Analysis of India's Taxation Structure

lOMoAR cPSD| 3421986
V
GENERAL MANAGEMENT PROJECT
ON
“ANALYSIS OF DIFFERENT TYPES OF TAXATION STRUCTURE IN INDIA ”
Submitted in partial fulfilment for the award of the degree of
Master of Management Studies (MMS).
(University of Mumbai)
Submitted By
Hitesh J. Limbachiya
(Roll No. MB/18/B/013 )
Under the Guidance of

PROF. RUPALI BARI MADAM
Academic Year
2018-20
SAS INSTITUTE OF MANAGEMMENT STUDIES (MMS),

Saravali, Boisar (w),
Tal. & Dist. Palghar (MH) -401 501.
DEEP EDUCATION SOCIETY’S

SAS INSTITUTE OF MANAGEMENT STUDIES
Enrich Enhance Elevate
CERTIFICATE
This is to certify that project titled “Analysis of Different Types of Taxation Structure in
India” is successfully completed by Hitesh J. Limbachiya during the IV Semester, in
partial fulfillment of the Master’s Degree in Management Studies recognized by the
University of Mumbai for the academic year 2018-20 through SAS INSTITUTE OF
MANAGEMENT STUDIES.
This project work is original and not submitted earlier for the award of any degree /diploma
or associateship of any other university / Institution.
Internal Examiner
Name: Signature:
External Examiner
Name: Signature:
Dr. Bhagesh Sankhe
(Director SASIMS) College Seal

DECLARATION
I hereby declare that Project Report submitted by me on the topic “Analysis of Different
Types of Taxation Structure in India ” is a Bonafide work undertaken by me and it is
not submitted to any other University or Institution for the award of any degree
diploma/ certificate or published any time before.
Signature:
Name:Hitesh J.Limbachiya
Roll No: MB/18/B/013
Place: Saravali, Boisar (W) Date:09.03.20
ACKNOWLEDEMENT
I express my sincere thanks to my project guide, “Prof. Rupali Bari Madam”, Assistant
Prof, of MBA Department, for guiding me right from the Inception till the successful
Completion of the project, I sincerely acknowledge her for extending her valuable
guidance, support for literature, critical reviews of project and the report and above all
the moral support she had provided me for this project.
I would also like to thank our Director Dr. Bhagesh Sankhe Sir, our HOD Kushal Rajput
sir and other staff members of MBA Department, for their help and cooperation
throughout my project.
Sincere thanks to all.
Hitesh Jayantibhai Limbachiya

FOREWORD
Tax policies play an important role on the economy through their impact on both
efficiency and equity. A good tax system should keep in view issues of income
distribution and ,at the same time , also endeavor to generate tax revenues to
support government expenditure on public service and infrastructure
development .cascading tax revenues have differential impact on firms in the
economy with relatively high burden on those not getting full offsets.
The tax structure in India is divided into direct and indirect taxes.
Direct taxes are levied on taxable income earned by individuals and corporate
entities, the burden to deposit taxes is on the assessees themselves. On the other
hand, Indirect taxes are levied on the sale and provision of goods and services
respectively and the burden to collect and deposit taxes is on the sellers instead of
the assessees directly.
Taxes in India are levied by the Central Government and the State
Governments. Some minor taxes are also levied by the local authorities such as
the Municipality and the Local Governments.
Over the last few years, the Central and many State Governments have undertaken
various policy reforms and process simplification towards great predictability,
fairness and automation. This has consequently lead to India’s meteoric rise to the
top 100 in the World Bank’s Ease of Doing Business (EoDB) ranking in 2018. The
Goods & Services Tax (GST) reform is one such reform to ease the complex
multiple indirect tax regime in India.
Major Central Taxes
Income Tax
Central Goods & Services Tax (CGST)
Customs Duty
Integrated Goods & Services Tax (IGST)
Major State Taxes
State Goods & Services Tax (SGST)
Stamp Duty & Registration

Executive Summary
Direct taxes are levied on taxable income earned by individuals and corporate
entities, the burden to deposit taxes is on the assessees themselves. On the other
hand, Indirect taxes are levied on the sale and provision of goods and services
respectively and the burden to collect and deposit taxes is on the sellers instead of
the assessees directly.
Indirect Tax is levied on every goods and services purchase which upload in price
and Indirectly collect by Tax authority. The differential multiple tax regime across
sectors of production leads to distortions in allocation of resources thus
introducing inefficiencies in the sectors of domestic production. While indirect
taxes paid by the producing firms get offsets under state VAT and CENVAT, the
producers do not receive full offsets particularly at the state level. The multiplicity
of taxes further adds the difficulty in getting full offsets.
Add to this, the lack of full offsets taxes loaded on the fob export prices. The
export competitiveness gets negatively impacted even further. Efficient allocation
of productive resources and providing full tax offsets is expected to result in gains
for GDP, returns to the factors of production and export of the economy.
The proposed GST would eliminate the cascading effect and would integrate
hitherto disjointed goods and services taxes. It will lead to uniformity in tax rates
and procedures throughout the country.it will ensure better compliance and thus
will increases the revenue of both Centre and state. The export sector will also
gain from his integration of state and Centre taxes. Consumer will be benefited in
form of lower tax rates.
There will be dual tax rate viz. Central GST (CGST) and state GST (SGST).also
for interstate sales there will be an integrated GST. However cross credits among
CGST and SGST are yet to be decided .It is also proposed to keep certain taxes
such as taxes on petroleum products to be kept out of purview of GST.
However, there are major challenges to tax payer is amendment of constitution of

India by Finance minister and day to day change in taxation rules , standardization
to procedure, compensation for revenue loss to state, etc.
CONTENTS
Cover page
College Certificate
Declaration
Acknowledgement
Foreword
Executive Summary
CHAPTER– 1
Research Methodology
Problem statement
Objective of research
Types of Research
Source of Data
Instrument of Data Collection
Types of Sampling
Sample Size
CHAPTER-2
INTRODUCTION OF TAXATION
a. Meaning of Taxation
b. Characteristics of Taxation
c. Principles of Taxation
d. Tax applicable in India.
e. Types of Taxation
f. Direct Tax
g. Indirect Tax
CHAPTER-3
INTRODUCTION OF DIRECT TAX
a. Meaning of Direct Tax
b. Income tax slabs
c. Heads of Income
d. Deduction from Income
e. Tax deduction at source (TDS)
f. Penalty
CHAPTER-4
INTRODUCTION OF INDIRECT TAX-GST

a. Meaning of GST.
b. History of GST.
c. Key feature of GST.
d. GST Model.
e. GST Rates
f. GST Council
g. GSTIN
h. Impact of GST
i. Result Analysis
j. Important concept of GST
k. Important concept of GST
l. Works contract Act
CHAPTER-5
Conclusion
Annexure
Reference.
CHAPTER– 1
INTRODUCTION ABOUT RESEARCH.

INTRODUCTION
The project deal with Various Taxation in India, broadly two types of tax Direct
Tax and Indirect Tax. The process of working as a student to gain practical
experience and skills in an occupation. In order to expose the students to the actual
working environment, MBA (Finance) is a management program with the
provision of four semester Industry research is opportunity to observe, learn and
understand the corporate culture, acquire knowledge and skills in the respective
field which helps the students in their further carrier development. It is carried out
in the organization which suits the area of specialization. It provides the
opportunity to understand how the knowledge acquired through the lectures, group
discussion and formal study is applied in real working situation. It is the best way
of knowledge gaining as it provides as experience. Similarly the assigned
responsibilities during the internship period help to enhance the interpersonal and
communicative skills and boost up the confidence level as well. Even though the
interns are not the employees of the organizations, they are given an opportunity to
work as if they are the employees. The interns do what the staffs of the
organizations have to do. However, they do not have obligations or authority over
anything.
Problem Statement
It is common knowledge that dramatic events like change of tax, circulars,
notification, GST council meeting etc. is affect company cash reserve due to either
paying excess tax and lack of knowledge of experts. Further they have become the
focus of public and corporate policy issues. This is an area of potential good and
proposed evaluations study on Direct & Indirect Tax. This study attempts to asses
the successfulness of Saving Tax with availing maximum benefit from
Government in term of deduction/rebate. It analyses the implication from the
financial point of view.
Objectives of the Study :
• The purpose of the study is to get detailed knowledge about Tax System in India.
• The purpose of the study is to help the Tax Payer to briefly understand the need for
charging Tax and the benefits out of that.
• Need to understand how government raise their fund to run government and provide
services to the public.
• To observe the rate which in charges on various products.
• To study various benefits of Taxation in India to the Assesee.
• To find out distinguishing between Direct & Indirect tax.
• Various tax deduction/ benefits available to Assesee
• In 2020, two option available to Tax payer to select best option either claim
deduction or paid lower tax rates.
• Tax reform in newly manufacturing company where corporate tax reduced to 25%
from 30% plus Surcharge & Education cess.
• Reduced GST rate from 28% to 18% for necessary product list.
• To study either applicable GST rate correctly charged by Suppliers.
• To understand various GST provisions i.e. Section 17(5) abolished- Reverse charge
not applicable even goods or serviced received from unregistered dealer(URD)
• GST rate reduce to 12% from 18% in various construction contract and technical
services related to public benefits.

