PROJECT REPORT

(Submitted for the degree of B.Com Honors in Accounting and Finance/ Marketing under the
University of Calcutta)

TITLE OF THE PROJECT

GST – The New Era of The Taxation System

Submitted By

Name :

C.U. Registration No :
C.U. Roll No :
Name of the College :
College Roll No :

COLLEGE LOGO HERE

Name of the the supervisor :

Submission of Months :

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 Annexure-1

SUPERVISOR’S CERTIFICATE

This to certify that *Student's Name*, a student of B.Com (Honors) in Accounting and

Finance of *College Name* under the University of Calcutta has worked under my

Supervision and guidance for her project work and prepared a project report with the

Title “GST – The New Era of Taxation System”.

The project report, which she has submitted is her genuine and original work to the best of
my knowledge.

Place: (Signature)

Date: Name: *Professor's Name*

College Name: *College Name*

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 ANNEXURE -2

STUDENT’S DECLARATION

I hereby declare that the project work with the title “GST -The New Era of Taxation System”

Submitted by me for the partial fulfillment of the degree of B.COM Honors in Accounting

& Finance under the University of Calcutta is my original work and has not been not
submitted earlier to any other university/ institution of the requirement for any course

of study.

I also declare that no chapter of this manuscript is whole or in part has been incorporated in
this report from any earlier work done by others or by me. However, extracts of any
literature which has been used in this report has been duly acknowledged by providing
details of such literature in the references.

Signature: *Student's Signature*

Address: *Student's Address*

Reg. No: *Student's Registration No.*

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 ACKNOWLEDGEMENT

It is a matter of great pleasure to present this project on “GST–The New Era of Taxation
System.”

I take this opportunity to thank our respected principal for giving me an opportunity to work
on this field.

I am very thankful to my supervisor Prof. *Supervisor's Name* for her full support in
completing this project work.

Finally, I am grateful for the support of my family / friends / others and would also like to
thank them for co-operating with me to carry out these research work and help me with the
project work by filling up the questionnaire / report.

*Student's Name*

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 TABLE OF CONTENT

SI. NO PARTICULARS PAGE NO.

1 Annexure - I -

2 Annexure - II -

3 Acknowledgement -

4 Chapter 1 - Introduction 6-8

5 Chapter 2 - Conceptual Framework 9 - 21

6 Presentation of Data Analysis 21 - 31

7 Conclusion and Recommendation 32 - 32

8 Bibliography 33 - 33

9 Questionnaires 34 - 35

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 CHAPTER – 1

1. Back ground
2. Justification of GST.
3. Objective of the study.
4. Brief review of literature.
5. Limitation of the study.
6. Chapter planning.

INTRODUCTION
1.1 Background

Introduction of the Value Added Tax (VAT) At the Central and the state level has been considered to be
a major step -an important step forward in the globe of indirect tax reforms in India. If the VAT is a
major improvement over the preexisting Central excise duty at the national level and the sales tax
system at the state level, then the goods and services tax(GST) will indeed be an additional important
perfection -the next logical step-towards a widespread indirect tax reforms in the country. Initially, it
was conceptualized that there would be a national level goods and services tax, however, with the
release of first discussion paper by the Empowered Committee of the State Finance Ministers on
10.11.2009, it has been made clear that there would be a “Dual GST” in India, taxation power-both by
the center and the state to levy the taxes on the Goods and Services. Almost 150 countries have
introduced GST in some from. While countries such as Singapore and New Zealand tax virtually
everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of
exemptions. In China, GST applies only to goods and the provision of repairs, replacement and
processing services. Under the GST scheme, no distinction is made between goods and services for
levying tax. In other words, goods and services attract the some rate of tax. GST is a multi-tier tax where
ultimate burden of tax fall on the consumer of goods/services. It is called as Value Added Tax because at
every stage, tax is being paid on the Value addition. Under the GST scheme, a person who was liable to
pay tax on his output, whether the provision of service or sale of goods, is entitled to get input tax credit
(ITC) on the tax paid on its inputs.

1.2. Justification of GST

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 The introduction of GST at the Central level will not only include comprehensively more indirect Central
taxes and integrate goods and service taxes for the purpose of set-off relief, but may also lead to
revenue gain for the center through widening of the dealer base by capturing value addition in the
distributive trade and increased compliance. In the GST, both cascading effects of CENVAT and service
tax are removed with set-off, and a constant chain of set-off from the original producer’s point and
service provider's point up to the retailer's level is established which reduces the burden of all cascading
effects. This is the real meaning of GST, and this is why GST is not simply VAT plus service tax but an
improvement over the previous system of VAT and disjointed service tax. Moreover, with the
introduction of GST, burden of central sales tax (CST) will also be removed. The GST at the state level is
therefore, justified for-

➢ Additional power of levy of taxation of services for the states

➢ System of comprehensive set-off relief

➢ subsuming of several taxes in the GST

 Removal of burden of CST.

