1/1/23, 10:30 PM Goods And Service Tax And Its Impact On GDP

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Goods And Service Tax And Its Impact On GDP

 Vaishakh  December 6, 2021  CBSE 12th Commerce, Economics

Contents [hide]

1 INTRODUCTION

1.1 ABOUT GST

2 HISTORY

2.1 FORMATION

2.2 LAUNCH

3 MORE ABOUT GST

3.1 TAX SUBSUMED

3.2 HSN CODE

3.3 RATE

3.4 E-WAY BILL

3.5 INTRA-STATE E-WAY BILL

3.6 REVERSE CHARGE MECHANISM

3.7 GOODS KEPT OUTSIDE THE GST

4 GST COUNCIL

5 GOODS AND SERVICE TAX NETWORK

6 NEED FOR GST IN INDIA

6.1 THE TAX STRUCTURE WILL BE SIMPLE 

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6.2 INCREASE IN TAX REVENUE

6.3 COMPETITIVE PRICING

7 STATISTICS

7.1 RETURNS

8 IMPACT OF GST

8.1 FOR WHOLESALERS

9 FOR RETAILERS

10 FOR IMPORTERS AND EXPORTERS

11 IMPACT ON GROSS DOMESTIC PRODUCT

12 WHAT THE FUTURE LOOKS LIKE

13 CRITICISM

14 CONCLUSION

15 ACKNOWLEDGEMENT

16 BIBLIOGRAPHY

INTRODUCTION
ABOUT GST

Goods and Services Tax (GST) is an indirect tax imposed in India on the supply of goods and services. It is a
comprehensive multistage as it is imposed at every stage in the production process, but is meant to be
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refunded to all parties in the various stages of production other than the final consumer. And destination-

based tax, as is collected from the point of consumption and not the point of origin like promised taxes.
Goods and services are divided into five different tax slabs for collection of tax-0%, 5%, 12%, 18%,

however petroleum products alcoholic drinks, and electricity are not taxed under GST.

HISTORY

FORMATION
The reform of India’s indirect tax Regine was started in 1986 by Vishwanath Pratap Singh, finance minister
in Rajiv Gandhi’s government, with the introduction of the modified value Added (MODVAT) subsequently,
prime minister PV Narasimha Rao and his finance minister Manmohan Singh, initiated early discussions

on a value-added tax (VAT) at the state level. A single common “goods and services tax (GST) was proposed

and given a go-ahead in 1999 during a meeting between prime minister Atal Bihari Vajpayee and his
economic advisory panel which included three farmer RBI governance IG panel Bimal Jalan and C

Rangarajan. Vajpayee set up a committee headed by the finance minister of West Bengal, Asim Das Gupta

to design a GST model. The Rani Das Gupta committee was also tasked with putting in place the backend

technology and logistics. It later came out for rolling out a uniform taxation regime in the country. In
2002, the Vajpayee Government formed a task force under Vijay Kelkar to recommend tax reforms. In

2005, the Kelkar committee recommended rolling out a uniform taxation regime in the country. In 2002,

the Vajpayee government formed a task force under Vijay Kelkar to recommend a tax force. In 2005 the
Kelkar committee recommended rolling out GST as suggested by the 12th finance commission. After the

defeat of the BJP-led NDA government in the 2004 Lok Sabha election into power, the new finance

minister p Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1st

April 2010. However, in 2011, with the Trinamool congress routing (M) CPI out of power in West Bengal,
Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of

the task had been done. In the 2014 Lok Sabha election, the Bhartiya Janata Party-led NDA government

was elected into power with the consequential dissolution of the 15th Lok Sabha the GST Bill-approved by
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the standing committee for introduction lapsed seven months after the formation of the then Modi

government the new finance minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP
had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May

2016 the Lok Sabha passed the constitution amendment bill passing the way for GST.

LAUNCH

The GST was launched at midnight on 1 July 2017 by the president of India, and the government of India.