Types of Research
Research methodology is a way of systematically solve the problems. In research

methodology we not only talk about research but also logic behind we use in the
context of research study and explain why we using particular method and why we are
not using other so that research result re capable of being evaluated either by the
researcher himself or others.
In this report the type of research design can be used is Explanatory research study.
Explanatory research study is one of the simply describe something about research
character by using various factors. The Explanatory study typically concerned with
determining hypothesis and it is very time consuming.
Explanatory research or causal research is conducted to understand the impact of

certain changes in existing standard procedures. Conducting experiments is the most
popular form of casual research. For example, a study conducted to understand the
effect of Tax on every Citizens of Country.
Source Of Data
PRIMARY DATA:
Primary data collected from news papers & magazines.
Data collected from various Professionals.
Data obtained from company journals.
SECONDARY DATA:
Data collected from various books and sites.
Data collected from internet.
Instrument of data Collection
This study has analyzed the Tax structure and tax saving of various individuals as well
as entrepreneurs to growth of their business, increase profits, to compete the market
and survive in market to contribute improve country GDP as well as trade deficit.
Type of Sampling
A mixture of random sampling and the satisfied was choosen. The

whole list of present and past data were involved. The data was taken
from the internet and also from various database which was readily
available with the company.
Sample Size
For the purpose of study I have taken sample of 2 companies as well as

more than 10 Individuals from the company and analyst current tax
payment structures.
Rational of the study

In college we learn the organizational structure only in theoretical basis. Internship
is the place where how theoretical knowledge are useful in real life scenarios. For
that students need to prepare resumes, write cover letters and go through interviews
as if they were applying for the job. This gives students valuable experience in
preparation for employment. The internship allows opportunities for the
development of practical’s skills in contexts where professional criticism is both
immediate and constructive. It also furnishes students with opportunities to observe
and understand connections between coursework and skills needed to perform
effectively in a given profession. Finally, this research aid in the identification of
knowledge and skills essential to doing well in a particular profession.
Scope of the study

Generally, an this research consists of an exchange of services for experience
between the student and an organization program is a good opportunity to show
our learning skills that we get from our school/college. Students can also use this
to determine if they have an interest in a particular career. It helps to build
Curriculum Vitae (CV) for the student.
Methodology
For the preparation of this report both primary and secondary sources of data are
used. The secondary data are collected from annual reports, brochures, website of
Income tax, GST, CBEC etc. different financial magazine, published documents.
Most of the information in this report is written on the basis of experience gained
by the internee in the company during the period of research. While preparing this
I have consulted related departmental staff as a primary source. For the secondary
data I used various website, financial express website, and clear tax website.
Limitations of the Study

Even though great support was provided by the management but due to various
unavoidable constraints, the report could not do complete justice to the study. The
interns in the organization are more focused to assist their supervisors. It restricts
the amount of information and the level of complex work assigned to its interns
owing to the confidentially and competency issues. It is because of this interns get
to learn mostly by observation and some amount of discussion with supervisor
only. The report is limited to the department in which the intern is placed it might
not be able to provide the comprehensive knowledge of the overall functioning of
the company.
CHAPTER– 2
INTRODUCTION OF TAXATION
Taxation
The term “Taxation” comes from the Latin word “Taxatio”. It means to determine
the payable quantum on estimate. According to Justice Holmes “The price paid to
the government for living in a civilized society is the tax. According to Taylor
“taxes are the compulsory payments to government without expectation of direct
benefit to the tax payer.
Taxation is a system of raising money to finance government. All governments

require payments of money-taxes-from people. Governments use tax revenues to
pay soldiers and policy, to build dams and roads, to operate schools and hospitals,
to provide food to the poor and medical care to the elderly, and for hundreds of
other purposes. Without taxes to fund its activities, government could not exist.
Taxation is the most important sources of revenue for modern governments,

typically accounting for 90 percent or more of their income.
Taxation is a major instrument for the conduct of public policy. This is true
for both developed and developing countries . Taxation is known to
accomplish a number of objectives revenue generation for government,
economic stabilization and income re-distribution. Taxation as an instrument of
public policy is essentially concerned with the manipulation of financial operation
of both the government anti private sectors with a view of furthering certain
economic objectives.
PRINCIPLES OF A TAXATION
Principle of certainty: This principle states that the tax should be certain
and clear to everybody concerned; the amount to be paid and the manner of
payment should also be clear and plain to the tax payer.
Principle of equity: This principle states that tax should be paid based on
your abilities, it should be paid without causing undue hardship to the payers.
Principle of neutrality: this principle says that a good tax system should
not in any way interfere unnecessarily with the supply and demand for goods
and service. It studies the effect people’s ability to save, produce and their
willingness to work.
Adequacy: taxes should be just-enough to generate revenue required for

provision of essential public services.
Broad Basing: taxes should be spread over as wide as possible section of the
population, or sectors of economy to minimize the individual tax burden.
Compatibility: taxes should be coordinated to ensure tax neutrality and

overall objectives of good governance.
Convenience: taxes should be enforced in a manner that facilitates a way

to the maximum extent possible.
Efficiency: tax collection efforts should not cost an inordinately high

percentage of tax revenues.
Simplicity: tax assessment and determination should be easy to

understand by an average taxpayer.
Predictability: collection of taxes should reinforce their

inevitability andregularity.
TAXES APPLICABLE IN INDIA
Direct Tax
Indirect Tax
Direct Tax
Direct & Indirect Tax Collection in India
Direct Tax (Rs.incrore)
Financial Corporation Taxes on

Total
Year Tax Income
2015-16 453,228 288,717 741,945
2016-17 484,924 346,789 849,713
2017-18 571,202 431,539 1,002,741
Indirect
(Rs.in crore)
Tax
Financial Union Excise

Customs Duty Service Tax GST Total
Year Duty
2015-16 210,338 288,073 211,414 ---- 709,825
2016-17 225,370 381,756 254,499 ---- 861,625
2017-18 136,929 258,636 81,231 434,670 911,466
1,200,000
1,000,000
800,000
600,000 Direct Tax

Indirect Tax
400,000
200,000
0
2015-16 2016-17 2017-18
CHAPTER– 3
Direct Tax
Direct taxes are directly imposed on the tax payer. They depend on the income and
wealth of an individual or entity.
DIRECT TAX IN INDIA
This is one of the most well-known and least understood taxes. It is the tax that is
levied on your earning in a financial year. There are many facets to income tax,
such as the tax slabs, taxable income, tax deducted at source (TDS), reduction of
taxable income, etc. The tax is applicable to both individuals and companies. For
individuals, the tax that they have to pay depends on which tax bracket they fall in.
This bracket or slab determines the tax to be paid based on the annual income of
the assesse and ranges from no tax to 30% tax for the high income groups.
Tax Rate for other than Individual

Partnership Firms
Partnership Firms and LLPs (Limited Liability Partnerships) are to be taxed at the
rate of 30%.
Plus: Surcharge: 12% of tax where total income exceeds Rs. 1 Crore
Health & Education cess: 4% of tax plus surcharge
Local Authorities
Local Authorities are to be taxed at the rate of 30%.
Plus: Surcharge: 12% of tax where total income exceeds Rs. 1 Crore
Health & Education cess: 4% of tax plus surcharge
Domestic Companies
Domestic Companies are to be taxed at the rate of 30%. However, tax rate will be
25% if turnover or gross receipt of the company does not exceed Rs. 250
crores. Plus: Surcharge: 7% of tax where total income exceeds Rs. 1 Crore
12% of tax where total income exceeds Rs. 10 Crore Health & Education cess: 4%
of tax plus surcharge
Tax Rate for Individuals

Income Tax Slabs & Rates 2020-2021
The Finance Minister introduced new tax regime in Union Budget, 2020 wherein there
is an option for individuals and HUF (Hindu Undivided Family) to pay taxes at lower
rates without claiming deductions under various sections. The following Income Tax
slab rates are notified in new tax regime vs old tax regime:
Tax rates
Income Tax Tax rates as per
as per new
Slab old regime
regime
₹0 - ₹2,50,000 Nil Nil
₹2,50,001-
5% 5%
₹ 5,00,000
₹12500 +
₹12500 + 20% of
10% of total
₹5,00,001- ₹ total income
income
7,50,000 exceeding
exceeding
₹5,00,000
₹5,00,000
₹37500 +
₹62500 + 20% of
15% of total
₹7,50,001- total income
income
₹10,00,000 exceeding
exceeding
₹7,50,000
₹7,50,000
₹75000 +
₹112500 + 30% of
20% of total
income
exceeding
₹10,00,000
₹10,00,000
₹125000 +
₹187500 + 30% of
25% of total
income
exceeding
₹12,50,000
₹12,50,000
₹187500 +
₹262500 + 30% of
30% of total
Above ₹ total income
income
15,00,000 exceeding
exceeding
₹15,00,000
₹15,00,000
New tax regime slab rates are not differentiated based on age group. However, under
old tax regime the basic income threshold exempt from tax for senior citizen (aged
60 to 80 years) and super senior citizens (aged above 80 years) is ₹ 3 lakh and ₹ 5 lakh
respectively.
However, under new tax regime person cannot claim up to 70 income tax deductions
while calculating taxes. Hence, every person has to make his/her own calculation as
per old and new tax regime and calculate which one is beneficial based on type of
investments made and returns earned on those investments.
Consider an example, a person aged 35 years has the total income of ₹11, 00,00 and has
made the investment under section 80C of ₹1, 50,000 and under Section 80CCD of
₹50,000. He has claimed income tax deduction with medical and Leave travel
allowance of ₹50000 and HRA of ₹1,50,000 The tax payable under new and old tax
regime is as follows:
New Old
Particulars
regime regime
₹ ₹
Gross total income
11,00,000 11,00,000
Less: Deductions
₹0 ₹ 1,50,000
under 80C
Less: Standard
Deduction (Medical
₹0 ₹ 50,000
& Travel
Allowance)
Less: Deductions
₹0 ₹ 50,000
under 80CCD
Less : HRA
deduction as per ₹0 ₹ 1,50,000
section 10(13A)
Taxable Income ₹11,00,000 ₹ 7,00,000
Taxes payable as
per slab rates
₹0 - ₹2,50,000 ₹0 ₹0
₹2,50,001 - ₹
₹ 12,500 ₹ 12,500
5,00,000
₹5,00,001 - ₹
₹ 25,000 ₹ 40,000
7,50,000
₹7,50,001 - ₹
₹ 37,500 ₹0
10,00,000
₹10,00,001 -
₹ 20,000 ₹0
₹12,50,000
Total taxes ₹ 95,000 ₹ 52,500
Income Tax Slabs and Rates for Financial Year: 2019-20

Select your Age Group
Income Tax Slab Individuals below the age of 60 years
Up to `2,50,000 Nil
2,50,001 to 5,00,000 5%
5,00,001 to 12,500 + 20% of total income exceeding
10,00,000 5,00,000
1,12,500 + 30% of total income exceeding
Above 10,00,000
10,00,000
Above rates does not include Surcharge and Cess.
o 10% surcharge is applicable on income tax if income exceeds 50 lacs but upto 1 crore
o 15% surcharge is applicable on income tax if income exceeds 1 crore
o 4% Health & Education Cess is applicable on the income tax and applicable surcharge.
• Tax rates and slabs are same for Male and Female as per above table
• Individuals having total income below 5 lakhs, are eligible for full tax rebate under section 87A
Now, let’s examine the salary components of Ravi, Ramesh & Rahul to get a
clear picture
Particulars (.) Ravi Ramesh Rahul
Annual Salary 5,00,000 10,00,000 15,00,000
Less: Standard Deduction