1.3 Objectives:

 To understand the meaning of Goods and services Tax (GST)

 To obtain a true insight of GST
 To analyze the impact of GST over Gross Domestic Product(GDP)
 To make a comparative study of GST and other Taxes in India.

1.4 Brief Review of Literature on GST:

Before we proceed with the finer nuances of proposed Indian GST, let us first understand the
basic concept of GST. GST is a value added tax levied on manufacture, sale and consumption of
goods and services. GST offers comprehensive and continues chain of tax credits from the
producer’s point/service provider's point up to the retailer’s level/consumer's level thereby
texting only the Value Added at each stage of supply chain. The supplier at each stage is
permitted to avail credit of GST paid on the purchase of goods and/or Services and can set off
this credit against GST payable on the supply of goods and/or Services to be made by him. Thus,
only the final consumer bears the GST charged by last supplier in the supply chain, with set-off
benefits at all the previous stages. Since, only the Value Added at each stage is taxed or
cascading of taxes under GST system. Further, GST does not differentiate between goods and
services and thus, the two are taxed at a single rate.

1.5 Research Methodology

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 Our study has based on the basis of secondary data collected from various books, journals, magazines,
reports, newspapers, internet etc. We have also collected data from the source of “Department of
Revenue” and “Ministry of Finance”. after analyzed with the help of simple statistical tools. We have
used lucid language to present the Data in a more comprehensive manner. Finally some findings have
been gathered to establish our objectives

1.6 Limitations of The Study:

The study has some limitation on its scope and interpretation of the results. It covers only the narrow
concept of goods and service tax and not the whole, the present study has also the following limitation:

➢ The first and most shortage of Time, in fact we have not sufficient time for in-depth analysis,
international comparison and other analysis of data. this has indeed restricted our study to our
mission.

➢ There are few common and unavoidable general problems in collecting secondary data,
which are required for our study.

➢ There was a problem of cost involved in earning out the project.

1.7 Chapter Planning:

 INTRODUCTION
 CONCEPTURAL FRAMEWORK
 GLOBAL SCENARIO
 PRESENTATION OF DATA ANALYSIS
 CONCLUSIONS
 BIBLIOGRAPHY

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 CHAPTER -2
1. Definition
2. Applicability and Mechanism of GST
3. Salient Features of GST Model
4. GST- Overview, Registration & returns
5. Opportunities
6. Benefits of GST Implication

2.1 DEFINITION

It has been long pending issue to streamline all the different types of indirect taxes and implement a
“single taxation” system. This system is called as goods and services tax (GST). The main expectation
from this system is to abolish all indirect taxes and only GST would be levied. As the Name suggests, the
GST will be levied both on Goods and Services.

GST is a tax that we need to pay on supply of Goods and Services. Any person, who is providing or
supplying goods and services, is liable to charge GST. GST is a consumption based tax/levy. It is based on
the “Destination Principal”.

GST was first introduced during 2007-08 budget session. On 17th December 2014, the current union
cabinet ministry approved the proposal for introduction GST Constitutional Amendment bill. On 19th
December 2014, the bill was presented on GST in Loksabha. The bill will be tabled and taken up for
discussion during the current budget session. The current central government is very determining to
implement GST Constitutional Amendment Bill.

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 2. Applicability and Mechanism

Applicability and mechanism of GST

The GST is an indirect tax which means that the tax is passed on till the last stage where in it
is the customer of the goods and services who bears the tax. This is the case even today for
all Indirect taxes but the difference under the GST is that with streamlining of the multiple
taxes the final cost to the customer will come out to be lower on the elimination of double
charging in the system.

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Let us understand the above supply chain of GST with an Example:

The current tax structure does not allow a business person to take tax credits. There is a lot of chances
that double taxation takes place at every step of supply chain. This may set to change with the
implementation of GST. Indian Government is opting for Dual system GST. This system will have two
components which will be known as

 Central Goods and Service Tax(CGST)

 State Goods and Service Tax (SGST)

The current taxes like Excise duties, service tax, custom duty etc will be merged under CGST.
The taxes like sales tax, entertainment tax, VAT and other state taxes will be included in SGST.

3. Salient Features of The GST Model: Salient Features of the proposed Model are as:
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  The GST shall have two components: one levied by the center (referred to as central
GST) and the other levied by the states (referred to as state GST). Rate for central GST
and the state GST would be approved appropriately, reflecting revenue considerations
and acceptability.
 The Central GST and the state GST would be applicable to all transactions of goods and
services made for a consideration except the exempted goods and services.
 The Central GST and state GST are to be paid to the accounts of the Central and the
states individually.
 Since the Central GST and the state GST are to be treated individually, taxes paid against
the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST
and could be utilized only against the payment of central GST.
 Cross utilization of ITC between the Central GST and the state GST would not be
permitted except in the case of inter-state supply of goods and services.
 Ideally, the problem related to credit accumulation on account of refund of GST should
be avoided by both the Central and the states except in the cases such as exports,
purchase of capital goods, input tax at higher rate than output tax etc.