The launch was marked by a historic midnight session of both the houses of parliament convened at the

central hall of the parliament. Though the session was attended by industry including Ratan Tata, it was

boycotted by the opposition due to the predicted problems that it was bound to lead for the middle and
lower class Indians. It is one of the few midnight sessions that have been held by the parliament the

others being the declaration of India’s independence on 15 August 1947 and the silver and golden jubilees

of that occasion. Members of congress boycotted the GST launch altogether. They were joined by the

members of the train band.

MORE ABOUT GST

TAX SUBSUMED
The single GST subsumed several taxes and lorries which included central excise duty sub charges state
leaders value-added tax and Octroi other levies which were applicable on interstate transportation of

goods have also been done away net the GST regime. GST is levied on all transactions such as sale transfer

purchase barter lease or import of goods and services. India adopted a dual GST model meaning that
taxation is administered by both the union and state governments.

HSN CODE
HSN is an 8 digit code for identifying the applicable rate of GST on different products as per GST rules. IF a

company has a turnover of up to 1.5 crores in the proceeding financial year then they need not mention

the HSN code while supplying goods on invoices. If a company has a turnover of more than 1.5 Cr. Then
they need to mention the first two digits of the HSN code while invoices.
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RATE
The GST is imposed at a variable rate on variable items. The rate of GST is 18% for soaps and 28% for

washing detergents. On GST on movie tickets is based on slabs, with 18% GST for tickets that costs less

than Rs 100 and 28% on tickets costing more than Rs 100. Check posts across the country were abolished
ensuring free and fash movements of goods. The central government had proposed to insulate the

revenues of the states from the impact of GST, with the expectation that in due course, GST will be levied

on petroleum and its products. The government has ensured rates of compensation for any revenue loss
incurred by them from the date of GST for five years. However, no concrete laves have yet been made to

support such action.

E-WAY BILL
An E-way bill is an electronic permit for shipping goods similar to a waybill. It was made mandatory for

interstate transport of goods from 1 June 2018. It is required to be generated for every interstate

movement of goods beyond 10 kilometres and the limit of 50,000. The pilot started on 1st February 2018

but was withdrawn after glitches in the GST network. The state is divided into four zones.

INTRA-STATE E-WAY BILL

The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, and Telangana which amount to
61.8% of the interstate e-way bill from 15 April 2018 to further reduce tax evasion. It was successfully

introduced in Karnataka on 1 April 2018.

REVERSE CHARGE MECHANISM

The reverse charge mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of

unregistered, smaller the tax on behalf of suppliers. The receiver of the goods is eligible for the Input tax
credit, while the registered dealer is not. In the notification noted on 29th January 2019, the Indian

government has finally implemented the RCM (reverse charge mechanism) which started on 1st February
2019 as per the GST acts and amendments. Also to note that the up to INR 5000 exceptions will be
removed effectively.

GOODS KEPT OUTSIDE THE GST

Alcohol for human consumption

Petrol and petroleum products (GST will apply at a later date ) viz.

Petroleum crude, high-speed diesel, motor spirit ( petrol) natural gas aviation turbine fuel.

GST COUNCIL

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GST council is the governing body of GST having 33 members. It is chaired by the Union Finance Minister.

GST council is an apex member committee to modify, council, or produce any law or regulation based on
the content of goods and services tax in India. The council is headed by the union finance minister
Nirmala Sitharaman assisted the finance minister of all the states of India. The GST council is responsible

for any revision or enactment of rules or any rate changes of the goods and services in India. 

GOODS AND SERVICE TAX NETWORK

The GST N software is developed by Infosys Technologies and the information Technology network that
provides the computing resources is maintained by the NIC “Goods and Services Tax “ Network (GSTN) is a
non-profit organization formed for creating a sophisticated network accessible to stakeholders,

government and taxpayers to access information from a single source (petrol). The portal is accessible to
the tax authorities from tracking down every transaction, while taxpayers can connect for their tax
returns. The GSTNS authorized capital is 10 crores (US$1.4 million) which initially the central government

held 24.5 per cent were held by non-government financial institutions, HDFC hold 20%, ICICI holds 10%
NSE Strategic Investment holds 10% and LIC housing finance holds 11%

NEED FOR GST IN INDIA

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THE TAX STRUCTURE WILL BE SIMPLE

At present there is a huge member of taxes that has to pay by consumers with GST it will single tax to pay

which is must easier for businesses according to complexities will reduce and results in less paperwork
which will save both time and money GST will increase economic GDP by 2% -2.5%.