50,000 50,000 50,000
(Medical & Travel Allowance)
Less : Deduction u/s 80C 80,000 1,50,000 1,50,000
Less : HRA deduction as per

92,000 1,00,000 1,50,000
section 10(13A)
Gross Taxable Income (GTI) 2,78,000 7,00,000 11,50,000
Tax computation on GTI
Up to 2,50,000 - - -
2,50,001 to 5,00,000 1,400 12,500 12,500
5,00,001-10,00,000 - 40,000 1,00,000
Above 10,00,001 - - 45,000
Total tax (A) 1,400 52,500 1,57,500
Less Rebate u/s 87A (B) 1,400 - -
Add: Health & Education Cess

- 2,100 6,300
@ 4% on (A-B) (C )
Tax Payable (A-B+C) - 54,600 1,63,800
As per interim budget 2019, Individual taxpayers having taxable annual income up
to Rs.5 lakh will get full tax rebate u/s 87A and therefore will not be required to
pay any income tax. However Income tax Slabs and Rates will remain unchanged
for the FY2019-20.
Heads of Income
The total income of a person is divided into five heads, viz.,

1) Income from Salary
2) Income from House property
3) Income from Business & Profession
4) Income from Capital Gains
5) Income from Other sources
1) Income from Salary
All income received as salary under Employer-Employee relationship is taxed
under this head. Employers must withhold tax compulsorily, if income exceeds
minimum exemption limit, as Tax Deducted at Source (TDS), and provide their
employees with a Form 16 which shows the tax deductions and net paid income. In
addition, the Form 16 will contain any other deductions provided from salary such
as:
1. Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills.
2. Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if
provided as conveyance allowance. No bills are required for this amount.
3. Professional taxes: Most states tax employment on a per-professional basis, usually
a slabbed amount based on gross income. Such taxes paid are deductible from
income tax.
4. House rent allowance: the least of the following is available as deduction:-
1. Actual HRA received
2. 50%/40%(metro/non-metro) of basic 'salary'
3. Rent paid minus 10% of 'salary'. Basic Salary for this purpose is basic + DA
forming part+ commission on sale on fixed rate.
Income from salary is net of all the above deductions.
2) Income from House property

Income from House property is computed by taking what is called Annual Value. The
annual value (in the case of a let out property) is the maximum of the following:
Rent received
Municipal Valuation
Fair Rent (as determined by the I-T department)
If a house is not let out and not self-occupied, annual value is assumed to have
accrued to the owner. Annual value in case of a self occupied house is to be taken
as NIL. (However if there is more than one self occupied house then the annual
value of the other house/s is taxable.) From this, deduct Municipal Tax paid and
you get the Net Annual Value. From this Net Annual Value, deduct:
30% of Net value as repair cost (This is a mandatory deduction)

Interest paid or payable on a housing loan against this house
In the case of a self occupied house interest paid or payable is subject to a
maximum limit of Rs, 1, 50,000 (if loan is taken on or after 1 April 1999 and
construction is completed within 3 years) and Rs.30, 000 (if the loan is taken
before 1 April 1999). For all non self-occupied homes, all interest is deductible,
with no upper limits.The balance is added to taxable income.
3) Income from Business or Profession
The Income arises from self employed Business is fall under Income received from
Business and professions. An example... An architect works out of home and co-
ordinates work for his clients. All the following expenses would be deductible
from his professional fees.
he uses a computer,
he travels to sites in his car,
he has a peon to help him collect payments
He has a maid who comes in daily
part of the society maintenance bills
Entertainment expenses incurred...
Carry forward losses..
Books and magazines for his professional practice.
The computation of income under the head "Profits and Gains of Business or
Profession" depends on the particulars and information available.
If regular books of accounts are not maintained, then the computation would be as
under: Income (including Deemed Incomes) chargeable as income under this head
xxx Less: Expenses deductible (net of disallowances) under this head xxx Profits
and Gains of Business or Profession xxx
However, if regular books of accounts have been maintained and Profit and Loss
Account has been prepared, then the computation would be as under: -
Net Profit as per Profit and Loss Account xxx

Add: Inadmissible Expenses debited to Profit and Loss Account xxx
Deemed Incomes not credited to Profit and Loss Account xxx
Xxx
Less: Deductible Expenses not debited to Profit and Loss Account xxx
Incomes chargeable under other heads credited to Profit & Loss A/c xxx
xxx
Profits and Gains of Business or Profession xxx
4) Income from Capital Gains

Transfer of capital assets results in capital gains. A Capital asset is defined under
section 2(14) of the I.T. Act, 1961 as property of any kind held by an assesse such
as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not
include some items like any stock-in-trade for businesses and personal effects.
Transfer has been defined under section 2(47) to include sale, exchange,
relinquishment of asset, extinguishment of rights in an asset, etc. Certain
transactions are not regarded as 'Transfer' under section 47.
For tax purposes, there are two types of capital assets: Long term and short term.
Long term asset are held by a person for three years except in case of shares or
mutual funds which becomes long term just after one year of holding. Sale of such
long term assets gives rise to long term capital gains. There are different scheme of
taxation of long term capital gains. These are:
As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares
or securities or mutual funds on which Securities Transaction Tax (STT) has been
deducted and paid, no tax is payable. STT has been applied on all stock market
transactions since October 2004 but does not apply to off-market transactions and
company buybacks; therefore, the higher capital gains taxes will apply to such
transactions where STT is not paid.
1. In case of other shares and securities, person has an option to either index costs to
inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The
indexation rates are released by the I-T department each year.
2. In case of all other long term capital gains, indexation benefit is available and tax
rate is 20%.
All capital gains that are not long term are short term capital gains, which are taxed
as such:
Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10%
From Asst Yr 2005-06 as per Finance Act 2004. For Asst Yr 2019-20 the tax rate
is 20%.
In all other cases, it is part of gross total income and normal tax rate is applicable.
For companies abroad, the tax liability is 20% of such gains suitably indexed
(since STT is not paid).
5) Income from Other Sources
This is a residual head; under this head income which does not meet criteria to go
to other heads is taxed. There are also some specific incomes which are to be taxed
under this head.
1. Income by way of Dividends

2. Income from horse races
3. Income from winning bull races
4. Any amount received from key man insurance policy as donation.
5. Income from shares (dividend other than Indian company)
Deduction From Income
While exemptions are on income some deduction in calculation of taxable income

is allowed for certain payments.
Section 80C Deductions
Section 80C of the Income Tax Act allows certain investments and expenditure to
be tax-exempt. The total limit under this section is Rs. 100,000 (Rupees One lakh)
which can be any combination of the below:
Contribution to Provident Fund or Public Provident Fund. PPF provides 8% return

compounded annually. Maximum limit to contribute in it is 70,000 for each year. It
is a long term investment with complete withdrawal not possible till 15 years
though partial withdrawal is possible after 5 years. Besides, there is employee
provident fund which is deducted from the salary of the person. This is about 10%
to 12% of the BASIC salary component. Recent changes are being discussed
regarding reducing the instances of withdrawal from EPF especially when one
changes the job. EPF has the option of full settlement on leaving the job, taking
VRS, retirement after 58. It also has options of withdrawal for certain expenses
related to home, marriage or medical. EPF contribution includes 12% of basic
salary from employee and employer. It is distributed in ratio of 8.33:3.67 in
Pension fund and Provident fund
Payment of life insurance premium

Investment in pension Plans. National Pension Scheme is meant to save money for
the post retirement which invests money in different combination of equity and
debt. Depending upon age up to 50% can go in equity. Annuity payable after
retirement is dependent upon age. NPS has six fund managers. Individual can
make minimum contribution of Rs6000/- . It has 22 point of purchase (banks).
Investment in Equity Linked Savings schemes (ELSS) of mutual funds
Investment in National Savings Certificates (interest of past NSCs is reinvested
every year and can be added to the Section 80 limit)
Tax saving Fixed Deposits provided by banks for tenure of 5 years. Interest is also
taxable.
Payments towards principal repayment of housing loans. Also any registration fee
or stamp duty paid.
Payments towards tuition fees for children to any school or college or university or
similar institution. (Only for 2 children) or towards coaching fee of various
competitive exams.
Post office investments
The investment can be from any source and not necessarily from income
chargeable to tax.
Section 80CCF: Investment in Infrastructure Bonds
From April, 1 2010, a maximum of Rs. 20,000is deductible under section 80CCF
provided that amount is invested in infrastructure bonds. This is in addition to the
100,000 deduction allowed under Section 80(C).
Section 80D: Medical Insurance Premiums
Health insurance, popularly known as Mediclaim Policies, provides a deduction of
up to Rs.35,000.00 (Rs. 20,000.00 for premium payments towards policies on self,
spouse and children and (read as in addition to) Rs. 15,000.00 for premium
payment towards non-senior citizen dependent parents or Rs. 30,000.00 for
premium payment towards senior citizen dependent). This deduction is in addition
to Rs. 1, 00,000 savings under IT deductions clause 80C. For consideration under a
senior citizen category, the incumbent's age should be 65 years during any part of
the current fiscal.
Section 24B-Interest on Housing Loans

For self occupied properties, interest paid on a housing loan up to Rs 2,00,000 per
year is exempt from tax.(Excluding Rs.1,50,000/p.a. u/s 80c Saving) However, this
is only applicable for a residence constructed within three financial years after the
loan is taken and also the loan if taken after April 1, 1999.
If the house is not occupied due to employment, the house will be considered self
occupied.
For let out properties, the entire interest paid is deductible under section 24 of the
Income Tax act. However, the rent is to be shown as income from such properties.
30% of rent received and municipal taxes paid are available for deduction of tax.
The losses from all properties shall be allowed to be adjusted against salary income
at the source itself. Therefore, refund claims of T.D.S. deducted in excess, on this
count, will no more be necessary.
Use of Deductions
While the use of the above sections helps one to avoid paying money as tax if one
falls in the tax bracket, one should look at this more as an investment-return
opportunity. One should still file income tax, even if one is not paying any tax.
Except ELSS (Equity Linked Savings Scheme) and the NPS (National Pension
Scheme), other schemes under 80C typically offer a relatively risk-free investment
and guaranteed returns.
.
Tax Penalties
The major number of penalties initiated every year as a ritual by I T Authorities is
under section 271(1)(c) which is for either concealment of income or for furnishing
inaccurate particulars of income. What is inaccurate particulars of income is not
defined under Income Tax Act 1961, however recently Supreme Court in case
of CIT vs. Reliance Petro products states as under "If we accept the contention of
the Revenue then in case of every Return where the claim made is not accepted by
Assessing Officer for any reason, the assesse will invite penalty under Section
271(1) (c). That is clearly not the intendment of the Legislature."