4. Overview, Registration & Returns

Present System: GST

 INTRA STATE SUPPLY: CGST & SGST

 INTER STATE: IGST = CGST + SGST
 IMPORT FROM OUTSIDE INDIA: CUSTOM DUTY (CVD-SAD) & IGST

GST BASICS:

 GST is principally consumption/destination based tax.

 Tax will be payable in the state in which goods and services are consumed.
 No declaration
 No check posts
 SGST will be kept same in all states. However, a price band may be given to states for SGST
rates.
 CGST & IGST rates will be same all over India.
 IGST may be sum total of SGST & CGST i.e. IGST=SGST+CGST

VAT PRINCIPLE IN GST:

 GST will be on basis of value Added Tax (VAT) concept

 VAT to avoid cascading effect of taxes
 ITC (set off) of CGST for CGST and IGST but not for SGST
 ITC (set off) of SGST and IGSST but not for CGST

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  ITC (set off) of IGST for IGST, CGST and SGST in that order
 Credit on basis of Return like 26AS

RATES IN GST:

 SCHEDULE 1 : LIST OF GOODS AT NIL RATE- Meat of bovine animals fresh or chilled,
Natural Honey, Live sheep, goats poultry etc.
 SCHEDULE 2 : LIST OF GOODS AT 0.25% RATES- Diamonds, precious metals, Semi precious
stones etc.
 SCHEDULE 3 : LIST OF GOODS AT 3% RATES –Silver, Gold, Platinum, Beans, Coin, Imitation
jewellery etc.
 SCHEDULE 4 : LIST OF GOODS AT 5% RATE- Vanilla, oats ,Soya beans, Olive oil, Cane sugar,
Cocoa beans, Pizza bread etc.
 SCHEDULE 5 : LIST OF GOODS AT 12% RATE- Beverages, contacting milk, live horses,
stream, Cheese, Granite Blocks, Stream, Feeding bottles etc.
 SCHEDULE 6 : LIST OF GOODS AT 18% RATE- Kajal pencil sticks, hair oil, toothpaste, Gum,
Tall oil, Activated carbon, photographic plates & films etc.
 SCHEDULE 7 : LIST OF GOODS AT 28% RATE- Molasses, Chewing gum, cocoa butter, pan
masala etc.

TAXABLE EVENT:

Taxable event is supply of goods and services being payable by the supplier at the time of supply on
a forward charge basis.

In certain notified matters, liability of GST will be on recipient of goods and services under a
reverse charge mechanism.

There is TDS & TCS mechanism under specified circumstances.

SUPPLY:

Supply includes all forms of Goods and Services-

 Such as sales, transfer, barter, license, exchange, rental, lease or disposal made or agreed to
be made for a consideration by a person in the course of furtherance of business.
 Importation of Service where the same is not for a consideration and whether or not it is in
the course of furtherance of business.
 Schedule-I to schedule-IV describes what would be supply or supply of goods/Service or
would not be supply.
 Sale of under construction properties, temporary transfer of intellectual property rights,
intangible property, works contracts, transfer of right to use any goods and development,
up graduation, customization of software would be supply of Service.
 Transactions between principal and agents are deemed to be suppliers.
 Supply of goods to job Worker would not be covered.

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ELECTRONIC ERA TO COMMERCE:

 E-REGISTRATION
 E-PAYMENT
 E-RETURN

WHO CAN OPT FOR COMPOSITION SCHEME:

A taxpayer whose turnover is below Rs. 1.5Crore* can opt for composition scheme. In case of North
Eastern states and Himachal Pradesh, the limit is now Rs. 75 lakh.

Turnover of all businesses registered with the same PAN should be taken into consideration to
calculate turnover.

WHAT ARE THE CONDITIONS FOR AVAILING COMPOSITION SCHEME?

 No input tax credit can be claimed by a dealer opting for composition scheme.
 The taxpayer cannot make any inter-state supply of goods.
 The dealer cannot supply GST exempted goods.
 Taxpayer has to pay tax at normal rates for transportations under reverse charge system.
 If a taxable person has different segments of businesses (such as textile, electronic
accessories, groceries etc.) under the same PAN, they must register all such businesses
under the scheme collectively or opt out of the scheme
 The taxpayer has to mention the words “Composition Taxable Person” on every notice or
signboard displayed prominently at their place of business.
 The taxpayer has to mention the words “composition taxable person” on every bill of
supply issued by him.
 Those supplying goods can provide services of up to Rs. 5 lakh

HOW CAN A TAXPAYER OPT FOR COMPOSITION SCHEME?

