services. It has further has
removed the customs duty which was imposed on exports. Due to this, there are chances of the
nation’s competitiveness increasing in the foreign market on the account of lower cost of the
transaction.

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VII. CONCLUSION

Everything has two facades i.e. negative and positive and both should be taken into consideration
before giving any conclusive opinion. Goods and Services Tax aka GST is still in its salad days in
India, therefore, making a final and conclusive list of its benefit to states is not practical. GST is a
conglomeration of various taxes. There are states like Bihar, Jammu and Kashmir, West Bengal,
Kerala and Assam which have benefited from the introduction and there are states like Haryana,
Gujarat etc which did not get as much benefit as consuming states. GST is a step in bringing about
parity between manufacturing and consuming states but it does not intend to harm the former and
benefit the latter. It will thus, take time to conclude the final effects of GST.

REFERENCES
Bare Acts

• Goods and services Act, 2017

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• Constitution of India

Websites( E-sources)

• www.scconline.com
• www.manupatra.com  www.heinonline.com
• www.economic&political weekly.com
• www.taxguru.com
• www.lexisnexis.com
• www.icsi.edu/media/webmodules/Tax-law-book.com

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