"If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in
the course of any proceedings under this Act, is satisfied that any person-
(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-
section (2) of section 143 or fails to comply with a direction issued under sub-
section (2A) of section 142, or
(c) Has concealed the particulars of his income or furnished inaccurate particulars
of such income,
He may direct that such person shall pay by way of penalty,-
(i) In the cases referred to in clause (b), in addition to any tax payable by him, a
sum of ten thousand rupees for each such failure;
(ii) in the cases referred to in clause (c), in addition to any tax payable by him, a
sum which shall not be less than, but which shall not exceed three times, the
amount of tax sought to be evaded by reason of the concealment of particulars of
his income or the furnishing of inaccurate particulars of such income.
TDS (Tax Deduction at Source)

Tax Deducted at Source or best known TDS is one of the modes of collecting
Income-tax from the assessee in India. This is governed under Indian Income Tax
Act, 1961, by the Central Board for Direct Taxes (CBDT) and is part of the
Department of Revenue managed by Indian Revenue Service (IRS), Ministry of
Finance, and Govt. of India.
In simple terms, TDS is the tax getting deducted from the person the amount
(Employee/Deductee) by the person paying such amount (Employer/Deductor).
This is applicable for certain types of payments, as applicable under the Act.
In the process of TDS, deduction of tax is effected at the source when income
arises or accrues. Hence where any specified type of income arises or accrues to
any one, the Income-tax Act enjoins on the payer of such income to deduct a
stipulated percentage of such income by way of Income-tax and pay only the
balance amount to the recipient of such income.
The tax so deducted at source by the payer has to be deposited in the Government
treasury to the credit of Central Govt, within the specified time. The tax so
deducted from the income of the recipient is deemed to be payment of Income-tax
by the recipient at the time of his assessment.
Income from several sources is subjected to tax deduction at source. Presently this
concept of TDS is also used as an instrument in enlarging the tax base.
Some of such incomes subjected to TDS are salary, interest, dividend, interest on
securities, winnings from lottery, horse races, commission and brokerage, rent, fees
for professional and technical services, payments to non-residents etc. It is always
considered as an Advance tax which is paid to the government.
Tax Deduction Account Number
Tax Deduction Account Number or TAN is a unique identification number for

person deducting the tax. The person who is liable to deduct the Tax should obtain
a TAN before deducting such Tax. TAN should apply through Form No 49B
(prescribed under Income Tax Law). Such form can be submitted online at NSDL
website. OR can also be submitted at Tax Information Network Facilitation Center
(TIN-FC). These centres are established by NSDL (which is an appointed
intermediary by the Government) across India. TAN Application should
accompany a 'proof of identity' and a 'proof of address' (photocopies) of the
Deductor. In case, the application is made online, these documents need to be sent
over mail (post/courier) to NSDL - TAN Application division.
Once NSDL receives the TAN application along with said documents (either
through TIN FC / Online), the details are verified and then sent to Income Tax
Department. Once approved, Income Tax Department will allocate a unique
number, and indicate the applicant through NSDL. TAN will be a 10-character
alphanumeric string composed of four alphabetic, five numeric, and then one
alphabetic character. E.g.: "BLRR02933A". The first three characters are an
Income Tax Region Code (BLR => Bangalore) and the fourth digit is the first
character of the Deductor name (R => is denote to the deductee. That which is
individual or Company if individuality denote =P and Company Denote =C
Remaining characters form a unique combination to get identified at Income Tax
Department.
With effect from 1-4-2010, the deductee shall furnish his PAN
(Permanent Account Number) to Deductor, failing which tax at the below rates
of TDS or at the rate of 20% whichever is higher shall be deducted at source.
Where PAN provided to the Deductor is invalid or does not belong to the deductee,
it shall be deemed that deductee has not furnish his PAN to the Deductor and
higher rate of TDS as mentioned below shall be applicable.
No surcharge, education cess and secondary and higher education cess is leviable
for the financial year 2010-11 onwards for TDS purposes in case of payment to
resident. But in respect of TDS on salary, cess will be leviable.
TDS RATE CHART FOR THE FY-2019-2020 (AY: 2020-2021)

If PAN is
Sl. Individual Other than not
Basic Cut-off
No Nature of Payment Section and Individual/ submitted/
(Rs.) p.a.
. HUF HUF Invalid
PAN
Payment of Salaries
Not
1 by 192 Slab rate Slab rate 30%
applicable
Employers
Premature payment by
PFOrganization from Not
2 192A 50,000.00 10% 20%
EPF A/c(i.e. before 5 applicable
Years).
Payment of Interest on
3 Securities by 193 10,000.00 10% 10% 20%
company.
Payment of Dividend
other
than dividend as
referred to
Section 115O by
company
4 194 2,500.00 10% 10% 20%
(i.e. Dividend on
which
Dividend Distribution
Tax is
not
paid)
40,000 (non-
Payment of Interest by
5 194A seniors)/50,000 10% 10% 20%
Bank
(Senior citizen)
Payment of Interest by
6 194A 5,000.00 10% 10% 20%
others
Payment of prize from
Wining from Lotteries
7 194B 10,000.00 30% 30% 30%
by
any person.
Payment of prize from
Wining from Horse
8 194B 10,000.00 30% 30% 30%
Race by
any person.
30,000.00
(Single bill) or
Payment to
1 Lakh
9 Contractors by 194C 1% 2% 20%
aggregate
any person.
bills
during the year.
Payment to
10 Transporter 194C - 0 0 20%
Covered u/s. 44E and
submit declaration in
prescribed format. (i.e.
owning less than 10
goods carriages)
Payment to 30,000.00
Transporter not (Single bill ) or
covered u/s. 44E 75,000.00
11 194C 1% 2% 20%
(i.e. owning more than aggregate
10 bills during the
goods carriages) year.
Payment of Insurance
Commission to agents
12 194D 15,000.00 5% 10% 20%
by
Insurance Company.
Payment in respect of
maturity of Life
13 Insurance 194DA 1 Lakh 1% 1% 20%
Policy by Life
Insurance Company.
Payment to NRI
sportsman
or association by any
14 194E - 20% 20% 20%
person
or
organization
Payment out of
deposit under
15 194EE 2,500.00 10% 10% 20%
National Saving
Scheme (NSS)
Payment with respect
to
16 repurchase of units by 194F - 20% 20% 20%
Mutual Fund
Companies.
Payment of Lottery
17 194G 15,000.00 5% 5% 20%
Commission
Payment of
18 commission or 194H 15,000.00 5% 5% 20%
Brokerage
Payment of rent on
land,
19 194I 240,000.00 10% 10% 20%
building, furniture and
fittings.
Payment of rent on
plant,
20 194I 240,000.00 2% 2% 20%
machinery or
equipments.
Payment made on
account of
21 transfer of immovable 194IA 50 Lakh 1% 1% 20%
property other
than agriculture land.
Rent payable by
individual not covered
22 u/s. 194I for land, 194IB 50,000.00 PM 5% 5% 20%
building, furniture and
fittings
Payment of
Professional
23 194J 30,000.00 10% 10% 20%
Fees other than call
centers
Payment of
24 Professional 194J 30,000.00 2% 2% 20%
Fees to call centers.
Compensation on
transfer of
certain immoveable
25 194LA 250,000.00 10% 10% 20%
property
than Agriculture
Land
CHAPTER– 4
INDIRECT TAX
Indirect taxes are those taxes that are levied on goods or services. They differ from
direct taxes because they are not levied on a person who pays them directly to the
government, they are instead levied on products and are collected by an
intermediary, the person selling the product. The most common examples of
indirect tax Indirect tax can be VAT (Value Added Tax), Taxes on Imported
Goods, Sales Tax, etc. These taxes are levied by adding them to the price of the
service or product which tends to push the cost of the product up.
GST Subsumed all Indirect taxes In India
• Excise Duty
• Service tax
GST •
•
•
STT
VAT
Entry Tax
ABOUT THE GOODS AND SERVICE TAX.
Introduction to Goods and Services Tax (GST)
About GST:
The Good and services tax (GST) is the biggest and substantial indirect tax reform
since 1947. The main idea of GST is to replace existing taxes like value-added tax,
excise duty, service tax and sales tax. GST as it is known is all set to be a game
changer for the Indian economy. India as world’s one of the biggest democratic
country follow the federal tax system for levy and collection of various taxes.
Different types of indirect taxes are levied and collected at different point in the
supply chain. The center and the states are empowered to levy respective taxes as
per the Constitution of India. The Value Added Tax (VAT) when introduced was
considered to be a major improvement over the pre-existing Central excise duty at
the national level and the sales tax system at the State level. Now the Goods and
Services Tax (GST) will be a further significant breakthrough - the next logical
step - towards a comprehensive indirect tax reform in the country.
Several countries have already established the Goods and Services Tax. In
Australia, the system was introduced in 2000 to replace the Federal Wholesale
Tax. GST was implemented in New Zealand in 1986. A hidden Manufacturer’s
Sales Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST
was implemented in 1994. GST is a value-added tax in Malaysia that came into
effect in 2015.
History of GST in India
• 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari
Vajpayee Government in 2000. The state finance ministers formed an
Empowered Committee (EC) to create a structure for GST, based on their
experience in designing State VAT. Representatives from the Centre and states
were requested to examine various aspects of the GST proposal and create
reports on the thresholds, exemptions, taxation of inter-state supplies, and
taxation of services. The committee was headed by Asim Dasgupta, the finance
minister of West Bengal. Dasgupta chaired the committee till 2011.
• 2004: A task force that was headed by Vijay L. Kelkar the advisor to the
finance ministry, indicated that the existing tax structure had many issues that
would be mitigated by the GST system.
• February 2005: The finance minister, P. Chidambaram, said that the
medium-to-long term goal of the government was to implement a uniform GST
structure across the country, covering the whole production-distribution chain.
This was discussed in the budget session for the financial year 2005-06.
• February 2006: The finance minister set 1 April 2010 as the GST
introduction date.
• November 2006: Parthasarthy Shome, the advisor to P. Chidambaram,
mentioned that states will have to prepare and make reforms for the upcoming
GST regime.
• February 2007: The 1 April 2010 deadline for GST implementation was
retained in the union budget for 2007-08.
• February 2008: At the union budget session for 2008-09, the finance minister
confirmed that considerable progress was being made in the preparation of the
roadmap for GST. The targeted timeline for the implementation was confirmed
to be 1 April 2010.
• July 2009: Pranab Mukherjee, the new finance minister of India, announced the
basic skeleton of the GST system. The 1 April 2010 deadline was being followed
then as well.
• November 2009: The EC that was headed by Asim Dasgupta put forth the
First Discussion Paper (FDP), describing the proposed GST regime. The paper
was expected to start a debate that would generate further inputs from
stakeholders.
• February 2010: The government introduced the mission-mode project that