To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be
done online by logging into the GST portal.

This intimation should be given at the beginning of every financial year by a dealer wanting to opt
for composition scheme.

WHAT ARE THE GST RATES FOR A COMPOSITION DEALER?

Following chart explains the rate of tax on turnover applicable for composition dealers:

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WHAT ARE THE RETURNS TO BE FILED BY A COMPOSITION DEALER: A dealer
is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also,
an annual return GSTR-9A has to be filled by 31st December of next financial year.

Also, note that a dealer registered under composition scheme is not required to maintain detailed
records.

WHAT ARE THE ADVANTAGES OF COMPOSITION SCHEME?

The following are the advantages of registering under composition scheme:

 Lesser compliance (returns, maintaining books of record, issuance of invoices)

 Limited tax liability
 High liquidity as taxes are at a lower rate.

WHAT ARE THE DISADVANTAGES OF COMPOSITION SCHEM?:

Let us now see the disadvantages of registering under GST Composition scheme:

 A limited territory of business. The dealer is barred from carrying out inter-state
transactions.
 No input tax credit available to composition dealers.
 The taxpayer will not be eligible to supply exempt goods or goods through an ecommerce
portal.

REGISTRATION:

Advantages of registration:-

 Plays very important role in any tax statute.

 Determines jurisdiction of a particular authority.
 Unique identification.

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  Link transactions.
 Proper accounting of input taxes paid.
 GST collection.
 Legally recognized as supplier of goods and services.
 Pass on the credit of taxes paid on the goods or Services supplied to purchase or
recipients.
 Without GST registration, a legal person can neither collect GST nor claim any input
tax credit of GST paid by him.
 Service compliances: Tax-Returns-Assessment or any communication.

EXEMPTION FROM PAYMENT OF TAX :

 Taxpayers with an aggregate turnover of Rs. 20 lakhs would be exempted from tax. For,
North Indian states and Sikkim, the exemption would be Rs. 10 lakhs.
 Aggregate turnover shall include the aggregate value of all taxable and non-taxable/ non
GST supplies, exempt/ nil-rated supplies and exports of goods and/ or Services and exclude
taxes under GST.

5. OPPORTUNITIES AN END TO CASCADING EFFECTS:

This will be the major contribution of GST for the business and Commerce. At present, there are
different state level indirect tax levies that are compulsory one after another on the supply chain till
the time of its utilization.

GROWTH OF REVENUE IN STATES AND UNION:

It is expected that the introduction of GST will increase the tax base but lowers down the tax rates
and also removes the multiple point. This will lead to higher amount of revenue to both the states
and the union.

REDUCES TRANSACTION COST AND UNNECESSARY WASTAGES:

If government works in an efficient mode, it may be also possible that a single registration and
single compliance will sufficient for both SGST and CGST provided government produces effective
IT infrastructure and integration of such infrastructure of states level with the union.

ELIMINATES THE MULTIPLICITY OF TAXATION:

One of the great advantages that a taxpayer can expect from GST is elimination of multiplicity of
Taxation. The reduction in the number of Taxation applicable in a chain of transaction will help to
clean up the current mess that is brought by existing indirect tax laws. ONE-POINT SINGLE TAX:

Another feature that GST must hold is it should be “one-point single Taxation”. This also gives a lot
of comforts and confidence to business community that they would focus on business rather than
worrying about taxation that may crop at later stage.

6. BENEFITS OF GST BILL IMPLEMENTATION

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➢ The tax structure will be made lean and simple.

➢ The entire Indian market will be a unified market which may translate into lower business costs.
It can facilitate seamless movement of goods across states and reduce the transaction costs of
business.

➢ It is good for export oriented business. Because it is not applied for goods/Services which are
exported out of India.

➢ In the long run, the lower tax burden could translate into lower prices on goods and consumer’s.
➢ The suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on
input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for
consumer’s.

PROCEDURE OF GST:

 Every person who is registered under the pre-GST law (i.e., Excise, VAT, Service tax etc.)
Needs to register under GST.
 When a business which is registered has been transferred to someone, the transferee shall
take registration with effect from the date of transfer.
 Anyone who drives inter-state supply of goods**
 Casual taxable person
 Non-resident taxable person.
 Agents of a supplier.
 Those paying tax under the reverse charge mechanism.
 Input Service distributor.
 E-commerce operator or aggregator.
 Person supplying online information and database access or retrieval Services from a place
outside India to a person in India, other than a registered Taxable Person.

WHAT ARE THE DOCUMENTS REQUIRED TO REGISTER UNDER GST:

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PAN is mandatory to apply for GST registration (except in case of non-resident).

The document/ details required to register for GST are:

GST REGISTRATION FEES:

Business can register for GST and obtain GSTIN free of cost.