INCREASE IN TAX REVENUE

A simple tax structure will bring more taxpayers and in return, it will be the revenue for the government.

COMPETITIVE PRICING
GST will eliminate all other taxes of indirect taxes and this will effectively mean that the tax amount paid
by end-users will reduce. As in economics, the lower will the prices more will be demand for that product.

STATISTICS
RETURNS
Around 38 lakhs new taxpayers have registered under the GST regime and the total count has crossed one
crore if we include the 64 lakh earlier novels. The total number of taxpayers was above 1.14 crore in
October 2018

  2018-19   2017-18  

Month No. of returns Change No. Change

March        

February        

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January 73 30 lakh      

December 72 44 lakh   67 lakh  

November 69 60 lakh   64 lakh  

October 67 45 lakh   65 lakh  

September     69 lakh  

August     67 lakh  

July     63 lakh  

June        

May        

April        

IMPACT OF GST

FOR WHOLESALERS
TRANSPARENT TAX MANAGEMENT

The introduction of technology into the taxation system can be a blessing in disguise, an opportunity to

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bring about transparency in tax management. Rather than relying on cash transactions, the wholesalers
will now get an opportunity to go digital.

FINANCIAL STREAMING
Because the entire supply value chain including tax forms will be on GST records wholesalers will be
better connected to retailers and suppliers this will make it easier to process payments and get tax

returns promptly thereby improving the cash flows.

RE-ORGANISATION OF SUPPLY CHAIN

GST will enable high visibility and streamlining of the supply chain providing wholesalers with a
transparent view of supply movements. However, in the initial transition phase, many wholesalers may

undergo de-stocking since they would have already paid VAT on their current stocks.

EASE OF BORROWING THROUGH DIGITAL LENDING

Because financial and tax transactions will now be recorded in the GST system even small traders will
have digital records that will act as a ready reckoner of information when a trader opts for a loan.

Financial institutions and online lenders like capital float can now easily access the loan eligibility of
small traders such as Kirana owners by accessing this data and providing them with quick and easy

loans.

FOR RETAILERS
IMPORT TAX CREDIT FACILITY

Retailers would be able to claim taxes paid for input products and services availed. This will present a
cost advantage to retailers. Under GST they will be able to claim the tax paid on the most refrigerator
when they file their taxes.

EASE OF ENTRY INTO THE MARKET

The market is expected to become more business-friendly due to the clarity of processes related to the
procurement of raw materials and better supply logistics.

BETTER BORROWING OPPORTUNITY

The retailer’s scope for business growth can be increased by increasing the retailer’s access to finances.
This is where fintech conders like capital float slip in they can ease their passage to the new regime.
Capital float recognizes the financial challenges.

FOR IMPORTERS AND EXPORTERS

IMPORTS TAXATION

Every import will be treated as an interstate supply and will be subject to integrated goods and services
tax along with basic customs Duty.

1 duties+taxes payable Basic customs Duty GST (18%) GST cess (if applicable)
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2800 1000 1800 Nil

EXPORTS TAXATION
Exports will be treated as zero-rated supply i.e. no GST will be charged on exports. This is in line with the
“make in India” campaign that aims to make India a global manufacturing hub.

IMPORT OF SERVICES

The new clause of import of services is one of the tax payments on the service receiver when the
services are provided by a person riding outside India.

IMPACT ON GROSS DOMESTIC PRODUCT

The biggest tax reform i.e. goods and services tax is now a part of the Indian economy. A new and unified
tax structure is followed for indirect taxation in the place of various tax laws like excise duty service tax,

VAT, CST, etc.