laid the foundation for GST. This project, with a budgetary outlay of Rs.1,133
crore, computerized commercial taxes in states. Following this, the
implementation of GST was pushed by one year.
• March 2011: The government led by the Congress party puts forth the
Constitution (115th Amendment) Bill for the introduction of GST. Following
protest by the opposition party, the Bill was sent to a standing committee for a
detailed examination.
• June 2012: The standing committee starts discussion on the Bill. Opposition
parties raise concerns over the 279B clause that offers additional powers to the
Centre over the GST dispute authority.
• November 2012: P. Chidambaram and the finance ministers of states hold
meetings and set the deadline for resolution of issues as 31 December 2012.
• February 2013: The finance minister, during the budget session, announces that
the government will provide Rs.9,000 crore as compensation to states. He also
appeals to the state finance ministers to work in association with the government
for the implementation of the indirect tax reform.
• August 2013: The report created by the standing committee is submitted to
the parliament. The panel approves the regulation with few amendments to the
provisions for the tax structure and the mechanism of resolution.
• October 2013: The state of Gujarat opposes the Bill, as it would have to
bear a loss of Rs.14,000 crore per annum, owing to the destination-based
taxation rule.
• May 2014: The Constitution Amendment Bill lapses. This is the same year
that Narendra Modi was voted into power at the Centre.
• December 2014: India’s new finance minister, Arun Jaitley, submits the
Constitution (122nd Amendment) Bill, 2014 in the parliament. The opposition
demanded that the Bill be sent for discussion to the standing committee.
• February 2015: Jaitley, in his budget speech, indicated that the government
is looking to implement the GST system by 1 April 2016.
• May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also
announced that petroleum would be kept out of the ambit of GST for the time
being.
• August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions
that the disruption had no specific cause.
• March 2016: Jaitley says that he is in agreement with the Congress’s demand for
the GST rate not to be set above 18%. But he is not inclined to fix the rate at
18%.
In the future if the Government, in an unforeseen emergency, is required to raise

the tax rate, it would have to take the permission of the parliament. So, a fixed rate
of tax is ruled out.
• June 2016: The Ministry of Finance releases the draft model law on GST to
the public, expecting suggestions and views.
• August 2016: The Congress-led opposition finally agrees to the Government’s
proposal on the four broad amendments to the Bill. The Bill was passed in the
Rajya Sabha.
• September 2016: The Honorable President of India gives his consent for the
Constitution Amendment Bill to become an Act.
• 2017: Four Bills related to GST become Act, following approval in the
parliament and the President’s assent:
o Central GST Bill
o Integrated GST Bill
o Union Territory GST Bill
o GST (Compensation to States) Bill.
Goods and Services Tax (GST) is an indirect tax which was launched at midnight
on 1 July 2017 by the President of India, Pranab Mukherjee and Prime Minister of
India, Narendra Modi. The launch was marked by a historic midnight (30 June-1
July) session of both houses of the Parliament convened at the Central Hall of the
Parliament. GST is applicable throughout India which will replace multiple
cascading taxes levied by the central and state governments. It was introduced as
The Constitution (One Hundred and First Amendment) Act 2017, following the
passage of Constitution 122nd Amendment Act Bill.
Key features of GST

1. Dual Goods and Service Tax: CGST and SGST
2. Destination-Based Consumption Tax: GST will be a destination-based tax.

This implies that all SGST collected will ordinarily accrue to the State where the
consumer of the goods or services sold resides.
3. Computation of GST on the basis of invoice credit method: The liability

under the GST will be invoice credit method i.e. cenvat credit will be allowed on
the basis of invoice issued by the suppliers.
4. Payment of GST: The CGST and SGST are to be paid to the accounts of the
central and states respectively.
5. Goods and Services Tax Network (GSTN): A not-for-profit, Non-

Government Company called Goods and Services Tax Network (GSTN), jointly
set up by the Central and State Governments will provide shared IT infrastructure
and services to the Central and State Governments, tax payers and other
stakeholders.
6. GST on Imports: Centre will levy IGST on inter-State supply of goods and
services. Import of goods will be subject to basic customs duty and IGST.
7. Maintenance of Records: A taxpayer or exporter would have to maintain

separate details in books of account for availment , utilization or refund of Input
Tax Credit of CGST, SGST and IGST.
8. Administration of GST: Administration of GST will be the responsibility of

the GST Council, which will be the apex policy making body of the GST.
Members of GST Council comprised of the Central and State ministers in charge
of the finance portfolio.
9. Goods and Service Tax Council : The GST Council will be a joint forum of
the Centre and the States. The Council will make recommendations to the Union
and the States on important issues like tax rates, exemption list, threshold limits,
etc. One-half of the total number of Members of the Council will constitute the
quorum of GST council.
GST MODEL
GOODS AND SERVICE

TAX
State GST Integrated GST

Central GST Levied by the State Levied by the State
Levied by the Centre This is applicable on supplies This is applicable on supplies within
This is applicable on supplies within the state.Tax collected the state.Tax collected will be shared
within the state.Tax collected will be shared to Centre to Centre
will be shared to Centre
Central Goods and Service Tax.
CGST means Central Goods and Service Tax. CGST is a part of goods and service
tax. It is covered under Central Goods and Service Tax Act 2016. Taxes collected
under Central Goods and Service tax will be the revenue for central Government.
Present Central taxes like Central excise duty, Additional Excise duty, Special
Excise Duty, Central Sales Tax, Service Tax etc. will be subsumed under Central
Goods And Service Tax.
State Goods and Service Tax
SGST means State Goods and Service Tax. It is covered under State Goods and
Service Tax Act 2016. A collection of SGST will be the revenue for State
Government. After the introduction of SGST all the state taxes like Value Added
Tax, Entertainment Tax, Luxury Tax, Entry Tax etc. will be merged under SGST.
For example, if goods are sold or services are provided within the State then SGST
will be levied on such transaction.
Integrated Goods and Service Tax
IGST means Integrated Goods and Service Tax. IGST falls under Integrated Goods
and Service Tax Act 2016. Revenue collected from IGST will be divided between
Central Government and State Government as per the rates specified by the
government. IGST will be charged on transfer of goods and services from one state
to another state. Import of Goods and Services will also be deemed to be covered
under Inter-state transactions so IGST will be levied on such transactions. For
example, if Goods or services are transferred from Rajasthan to Maharashtra then
the transaction will attract IGST.
GST Rates in India
The GST council has agreed upon the 5 rate structure for levying tax on various
goods and services i.e.
• Exempt
• 0% : Zero Rated for export
• 3% : Gold
• 5% : Essential Goods
• 12% : Basic Necessity Products
• 18% : Revenue Neutral Rate
• 28% : Demerit Goods
It is expected that the rate of GST that may be applicable on this sector would be
mostly 12% or 18%.
There may not be any further abatement/ composition on this rate.
Although this rate will be little on the higher side as compared to current tax rates
which is between 6% to 10%.
Although such high rate could have an adverse impact on this sector, however this
impact could largely get reduced due to ease in credits availability. Thus net
impact may be around 6 to 9%.
GST Council
 It is set up by president under article 279-A. It is chaired by union finance
minister.
 It will constitute union minister of state in charge of revenue and minister in
charge of finance or taxation or of any other field nominated by state governments.
The 2/3rd representatives in council are from states and 1/3rd from union.
• It will make recommendations on:
a. Taxes, surcharge, cess of central and states which will be integrated in GST.
b. Goods and services which may be exempted from GST.

c. Interstate commerce – IGST- proportion of distribution between state and center.
d. Registration threshold limit for GST.
e. GST floor rates.
f. Special rates during calamities.
g. Provision with respect to special category states specially north east states
• It may also work as Dispute Settlement Authority for GST.