However, GST registration is a tedious 11 step process which involves submission of many Business
details and scanned documents.

You can opt for clear tax goods and services tax (GST) Registration Services where a GST expert will
assist you end to end with GST registration.

WHAT IS GSTIN?

All businesses that successfully register under GST are assigned unique Goods and Services
tax Identification Number also known as GSTIN.

TAX INVOICE, CREDIT & DEBIT NOTES:

There shall be separate invoice for taxable supplies called as tax invoice. For non-taxable goods a
bill shall be issued.

POINT OF TAXATION (TIME OF SUPPLY): FOR GOODS:

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  Normal supply of goods- earliest of removal of goods (in case of movable) made available to
recipient (non-movable) invoice raising, recipient of payment, accounting books.
 Continuous supply of goods- on successive payments/ statement of account or invoice/
payment.
 Confirmation of supply.

FOR SERVICES:

1. Normal Supply Of Services

 When invoice raise within time- Earliest of invoice raising or recipient of payment.
 Otherwise- Earliest of completion of service, receipt of payment or accounting in
books.
2. Continuous supply of Services- when due date is ascertainable from contract, the due date
else each time payment is received/ invoice issued, in case payment is linked to completion
of event.
3. REVERSE CHARGE:

Earliest of date of receipt of goods/Services, payment, invoice, Accounting in books.

PLACE OF SUPPLY:

FOR GOODS: Place where the goods are delivered except in case of Goods not involve movement,
assembled/ installed at site- location of goods.

FOR SERVICES:

In case of a registered person- location of such registered person.

In case of a unregistered recipient- address the recipient and if it is not available, the location of the
supplier of Services.

PAYMENT OF CHALLANS:

FEATURES OF PAYMENT PROCESS UNDER PROPOSED GST SCHEME

Tax payable as per return shall be paid on or before the last date for filling the return, i.e. on or
before 20th of the next month in case of monthly return.

PROPOSED MODE OF PAYMENTS:

Payment of challah can be through internet banking through authorized banks or credit/debit card
or over the counter payment (OTC) through authorized banks or payment through NEFT/ RTGS
from any bank.

Payment by book adjustments would not be allowed.

BIRD'S EYE VIEW OF GST RETURNS:

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 MAINTENANCE OF RECORD:

Every registered person shall be required to keep and maintain records of production, inward and
outward supplies, stock, input tax credit availed, tax payable and paid at least for 60 months.
AUDIT:

 Audit of all returns compulsorily.

 Around 70% state- 30% central.

REFUND PROCESS:

Refund may arise on account of

 Excess payment of tax due to mistake or inadvertence.
 Export of goods/Services.
 Finalization of provisional assessment.
 Refund of pre-deposit for filling appeal.
 Payment of duty/tax during investigation but no/ less liability arises at the time of
finalization of investigation/adjudication.

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  Refund of tax payments on purchases made by Embassies or UN bodies.
 Tax credit on inputs used for manufacturing/generation/production/creation of tax free
supplies or Non- GST supplies.

CHAPTER -3

Presentation, Analysis & Findings

1. Present taxes to be subsumed
2. Need of Goods and Service Tax(GST)
3. GST Analysis & Opinions
4. Impact of GST On Automobile Industry
5. Global Experience of GST

1. GST SUBSUMED PREVIOUS TAX STRUCTURE

GST proposes to subsume the following indirect taxes currently levied by the Central Government
(CG) and the state government (SG).

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  All goods and services are covered under GST except alcoholic liquor for human consumption.
Excise duty would be levied by the SGs on production and VAT would be levied by the SGs on
sale of liquor for human consumption
 5 petroleum products namely, petroleum crude, natural gas, motor spirit (petrol), high speed
diesel and aviation turbine fuel would be brought under GST from the date to be notified on
recommendation of GST council. These 5 petroleum products continue in the union list of
articles 246 of the constitution of India for excise duty & state list for VAT. Other petroleum
products like LPG, Naphtha, kerosene, fuel oil etc. Would be covered under GST.
 Tobacco products are covered under GST and the CG is empowered to levy Excise duty on the
same over and above GST.

2. NEED OF GOODS AND SERVICE TAX (GST) :

India has a 3-tier federal structure, compromising the union Government, the state government and the
urban / rural local bodies. The power to levy taxes and duties is distributed among the 3 tires of
governments, in accordance with the provisions of the India Constitution. Principal indirect taxes levied
in India are listed.

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3. GST ANALYSIS AND OPINIONS:

GST has brought in “one nation one tax” system, but its effect on various industries is slightly different.
The first level of differentiation will come in depending on whether the industries deals with
manufacturing, distributing and retailing or is providing a service.