LATEST GDP DATA FOR JAN-MARCH QUARTER

India’s GDP has been recorded at 7.7 per cent in the quarter of January-March, with a fast approach
towards better than 7.0 in the previous quarter with some expectations for 7.6 per cent in the financial

year 2018, to the 7.3 per cent and 7.5 per cent in the FY19 and FY 20 respectively. There is some
hindrance to the GDP number due to GST as speculated by the experts but still, many economists are
likely to maintain around 6.5 per cent.

GST’S POSITIVE IMPACT ON GDP

Now there is only one tax rate for all which will create a unified market in terms of tax implementation
and the transaction of goods and services will be seamless across the states. The same will reduce the

cost of the transaction. In a survey, it was found that 10-11 types of taxes were levied on the road
transport business. So the GST will be helpful to reduce transportation costs by eliminating other taxes.
After GST implementation the export of goods and services will become competitive because of the

effect of cascading effect of taxes on goods and services. GST is more transparent and in comparison to
the previous law provision so it will generate more revenue for the government and will be more
effective in reducing corruption at the same time. Overall GST will improve the tax compliances. The GST

regime has a very powerful impact on many things including GDP.

GST’S NEGATIVE IMPACT ON GDP

In a report, DBS bank noted that initially, GST will lead to a rise in inflammation rate which will remain
for a year but after that GST will affect positively on the economy. As we know Real Estate also plays an

important role in the Indian economy but some experts think that GST will impact the Real Estate
business negatively as it will add up an additional 8 to 10 per cent to the cost and reduce the demand by

about 12 per cent.GST is applied in the form of IGST, CGST, and SGST by the centre and state
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governments but some economists say that there is nothing new in the form of GST although these are

the new names of central excise, VAT, CST, and service tax, etc. Despite having some factors which are
being expected to affect the economy adversely there are expected with a positive impact.

WHAT THE FUTURE LOOKS LIKE

Talking about the long-term benefits it is expected that GST would not mean a lower rate of taxes, but also
minimum tax slabs. Countries where the goods and services tax has helped in reforming the economy

apply only 2 or 3 rates-one being the mean rate a lower rate for essential commodities and a higher tax
rate for the luxurious commodities. Currently, in India, we have 5 slabs, with as many as 3 rates-an an
integrated rate a central rate, and a state rate. In addition to these cess is all levied. The fear of losing out

on revenue has kept the government from gambling on fever or toner rates. This is very unlikely to see a
shift anytime soon though the government has said that rates may be revisited once the RNR (Revenue
Neutral Rate) is reached.

CRITICISM
Technicalities of GST implementation in India have been criticized by global financial institutions sections

of Indian media and opposition political parties in India. World banks 2018 version of India development
update described India’s version of GST as too complex, noticing various flaws compared to the GST

system prevalent in other countries most significantly the second-highest tax rate among a sample of 115

countries at 28%The opposition congress parties has consistently been among the most vocal opponents

of GST implementation in India with party president and leader of the opposition, Rahul Gandhi slams BJP
for allegedly destroying small businessmen and industrial in the country.

CONCLUSION
On priority, it is up to the government to address the capacity building amongst the lesser endowed

participants such as the small-scale manufacturers and traders. Ways have to be found for lowering the
overall compliance cost and necessary changes may have to be made for the good of the masses. GST will

become good and simple only when the entire country works as a whole towards making it successful.

ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my teacher well as our principal who gave me the

golden opportunity to do this wonderful project on the topic of Goods and service tax, which also helped
me in doing a lot of research and I came to know about so many new things. Secondly, I would also like to

thank my parents and friends who helped me a lot in finalizing this project within a limited time.

BIBLIOGRAPHY
http://blog.capitalfloat.com/impications-gst-trading

http://en.wikipedia.org/wiki/goods-and-services-tax-(India)

http:.//cleartax.in/s/impact-of-GST-on-Indian-economy
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http://blog.saginfotech.com/gst-impact-on-gdp-India

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