• The Council would consist of 2/3rd representation of states and 1/3rd
representation of the Centre. The GST Council will take all decisions regarding tax
rates, dispute resolution, exemptions and so on. Recommendations of the GST
Council (75% votes) will be binding on the Centre and the States.
Goods and Services Tax Network (GSTN)

Goods and Services Tax Network has been set up by the Government as a private
company under erstwhile Section 25 of the Companies Act, 1956. GSTN would
provide three front end services, namely Registration, Payment and Return to
taxpayers. It will also assist some State with the development of back end modules.
Goods and Services Tax Network (GSTN) is a Section 8 (under new companies
Act, not for profit companies are governed under section 8), non-Government,
private limited company. It was incorporated on March 28, 2013. The Government
of India holds 24.5% equity in GSTN and all States of the Indian Union, including
NCT of Delhi and Pondicherry, and the Empowered Committee of State Finance
Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-
Government financial institutions. The Company has been set up primarily to
provide IT infrastructure and services to the Central and State Governments, tax
payers and other stakeholders for implementation of the Goods and Services Tax
(GST). The Authorized Capital of the company is Rs. 10,00,00,000 (Rupees ten
crore only).
There are three important concepts in GST.
1. Time of Supply
As per Section 13 Time of supply means the point in time when goods/services are
considered supplied’. When the seller knows the ‘time’, it helps him identify due
date for payment of taxes.
CGST/SGST or IGST must be paid at the time of supply. Goods and services have
a separate basis to identify their time of supply.
Section 31(1) of the CGST Act provides that a registered person supplying taxable
goods shall, before or at the time of,
An invoice has to be created before removal of goods as defined in Clause
(96) of Section 2 of the CGST Act. If invoice is not created time of removal
shall be taken as last date of making invoice as mentioned in Section 12.
If invoice is created earlier than time of removal, time of supply shall be
treated as date of preparation of invoice.
If payment is received with respect to supply of goods earlier than making of
invoice, such payment shall be treated as time of supply.
Concept of time of supply of goods provided in GST law shows a departure from
the earlier Central Excise provisions. In the Central Excise provisions invoice was
required to be made at the time of removal only. These provisions give liberty to
trade and industry to prepare invoice well in advance of removal of goods. Thus, a
supplier of goods may issue an invoice to recipient but removes goods only after,
say receipt of payment. If in the meantime say, payment is not received, he can
cancel the invoice as per provisions of GST laws. Such cancellation of invoice
shall not result in removal of goods, retaking or return of goods in the supplier
premises etc.
A. Time of Supply of Goods
Time of supply of goods is earliest of:
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment*.
For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th
January. The payment was received on 31st January. The goods were supplied on
20th January.
*Note: GST is not applicable to advances under GST. GST in Advance is payable
at the time of issue of the invoice. Notification No. 66/2017 – Central Tax issued
on 15.11.2017
Let us analyze and arrive at the time of supply in this case.
Time of supply is earliest of –
1. Date of issue of invoice = 15th January
2. Last date on which invoice should have been issued = 20th January
Thus the time of supply is 15th January.
What will happen if, in the same example an advance of Rs 50,000 is received by
Mr. X on 1st January?
The time of supply for the advance of Rs. 50,000 will be 1st January (since the
date of receipt of advance is before the invoice is issued). For the balance Rs.
50,000, the time of supply will be 15th January.
B. Time of Supply for Services
Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within prescribed period)
Example:
Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was
issued on 20th January and the payment for the same was received on 1st February.
In the present case, we need to 1st check if the invoice was issued within the
prescribed time. The prescribed time is 30 days from the date of supply i.e. 31st
January. The invoice was issued on 20th January. This means that the invoice was
issued within a prescribed time limit.
The time of supply will be earliest of –
1. Date of issue of invoice = 20th January
2. Date of payment = 1st February
This means that the time of supply of services will be 20th January.
C. Time of Supply under Reverse Charge
In case of reverse charge the time of supply for service receiver is earliest of:
1. Date of payment*
2. 30 days from date of issue of invoice for goods (60 days for services)
*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only
to services. Notification No. 66/2017 – Central Tax
For example:
M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th
January. The invoice was raised on 1st February. M/s ABC Pvt. Ltd made the
payment on 1st May.
The time of supply, in this case, will be earliest of –
1. Date of payment = 1st May
2. 60 days from date of date of invoice = 2nd April
Thus, the time of supply of services is 2nd April.
)
2.Place of supply
It is very important to understand the term ‘place of supply’ for determining the
right tax to be charged on the invoice.
Here is an example:
Location of Service Place of Nature of GST

Receiver Supply Supply Applicable
Maharashtra Maharashtra Intra-state CGST + SGST
Maharashtra Kerala Inter-state IGST

It is also considered 2 points.
A. Place of Supply of Goods
Usually, in case of goods, the place of supply is where the goods are delivered.
So, the place of supply of goods is the place where the ownership of goods
changes.
What if there is no movement of goods. In this case, the place of supply is the
location of goods at the time of delivery to the recipient.
Place of Supply When There is Movement of Goods:
Supply Place of supply

Involves movement of goods, whether Location of the goods when the
by the supplier or the recipient or by movement of goods terminates for
any other person. delivery to the recipient.
Goods are delivered by the seller to a It is assumed that the third person has
recipient on the direction of a third received the goods and the place of
person (whether agent or not) before or supply of such goods will be the
during movement of goods by way of principal place of business of third
transfer of documents of title to the person.
goods or some other way.
)
For example:
In case of sales in a supermarket, the place of supply is the supermarket itself.
Place of supply in cases where goods that are assembled and installed will be the
location where the installation is done
For Example: Intra-state sales
Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of Nagpur,

Maharashtra
The place of supply is Nagpur in Maharashtra. Since it is the same state CGST &
SGST will be charged.
For example –
Deliver to a 3rd party as per instructions
Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The buyer
requests the seller to send the goods to Nagpur (Maharashtra)
In this case, it will be assumed that the buyer in Lucknow has received the goods &
IGST will be charged.
Place of supply: Lucknow (UP
GST: IGST
)
No Movement of Goods
Supply is : Place of supply
No movement of goods, either by the Location of such goods at the time of
supplier or the recipient. the delivery to the recipient ( at the
time of transfer of ownership)
The goods are assembled or installed at Place of such installation or assembly.
site.
For Example: No movement of goods

Sales Heaven Ltd. (Chennai) opens a new showroom in Bangalore. It purchases a
building for showroom from ABC Realtors (Bangalore) along with pre-installed
workstations.
Place of supply: Bangalore
GST: CGST& SGST
There is no movement of goods (work stations), so the place of supply will be the
location of such goods at the time of delivery (handing over) to the receiver
Imports & Exports
The place of supply of goods:

Imported into India will be the location of the importer.
Exported from India shall be the location outside India.
Supply is Place of supply GST

Goods imported into Location Of the importer. Always IGST on imports.
India.
Exported from India. Location outside India. Exports are exempted.
For Example - Import
Ms. Malini imports school bags from China for her shop (registered in Mumbai)
Place of supply: Mumbai
GST: IGST
For Example - Export
Ms. Anita (Kolkata) exports Indian perfumes to UK

Place of supply: Kolkata
GST: Exempted
)
B. Place of Supply for Services

Generally, the place of supply of services is the location of the service recipient.
In cases where the services are provided to an unregistered dealer and their
location is not available the location of service provider will be the place of
provision of service.
Special provisions have been made to determine the place of supply for the
following services:
• Services related to immovable property

• Restaurant services
• Admission to events
• Transportation of goods and passengers
• Telecom services
• Banking, Financial and Insurance services.
In case of services related to immovable property, the location of the property is

the place of provision of services.
Example 1:
Mr. Anil from Delhi provides interior designing services to Mr. Ajay (Mumbai).
The property is located in Ooty (Tamil Nadu).
In this case, place of supply will be the location of the immovable property i.e.
Ooty, Tamil Nadu.
)
Determining The Place Of Supply Of Services
GST is destination based tax i.e. consumption tax, which means tax will be levied
where goods and services are consumed and will accrue to that state.
Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the
‘’place of supply’’ so determined, the respective tax will be levied. IGST is levied
where transaction is inter-state, and CGST & SGST are levied where the
transaction is intra-state. For understanding Place of Supply for Services the
following two concepts are very important namely:
⇒ location of the recipient of services
location of the supplier of services
The two concepts in detail as they will form the base for determining the place of
supply in case of supply of services are:
Location of the recipient of services:
S.No Case Location of

. Recipient of Service
where a supply is received at a place of such place of business
business for which the registration has
A been obtained
B where a supply is received at a place such fixed establishment

other than the place of business for
which registration has been obtained (a
fixed establishment elsewhere
C where a supply is received at more than the location of the
one establishment, whether the place of establishment most directly
business or fixed establishment concerned with the receipt
of the supply
D in absence of such places the location of the usual
place of residence of the
recipient;
)
Category of Supply of Services:
Domestic Transactions
International Transactions
)
Domestic Transactions;
These are the transactions where both the parties i.e. the supplier as well as
recipient of service are in India. Domestic transactions can be further categorized
as below:
Inter-State (i.e between two different states)
Intra-State (i.e within the same state)
General Rule
In general, the place of supply for services will be the location of the service
recipient (the recipient needs to be a registered person). In cases, where service is
provided to an unregistered person, the place of supply will be the:
Location of the service recipient (if the address is available on record);
Otherwise, location of service provider.
International Transactions
These are the transactions where either of the service recipient or the provider is
outside India. Transactions in which both the recipient as well as provider are
outside India are not covered here.
General Rule
The Place of Supply for services treated as international transactions shall be:
The location of service recipient

In case where the location of service recipient is not available, the place of
supply shall be location of the supplier.
)
Works Contract under GST
Works Contract As per section 2(119) of CGST Act.
The taxation laws on Works Contracts have changed since the implementation
of GST. Any Immovable property wherein transfer of property in goods
(whether as goods or in some other form) is involved in the execution of such
contract.
In simple words, any contract in relation to an Immovable property where
services are provided along with transfer of goods is known as a “Works
Contract”.
“Work s contract” is defined as a contract for Building, construction
Fabrication Completion, Fitting out, Repair, Maintenance, Renovation,
Improvement, modification,
Improvement,
Building, construction
modification,Fabrication
Works
Contract
Repair, Maintenance,
Completion,Fitting out
Renovation
)
Works Contract in Pre-GST Regime
Different aspects of an activity were taxed differently in the pre-GST regime as

mentioned below:
Aspect in the Works Tax Applicable

Contract
Provision of Services Service Tax
Transfer of Goods VAT
Goods manufactured in course of Central Excise

contract
Let us understand the complications that a provider of works contract would

encounter previously:
VAT being a state tax, different States had different VAT rates
Different VAT composition schemes in every state
Different abatement rates for new works contract and repair works contract
in service tax
Maintenance of Large amount of VAT documentation
)
Two GST rates have been prescribed for services provided under Works contract
i.e. 18% and 12%.
GST @ 18%
Construction of complex, building, civil structure or a part thereof, including a

complex or building intended for sale to a buyer, wholly or partly, except where
the entire consideration has been received after issuance of completion certificate
Composite supply of works contract
GST @ 12%
Composite supply of works contract supplied by way of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance,
renovation, or alteration of:
a road, bridge, tunnel, or terminal for road transportation for use by general
public.
a civil structure or any other original works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana
a pollution control or effluent treatment plant, except located as a part of a
factory
a structure meant for funeral, burial or cremation of deceased
railways, excluding monorail and metro
a single residential unit otherwise than as a part of a residential complex
low-cost houses up to a carpet area of 60 square meters per house in a housing
project approved by competent authority empowered under the ‘Scheme of
Affordable Housing in Partnership’ framed by the Ministry of Housing and
Urban Poverty Alleviation, Government of India
A works contract is treated as supply of services under GST. Under the previous
regime, there were issues in tax treatment of works contract. Both the Central
Government (on the services component of a works contract) & the State
Governments (on the sale of goods portion involved in the execution of a works
contract) used to levy tax. Thus, the same contract was subject to taxation by both
Central and State Government. GST aims to put at rest the controversy by defining
what will constitute a works contract (applicable for immovable property only), by
stating that a works contract will constitute a supply of service and specifying a
uniform rate of tax applicable on same value across India. Thus, under GST,
taxation of works contract will be simpler and easier to administer.
)
Impact of GST on various sectors