IMPACT OF GST ON MANUFACTURERS, DISTRIBUTOR AND RETAILERS:

GST is a boost competitiveness and performance in India’s manufacturing sector. Declining export and
high infrastructure spending are just some of the concerns of the sector. Multiple indirect taxes had also
increase the administrative cost for manufacturers and distributors and with GST in place, the
compliance burden has eased and this sector will grow more strongly.

But due to GST business which was not under the tax bracket previously will now have to register. This
will lead to lesser tax evasion

IMPACT OF GST ON SERVICE PROVIDER:

As of March 2014, there was 12, 76,861 service tax assesses in the country out of which only the top 50
paid more than 50% of the tax collected nationwide. Most of the tax burden is borne by domains such as

23
it services, the insurance industry, business support services, banking and financial services, etc. This
Pan-India business already worked in unified market, and when she compliance burden becoming lesser.
But they will have to separately register every place of business in each state.

SECTOR WISE IMPACT ANALYSIS:

 E-COMMERCE: The E-Commerce sector in India has been growing by leaps and bounds. In
many ways, GST will help the E-Commerce sectors continued growth, but the long-term effects
will be particularly interesting because the GST law specifically proposes a tax collection at
source (TCS) mechanism, which E-Commerce companies are not to happy with. The current rate
of TCS is at 1%.
 TELECOMMUNICATION: In the telecom sector, prices will come down after GST.
Manufacturers will save on cost through efficient management of inventory and by
consolidating their warehouses. Handset manufacturers will find it easier to sell their equipment
as GST has negated the need to set up state-specific entities, and transfer stocks. This will also
save on logistics costs.
 TEXTILE: The Indian textile industry provides employment to a large number of skilled and
unskilled workers in the country. It contributes about 10% of the total annual export, and this
value is likely to increase under GST. GST would affect the cotton value chain of the textile
industry which is chosen by most small medium enterprises as it previously attracted zero
central excise duty (under optional route).
 FMCG: The FMCG sector is experiencing significant savings in logistics and distribution costs as
the GST has eliminated the need for multiple sales depots.
 AUTOMOBILES: The automobile industry in India is a vast business producing a large number of
cars annually, filled mostly by the huge population of the country. Under the previous tax
system, there were several taxes applicable. on this sector like exercise, VAT, sales tax, road tax,
motor vehicle tax, registration duty which will be subsumed by GST.

4. IMPACT OF GST ON AUTOMOBILE DEALER’S INDUSTRY:

The Indian auto industry is one of the largest in the world. The industry accounts for 7.1% of the largest
in the world. The industry accounts for 7.1% of the country’s gross domestic product (GDP). Almost 13%
of the revenue from Central excise is from this sector and claims a size 4.3% of total exports from India.
Despite its contribution to the economy and growth potential, this sector has been combating the
hardship of high tax rates for substantially a long period of time now with central excise duty ranging
between 12.5% to 30% coupled with introduction of multiple cases ant revenues whims and fancies,
most recent being infrastructure chess.

Thus, introduction of GST shall be a breather for this sector wherein taxes on vehicle are largely
expected to be @ 18% in GST regime except for luxury cars where the rate may go up to 28% plus cases.
However, even this rate of taxation will be beneficial of this industry. The article focuses on the supply

24
chain part of this industry that is the “automobile dealers”. Therefore, this article examines the
intricacies of GST on automobile dealers.

BEFORE GST, DEALERS ARE PAYING FOLLOWING INDIRECT TAXES:

 Service tax (ST) on services both as provider and also as receiver under reverse / joint Charge.
 Value added tax (VAT) / Central sales tax (CST) / on sale of vehicles / spares /Accessories.

IMPACT OF GST ON VARIOUS ASPECTS IS AS EXAMINED BELOW:

1. Impact on Credits:
Currently, automobile dealers are not able to avail CENVAT credit on the following indirect taxes
paid by them.
❖ CST paid on purchase of vehicle, Spares, consumables and accessories.
❖ Excise duty paid on purchase of vehicle, spares, consumable and accessories.
❖ NCCD, auto season infrastructures is paid on purchase of vehicle.
❖ CVD pet on any imported spares, accessories and consumable. ❖ SBC paid on input services.
❖ Reversal of proportionate CENVAT credit of service tax due to trading activity showroom
rent, advertisement expenses etc.

In GST regime, all the above duties / taxes will get subsumed; therefore, dealers should be able to avail
the input tax credit of all its procurement of goods and services.

2. IMPACT ON THE PROCUREMENT COSTS OF VEHICLES:

Since, all of the above taxes get subsumed in the GST; therefore the procurement cost to that extent will
come down as explained below:

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  Since, IGST and cusses shall be fully available as credit in the GST regime, therefore they will not
form part of purchase cost and can be set off from output GST payable on sale of the vehicle.
 Procurements are assumed to be in the course of inter-state. GST rates have been assumed to
be at such levels based on the various news reports and the reports issued by various
committees formed by the Ministry of Finance.

As noted above, reduction in procurement Cost is substantial as cascading of taxes was just adding to
the cost in this sector.

3. IMPACT ON THE SALE PRICE:

Since, the procurement cost reduces in GST and if the benefit of the same is fully passed on to the
customer, then is leads to reduction in sale price of the vehicle as tabulated below:

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(Source: Internet)

Note:-

Assuming that the sale prices at 5% mark up above the purchase price. it is seen from the above
calculation that overall reduction in the purchase cost of the per vehicle ranges from 16 % to 34% and if
full benefit of such reduced prices is passed on to the end consumers then the sale prices of vehicles can
come down in the GST regime which will boost this sectors growth and must have largely positive
impact due to invasion of GST.

4. IMPACT ON WORKING CAPITAL:

Following aspects will impact the working capital of the automobile dealers in the GST regime:

❖ VEHICLE TRANSFERS:

Transfer of vehicle / spares to other premises will be liable for GST if the transfer is in the course of
inter-state trade. Further, if there is separate dealership of a dealer and separate GST registration
number is obtained for each such dealership, then transfer of any goods or services between such
dealerships will also be liable for GST. This shall be block the working capital as the taxes needs to be
paid from own fund and collection of taxes will be at a later date only when such / services evenly sold.

❖ FREE SERVICE COUPON VOUCHERS:

These coupons will be issued at the time of sale of the vehicle. As per the time of supply rule, GST on
such coupons needs to be paid immediately on the date of issue of such vouchers. As per the policy of

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some manufacturers, the amounts in respect of such coupons will be redeemed to the dealers only once
the customer brings the vehicle for repair to the workshop. Therefore, dealer's should have to pay tax
on such coupons immediately on its issue, but they said taxes can be collected from the customers only
when the vehicle comes for the repair leading to unnecessary blocking of fund in taxes.

 ❖ VEHICLE BOOKING ADVANCE: It is quite common in this sector that the vehicles will be booked
in advance on payment of certain amount as token. Currently, VAT is not being paid on such
advances as the same is payable at the time of sale of vehicle. However, this luxury of holding
advances without payment of taxes is clipped in the GST regime and taxes need to be paid on
receipt of the booking advances also. Therefore, dealers either have to pay taxes on the advances
out of its pocket or collect Axis text even on the token advances.
 COMMISSION, WARRANTIES AND INCENTIVES:
Currently, it is very difficult for dealers to pay service tax on accrual basis on the following incomes
and thereby as a system of practice many dealers are paying service tax on receipt basis.
 COMMISSION FROM BANKERS/INSURERS:

As details of the commission will be provided by bankers/insurers at a later date with constant changes
involved. Therefore, generally dealers pay service tax on such receives only upon receipt of commission.

 INCOME FROM MANUFACTURER:

Various commissions, incentives, reimbursements, warranty receipts etc. Are received from
manufacturer. Dealer does not pay taxes on this incomes on accrual basis as the same may or may
not get approved by the manufacturer at a later date. Therefore, currently Service tax is paid on
receipt basis only when the amount is credited by the manufacturer and is reflected in the
manufacturer’s statement.

However, the luxury of paying taxes on receipt basis will not be accepted in the GST regime as
everything will be system driven. Therefore, dealers will have to either get it system connected with
the bankers and manufacturers immediately to ensure smooth transition into the GST regime or else
it would have to take the brunt of taxes on its own due to fault of its vendor.

5. REDUCED CURRENT LITIGATIONS:

Currently this sector is facing on the following areas:

❖ VALUATION IN SERVICING OF VEHICLE: Complexity in bifurcation of the material and labor

component is the servicing of vehicle has led to multiple disputes as both the Service tax and sales tax
authorities demanded taxes on a higher component.

 HANDLING CHARGES:
Weather it is liable for VAT or Service tax has led to demand of taxes from both authorities and
thereby disputes.
 REGISTRATION CHARGES:

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 Disputes were noted on Applicability of Service tax on various charges that are merely collected as
pure agent such as temporary permanent Registrations etc.
 INCENTIVES:
It has been a matter of disputes at a various judicial forum as to whether the incentives received by
the automobile dealers from the manufacturer whether amounts to any “Service” to be liable for
Service tax. Such disputes would end in the GST regime as the tax base for both CGST and SGST
shall be same.

6. IMPACT ON TRASITIONAL CREDITS:

To transfer the existing credits in the GST regime, condition has been kept that such credit must have
been admissible in the GST regime. Therefore, the dealers should be able to transfer the following
credits to the GST regime.