IT
Currently IT sector is paying 14 percent of tax to the authority and subjected to 18-
20 percent after the imposition of GST. Also an important point to notice here, that
the long disputed issue of canned software taxation will also come to end as their
will no difference arise between goods and services after the GST. Overall impact
could be suggested here is neutral or slightly negative.
Telecom
In the current stage, the Telecom sector is paying 14 percent of tax to the
government body, but the scenario takes the shift after the imposition of GST. The
rate arises to 18 percent and the companies expect to pass the burden on the post-
paid customers. There is also a lower input tax credit in this sector's capex cost.
Overall, it seems that this regime will be negative to the industry and the sector
will also be in state where they can't pass the entire tax burden to the customers
especially their prepaid segment.
Automobiles
Currently, automobile sector pays around 30 to 47 percent tax to the Government
which is now expected to range between 20-22 per cent, after the implementation
of GST. And the overall cost cutting can be expected for the end user by around 10
per cent. Transportation time should also be reduced as the check points and octroi
is cleared hands before. Overall GST will bring a smile into the automobile sector.
Cement
In the current scenario, cement sector is presenting 27 to 32 per cent of their share
to the tax authority. After the rolling out of GST, this will improve the sector
growth in various terms, like transportation by 20-25 per cent and in the warehouse
scheme as the rationalization would be easy in terms of state wise fragmentation
and also in the transportation cost as reduced transit time.
Pharmacy
Here, the impact could be neutral as the sector only shares 6 per cent of his share
to the tax authority. The sector also avails the incentives in tax benefits of location
wise. There are various concessional benefits and exemptions held for this sector
and will extend till the expiry of the period. The implications of GST would also
try to reduce the logistics cost and would also try to see in to the matter of inverted
duty structure.
)
Banking and Financial Institutions

The sector is paying 14 percent right now, but not on the interest part of
transaction. After the GST implied, the tax horizon can expand up to 18 to 20
percent on the fee based transactions. Overall input expense of operations will
likely to increase and also hike in the transactions of financial in nature such as
loan processing fees, debit/credit charges, insurance premiums etc.
Construction Industry
Construction is an important sector that contributes greatly in the economic growth

of a nation. The Construction Industry is an investment-led sector where
government shows high interest.
Government contracts with Construction Industry to develop infrastructure related
to health, transport as well as education sector .

Background of erstwhile taxes on construction industry
In order to determine, whether a contract shall be treated as intra-state or an inter-state

transaction, the following pictorial diagram may be a help to understand the same:
Intra-State Inter-State
Location of Location of
Place of Supply Place of Supply
Supplier Supplier
Same Different
State State
From the above pictorial diagram, one may infer that in case the location of supplier and
the place of supply are in the same state then the transaction shall be treated as intra-state
supply or otherwise it shall be treated as inter-state supply. Therefore, there are two
important parameters which need to be elaborated to determine the taxability of works
contract service i.e. the location of supplier and the place of supply.
)
Input Tax Credit in GST.
Concept of Input Tax Credit
The concept of Input Tax Credit is to provide a mechanism whereby the person paying
taxes on goods or services procured by him are entitled for claim of credit, so that the
impact of tax on the end customer is reduced. The construction industry had various
concerns with respect to claim input tax credit in the erstwhile service tax and VAT
laws. The service tax specifically provided for restriction for claim of credit in respect
of inputs used in execution of contracts. Similarly, the VAT law for the state of
Maharashtra had provided to certain retentions for contractors opting for composition
scheme. Also, the developers/builders were provided with a composition scheme
without any credit of inputs.
The provisions of input tax credit under the GST law are contained in section 16 of the
CGST Act, 2017 which provides that a registered person shall be entitled to take the
credit of input tax charged on any supply of goods or services or both to him which are
used or intended to be used in the course or furtherance of his business. This shows
that the provisions are widely worded to allow input tax credit in respect of all goods
or services or both used for the purpose of business subject to certain conditions and
safeguards. Further section 16(2) provides that certain conditions needs to be fulfilled
before taking any input tax credit.
Restrictions of Input Tax Credit

The provisions of section 16 provides for eligibility of input tax credit in respect of
any input tax charged to a registered assessee. However, the provisions of section
17(5) specifically restrict certain input tax credit eligibility in respect of certain
supplies mentioned in the section therein. The specific restrictions are tabulated
below:
1) Motor vehicles and other conveyances

2) Food and beverages, outdoor catering, beauty treatment, health services, cosmetic
and plastic surgery
3) Membership of a club, health and fitness centre;
4) Rent-a-cab, life insurance and health insurance
5) Travel benefits extended to employees on vacation such as leave or home travel
concession
6) Invoice received from a composition dealer
7) Any supplies used for personal consumption
)
In view of above, one may find that there may be only specific restrictions that may
be applicable to a works contractor.
Benefits of Input Tax Credit
The other aspect of Anti-Profiteering is to pass on the benefits accruing on account of

Input tax credit made available to supplier. Almost all industries will be affected with
respect to passing of benefit due to seamless credit mechanism. It may be noted that a
works contract and the developer in the erstwhile taxation laws were required to
forego a substantial quantum of input credit. With the introduction of GST, the major
hurdles in claiming of credit were reduced and effectively the costs of tax were
converted into credits. The provisions of Anti-Profiteering measures provide to
effectively pass on such benefits to the customer.
This has given rise to an issue as to whether the anti-profiteering measures shall be
applicable only in case of on-going contracts or the same shall apply to contract
entered even after the introduction of GST. In this regards, I personally believe that
the provisions of anti-profiteering should apply on unfinished contracts and not for
new contract entered after the appointed date since the contracts made after the
appointed date have duly factored the costs and credits associated with such contracts.
In such cases, since both the parties to the contract have agreed to a price for a supply
and accordingly in my view that price is arrived after factoring all the applicable
taxes, costs and benefits connected with such project. However, to avoid any future
disputes, one may specifically provide in the contract that the prices as agreed are
after giving effect to the benefits as available to the contractor.
I would also like to highlight on the fact that the transitional credit so availed by a
contractor has in essence to be passed on to the end customer and the same cannot be
retained by the contractor. The purpose of providing transitional credit is to effectively
reduce the burden of taxation on the final output supplier.
)
Result Analysis
How GST Work
Retailer to wholesaler
Gold 1,00,000 1,00,000

Sales Tax (14%) 14,000 -
Duty (12.5%) 12,500 -
Excise Duty (1%) 1,000 -
CGST (18%) - 18,000
Grand Total 1,27,500 1,18,000
Wholesaler to retailers
Price 1,27,500 1,18,000

Add margin (10%) 12,750 11,800
other charges (rent, transport) 15,000 15,000
Sub Total 1,55,250 1,44,800
Sales Tax (14%) 21,735 -
SGST (18%) - 26,064
Total Price 1,76,985 1,70,864
Effect on IT Industrial
M&G LTD.
Software for school uses 9,500 9,500
Service Tax (14%) 1,330 -

GST (5%) - 475
Grand Total 10,830 9,975
)
Effect on Manufactory Industrial
Whirlpool 6.5 kg Fully Automatic Top Load Washing Machine
Price (exclusive Tax) 15,490 15,490
Sales Tax (14.5%) 2,168.6 -
GST (12%) - 1,858.8
Grand Total 17,658.6 17,348.8
Need For Goods and Service Tax(GST)
The primary reason for binging in GST was to eliminate the tax terrorism present in
the existing structure of taxation. The existing tax structure had various deficiencies in
terms of adding tax cost to the cost of product. The challenges mainly faced by the
Construction industry can be summarized as under:
a) Retention in Input Tax Credit in case a contractor opted for a composition scheme. This
resulted in adding to the cost of operations for a contractor.
b) No Input Tax Credit for a builder/developer for opting in 1% composition scheme. This
effectively added to the cost of construction and made the residential as well as
commercial complexes costlier.
c) No CENVAT Credit of Excise Duty paid on construction material was allowed. Inspite
of CENVAT Credit Rules, 2004 being framed with a purpose to allow cross credits for
Excise Duty and Service Tax, specific provisions were made to restrict the CENVAT
Credit on Excise duty for the Contractors as well as Builders.
d) Multiplicity of taxes for the contractors as well as developers since they were required
to pay taxes on the material portion under the VAT law and service tax on the service
portion. At many times, this resulted in the contract being taxed at a value which was
more than 100% of the value of contract.
e) Multiplicity of taxes also resulted in multiplicity of returns being filed, audits being
conducted, assessments being made.
)
VAT, SERVICE TAX and GST

• Under VAT 4 methods of Tax – now may be two in GST
• Principal Contractor and Sub-Contractor- joint and several liability under VAT.
May not be there in GST.
• NO ITC to builders- now it will be there.
• NO VAT on Completed property- Status quo maintained in GST.
• Renting of movable property like JCB, is Vat able. In GST its service.
• Service tax –RCM- IN GST it will be there even on ALL URD Supplies,
• Exemptions in Service tax- May be continued or Not IN GST.
• Completion Certificate- first Occupancy Certificate in GST.
• Match and mis-match in GST it was not in Service Tax.
• Reversal of ITC on closing stock.
• Rental of Residential house exempt, commercial is taxable. In GST.
• Interest on Instalments or EMI Charged by Builders- GST Impact.
SWOT Analysis
Strengths
GST provides a comprehensive and a wider coverage of input credit set off service
tax credit could be used for the payment of tax on the sale of goods etc.
• A single GST could be used instead of other indirect taxes at the state and
central level.
• It would end the cascading effects.
• There would be uniformity of tax rates across the states.
• It ensures better compliance as the aggregate tax reduces.