 CREDIT OF SERVICE TAX:

The same must be properly reflected in the last Service tax returns and documentation must be in
place to establish the same. Further, Service tax credit pertaining to cars, spares in stock can also
be availed.
 EXCISE DUTY/CVD:
Since, currently dealers are not availing the credit of excise duty & CVD. Therefore, they need to
ascertain the value of stock as on the appointed day and based on the availability of the invoice,
and credit can be availed. Further, even if proper excise invoice is not available with the dealers still
a percentage as prescribed can be taken as credit to transit its excise credit in the GST regime.
 VAT/SAD:
Similarly, if a dealer is not availing the credit of VAT/SAD current due to restriction in the state VAT
law, then credit can be availed based on the ascertainment of stock as on appointed day. However,
if the credit of VAT is being currently availed then the same needs to be properly reflected in the
last VAT return to transfer such credits to the GST regime.

❖ CREDIT OF CST:

The same can’t be availed subject to possession of appropriate documents for the same in states
where such set off is permissible.

❖ ENTRY TAX:

Credit of some can be availed subject to possession of appropriate documents for the same in
states where such set-off is permissible.
7. IMPACT DUE TO ANTI-PROFITEERING MEASURES:

Since a dealer will be able to take the credit of goods lying in stock, the tax cost would be decrease.
This additional benefits accruing to a dealer is expected to be passed on to the end consumer by

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way of reduction in prices etc. A separate authority will be formed in the GST regime to monitor
the non-compliance of the anti-profiteering matters which could have an adverse impact on the
entire industry especially when the pricing is predefined by the manufacturer. Therefore, it is
imperative for the dealer to establish passing of the GST benefits to its consumers. In this times of
falling prices this may not be

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 4. GLOBAL EXPERIENCE OF GST:

E.G. Australian Experience:

Australian Experience:
 GST is a window into business- indirect tax function more integrated into broader business
focus(DATA).
 Comment by ATO office- “Sunshine is a great disinfectant”.
 Integrity of business system (IBS)- the ATO risk and data integrity focus.
 Multiplier effect of incorrect transaction can lead to significant revenue risk.
 Business going through change our especially at risk (staff changes, organizational restructures
etc.)
 New accounting software or significant upgrades- a risk and a window of opportunity.
 Regional/ Global GST/ VAT reporting requirements.
 Self-Assurance more is coming / light touch / 3-year moratoriums-big ATO focus.

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 CONCLUSION & RECOMMENDATIONS

While successfully completing this project, I have identified that GST drives for boosting up economic
growth of any country. GST is the most logical steps towards the comprehensive indirect tax reform in
our country since independence. GST is lovable on all supply of goods and provision of services as well
combination thereof. All sectors of economic whether the industry, business including Govt.
Departments and service sector shall have to bear impact of GST. All six sense of economy viz., Big,
medium, small scale units, intermediaries, importers, exporters, traders, professionals and consumers
shall be directly affected by GST. One of the biggest taxation reforms in India – Goods and Service Tax
(GST) is all set to integrate state economies and boost overall growth. GST bill create a single. Unified
Indian market to make the economy stronger. Experts say that GST is likely to improve tax collections
and boost India's economic development by breaking tax barriers between states and integrating India
through a uniform tax rate. Under GST, the taxation burden will be divided equitably between
manufacturing and services through a lower tax rate by increasing the tax base and minimizing
exemptions.

Besides various recommendations has come to my mind while doing this project.

 The proactive initiative if implemented properly, government can expect refund of rupees
thousand core.
 GST will simplify our indirect tax structure.
 Government should create more items under zero rated supplies rather than exempt rate
supplies.
 In order to settle the issue, the Govt. Need to play their role by put more efforts in educating
the public about tax.

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BIBLIOGRAPHY

This project has been done with the help of different books, magazines, journals and websites.
My supervisor has also suggested some suggestions. I visited many sites and followed many
journals like:-

 www.caclubindia.com
 www.moneycontrol.com
 www.ey.com
 www.hindustantimes.com
 www.wikipedia.org
 www.finmin.nic.in
 www.economictimes.indiatimes.com
 The Economic Times (News Paper)
 Student’s journals of Institute of Chartered Accountants of India
 Monthly journals of Institute of Chartered Accountants of India
 All about GST- A Complete Guide to Model GST Law .

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QUESTIONNAIRES

1:- Will society get benefit through GST implementation?

A) Yes B) No

2:- Will Central Government collect more Revenue through GST system?

A) Yes. B) No

3:- Will GST block the loopholes of previous indirect taxation system?

A) Yes. B) No

4:- Is GST more beneficial than previous indirect tax structure?

A) Yes. B) No

5:- Will state government collect more Revenue through GST system?

A) Yes. B) No

6:- Will GST boost towards GDP of the Country?

A) Yes. B) No

7:- Will Government control the inflation of price of commodity?

A) Yes. B) No

8:- Do you think GST shall be applicable on necessary Goods?

A) Yes. B) No

9:- Do you think GST shall be applicable on books?

A) Yes. B) No

10:- Do you support GST?

A) Yes. B) No

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SURVEY RESULTS OF GST PROJECT

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