• It helps in the reduction of prices of the goods and services to the consumer with
the reduction of tax.
• tax would reduce transaction costs and unnecessary wastage to both
government and individuals.
• It encourages transparency and unbiased tax structure.
• It brings efficiency in the indirect tax mechanism.
)
Weaknesses
• It doesn’t include alcohol and petroleum products which would lead to incurring
of huge losses.
• It requires strong IT infrastructure which is not highly developed in India.
• Single GST rate would be high compared to individual indirect tax rate.
Opportunities
• Reduction in tax burden will increase the competitiveness of Indian products in
the international market.
• There would be a gradual increase in the revenues of state and the union.
• Helps reducing corruption as the implementation of GST would result in a

gradual decrease of procedures and formalities.
Threats
• It is entirely dependent on the efficiency and effectiveness of the system
• Beneficiaries of the system are uncertain. It could be either state or the Centre.
This would create a chaos while preparing budgets and financing polices
• Lack of co-ordination between the Centre and the state might affect the system
and also the revenues generated.
Interpretation of the SWOT Analysis

From the above SWOT analysis it is clear that GST would create uniformity of
taxes and also reduce tax burden. This in turn would increase revenues of the state
and the union at the country level and increase competition at the international
level. But this in reality might appear to be a dual tax system and would also
require a strong IT infrastructure. Besides this, it is entirely dependent on the
efficiency of the system. Co-ordination between the Centre and the state only can
help in its implementation and execution of the proposed plan. Therefore before
implementation of such a tax regime, it should be carefully examined at every
levels to benefit all the stakeholders.
)
CHAPTER– 5
Conclusion
The Finance Minister introduced new tax regime in Union Budget, 2020 wherein
there is an option for individuals and HUF (Hindu Undivided Family) to pay taxes
at lower rates without claiming deductions under various sections. I have analyst if
individual having income below 12 lakhs is more beneficial if availing option 1 i.e.
claiming various deduction and person having income more than 12 lakhs are
beneficial only if avail option 2 i.e. pay lower tax rate, without claiming
deduction.
Taxation is a very important branch to study & understand the overall gamut of the
Taxation system of India. In last 10-15 years, Indian taxation system has
undergone tremendous reforms. The tax rates have been rationalized and tax laws
have been simplified resulting in better compliance, ease of tax payment and better
enforcement. The process of rationalization of tax administration is ongoing in
India. Since July 01, 2017, most of the Indirect tax in India have replaced GST.
After conducting a comprehensive evaluation for this project, I immensely pleased

in stating that a significant and innovative step has indeed been taken by the
Central Government in coordination with and the State Governments to improve
the efficiency and productivity of the tax systems prevailing in India. This
pioneering move will not only aid in rendering satisfaction and economical growth
but will also yield in establishing a healthy image of taxes and their derived
benefits in the minds of the citizens. The first part of this project shows great
potential and by far has been successful in fulfilling all the aspired objectives in the
field of direct taxes. However, in the second part it indirect taxes are explained. It
is strongly emphasizes upon the highlighted recommendations and focused aspects
that may for the future positively render in establishing thorough professionalism
and more stability.
)
Significantly, it is further suggested to proceed with the commencement of both the

parts of this project as this radical step to add value to the present taxation system
and boost the economy thus introducing an era of change and advancement.
Due to Multiplicity of taxes there is unhappiness among citizens of India regarding

tax structure. Taxes by Union Government, State Governments and the local
governments have resulted in difficulties and harassment to the tax payer. He has
to contact several authorities and maintain separate records for each of them.
An Ideal Tax system must follow Adam smith’s canons of taxation.
but due to over dependence on indirect taxes, the tax systems suffers from the
problems like Inequality, regressive, uneconomical, inflationary, etc.
The Tax System has failed to stop tax evasion and curb the growth of parallel
economy. Whitepaper issued by Indian government on black money in 2012 tells
that parallel economy exist the same amount of Indian GDP.
It can be concluded from the above discussion w.r.t. GST will provide relief to
producers and consumers by providing wide and comprehensive coverage of input
tax credit set-off, service tax set off and subsuming the several taxes. Efficient
formulation of GST will lead to resource and revenue gain for both Centre and
States majorly through widening of tax base and improvement in tax compliance. It
can be further concluded that GST have a positive impact on various sectors and
industry. Centre has decided to review the existing exemptions from Central
Excise Duty so that list of goods exempt from CGST and SGST list and 99 items
exempted from VAT are taken off from both the components of GST. VAT has to
some extent reduced tax-evasion and frauds. It is encouraging to note that most of
the traders and general public are aware of VAT. GST, the major reforms on
indirect taxes, will reduce tax burden due to cascading effect.
)
The efficiency in tax administration will be improved, indirect tax revenue will be
increased considerably due to inclusion of more goods and services, and at last the
cost of compliance will be reduced for the dealers. The implementation of GST
will be in favor of free flow of trade and commerce throughout the country. This
single most important tax reform initiative by the Government of India since
independence provides a significant fillip to the investment and growth of our
country’s economy. To get the desired result, it should be assured that the benefit
of input credit is ultimately enjoyed by final consumers.
Although implementation of GST requires concentrated efforts of all stake holders

namely, Central and State Government, trade and industry.
GST reduce the price of various goods and increase the sale. After the
implementation of GST indirect taxation Systems will remove and it easy to all tax
payer to pay the tax to government. Efficient formulation of GST will lead to
resource and revenue gain for both Centre and States majorly through widening of
tax base and improvement in tax compliance. It can be further concluded that GST
have a positive impact on various sectors and industry. Although implementation
of GST requires concentrated efforts of all stake holders namely, Central and State
Government, trade and industry.
)
Findings:-
1) There is a vast number of taxes in India, different collecting authorities

causing multiplicity of taxes in India which result tax burden to assesee.
2) There is a huge dependence on indirect taxes for revenue generation. The
amount collected from indirect taxes is nearly twice the amount collected from
direct taxes.
3) Both direct taxes and Indirect taxes have their own advantages and
disadvantages.
4) Under direct taxes, the major components of taxes are corporation tax and taxes
on income.
5) Under indirect taxes, the major components are customs, excise duty and service
taxes which is subsumed under Goods and Service tax (GST).
6) The amount expended on collection of taxes is increasing year on year.
7) Unawareness of various tax systems in India which result difficult to

understand by Taxpayer.
)
Suggestions:-
1) Government should focus more on structural reforms than policy reforms.

2) GST should be simplify number of compliance to facilitate ease of doing
business in India.
3) There should be effective implementation of Anti Tax evasion Bill
4) Innovative Tax Systems like Banking Transaction Tax system Suggested by
Arthakranti Pratishthan Should be givens Serious thought upon alternatives.
5) Administrative expenses incurred on Tax Collection needs to be brought down
by making reduction in the number of taxes and tax collection authorities.
6) The Finances minister should think about Fringe Benefit Tax to avoid booking
dummy expenses in financial reports.
7) To simplify Direct tax structure, Government should think about Direct Tax
Code for citizens.
8) Suggestion to leavy Bank Cash Transaction Tax (BCTT) to enhance
digitalization and improve cash liquidity in economy.
9) To apply Progressive tax, Regressive tax, and Proportional tax into Tax
progressivity.
10) Circular 230 and Individual Taxpayer Identification Number into Internal
Revenue Service
11) Economic development incentive programs.
)
Bibliography
1. Income Tax Act- By Pradeep S Shah, Rajesh S. Kadakia
2. Income Tax Act & Rules- By Taxman Publication
3. Direct Taxes Ready Reckoner- By Dr. Vinod K. Singhania
4. Complete solution of GST-Taxprint
5. GST Ready Reckoner
Reference
www.gst.gov.in
www.taxguru.com
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Analysis of India's Taxation Structure

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lOMoAR cPSD| 3421986

GENERAL MANAGEMENT PROJECT

Under the Guidance of

SAS INSTITUTE OF MANAGEMMENT STUDIES (MMS),

DEEP EDUCATION SOCIETY’S

Enrich Enhance Elevate

Dr. Bhagesh Sankhe

(Director SASIMS) College Seal

Hitesh Jayantibhai Limbachiya

Major Central Taxes

Central Goods & Services Tax (CGST)

Integrated Goods & Services Tax (IGST)

Major State Taxes

State Goods & Services Tax (SGST)

Stamp Duty & Registration

However, there are major challenges to tax payer is amendment of constitution of

INTRODUCTION OF INDIRECT TAX-GST

INTRODUCTION ABOUT RESEARCH.

Objectives of the Study :

charging Tax and the benefits out of that.

services to the public.

• To observe the rate which in charges on various products.

• To study various benefits of Taxation in India to the Assesee.

• To find out distinguishing between Direct & Indirect tax.

• Various tax deduction/ benefits available to Assesee

deduction or paid lower tax rates.

from 30% plus Surcharge & Education cess.

• To study either applicable GST rate correctly charged by Suppliers.

not applicable even goods or serviced received from unregistered dealer(URD)

services related to public benefits.

Research methodology is a way of systematically solve the problems. In research

Explanatory research or causal research is conducted to understand the impact of

Instrument of data Collection

A mixture of random sampling and the satisfied was choosen. The

For the purpose of study I have taken sample of 2 companies as well as

Rational of the study

Scope of the study

Limitations of the Study

Taxation is a system of raising money to finance government. All governments

Taxation is the most important sources of revenue for modern governments,

Adequacy: taxes should be just-enough to generate revenue required for

Compatibility: taxes should be coordinated to ensure tax neutrality and

Convenience: taxes should be enforced in a manner that facilitates a way

Efficiency: tax collection efforts should not cost an inordinately high

Simplicity: tax assessment and determination should be easy to

Predictability: collection of taxes should reinforce their

TAXES APPLICABLE IN INDIA

Direct & Indirect Tax Collection in India

Direct Tax (Rs.incrore)

Financial Corporation Taxes on

Financial Union Excise

600,000 Direct Tax

Tax Rate for other than Individual

Health & Education cess: 4% of tax plus surcharge

Local Authorities are to be taxed at the rate of 30%.

Health & Education cess: 4% of tax plus surcharge

Tax Rate for Individuals

Taxable Income ₹11,00,000 ₹ 7,00,000

Income Tax Slabs and Rates for Financial Year: 2019-20

Above rates does not include Surcharge and Cess.

Particulars (.) Ravi Ramesh Rahul

Annual Salary 5,00,000 10,00,000 15,00,000