GST-The New Era Of The Taxation System M.

com

CHAPTER 1

1.1 INTRODUCTION
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I am Ashwini Ramesh M.com department Sharnbasav University

USN:SG21MCM002. I would like to express my deepest thanks to my internal project guide
our chairperson Dr.R.D.AWANTI sir, for completing my project, whose help stimulating ,
suggestion, encouragement, writing this report and giving me an excellent and valuable
guidance during the completion of project.

I also thankful to Mr IRANNA N Gobbur Chartered Accountant external guide for their
guidance and constant supervision as well as for providing necessary information regarding
the project & also for their support in completing the project.

Table Displaying The Introduction Of Vat In India By Year

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Year Of Introducing Mode Of Vat

1986 Modvat Inputs
1994 Modvat For Capital Goods

2002 AND 2003 Service Tax Credit

2004 Cross – Sectorsl Credit

2005 Vat

2000 Gst Proposed

2017 Gst Implemented

1.2 OBJECTIVE OF THE STUDY

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

 To obtain a true insight of GST
 To analyse the impact of GST over Gross Domestic Product (GDP)
 To make a comparative study of GST and other taxes in India
 To increase tax compliance
 To Achieve the policy of one nation one tax
 To reduce the tax avoidance and corruption
 To provide a seamless credit of input tax
 To subsumed all the indirect taxes at the centre and state level
 To increase the tax to GDP ratio and the revenue surplus

1.3 SCOPE OF THE STUDY

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With the exception of alcoholic beverages for human consumption, all commodities
and services are subject to the goods and services tax. It has been stipulated that until a date
announced on the advice of the goods and services tax council, petroleum and petroleum
products shall not be subject to the levy of goods and services tax.

Every transaction involving the supply of goods and services is subject to the GST,
with the exception of those involving exempt products and services, goods that fall outside
the scope of the GST, and transactions that fall below certain thresholds. Electricity and
alcoholic beverages intended for human consumption are exempt from the GST.

1.4 RESEARCH METHODOLOGY

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PRIMARY DATA

In order to collect first hand in information we interacted with various departments

and gathered the required information.

Primary Data was collected from various people and their opinion and information for
the specific purposes of study helped to run the analysis. The data was collected through
questionnaire to understand their experience and preference towards GST.

SECONDARY DATA

Our study has based on the basis of secondary data collected from various research
papers, internet, newspapers etc. to present the data in a more comprehensive manner. Finally
some findings have been gathered to establish our objectives.

1.5 LIMITATION OF THE STUDY

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 Adopting to a complete online taxation system

 Increase prices due to software purchase
 GST will mean an increase in operational costs.
 GST came into effect in the middle of financial year.
 SMEs (small and medium sized enterprises)will have a higher tax burden.

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CHAPTER 2

2.1 MEANING AND DEFINITION

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GST, or Goods and Services Tax is an indirect tax imposed on the supply of Goods
and Services. And GST is a consumption based tax charged by the government. It is levied on
the supply of all the goods and services taxable under the GST system in India. The central
government then uses this money in the functioning and administration of the nation. Every
consumer who is adding value in the supply chain will have to pay GST.

DEFINITION

The term GST is defined in Article 366 (12A) to mean “any tax on supply of goods
or services or both except taxes of the alcoholic liquor for human consumption”,

2.2 DEFICIENCIES IN THE VALUE ADDED TAXATION SYSTEM

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In the earlier indirect tax regime, a manufacturer of excisable goods charged excise
duty and value added tax (VAT) on intra=state sale of goods. The earlier indirect tax
framework in India suffered from various shortcomings. Under the earlier indirect tax
structure, the various indirect taxes being levied were not necessarily mutually exclusive.

When the goods were manufactured and sold, both central excise duty (CENVAT)
and state level VAT were levied. Though CENVAT and state level VAT were essentially
value added taxes, set off of one against the credit of another was not possible as CENVAT
was a central levy and state level VAT was a state levy.

Central excise duty value added tax was applicable only at manufacturing level and
not at distribution levels. Service tax was also a value added tax and credit across the service
tax and the central excise duty was integrated at the central level.

2.3 APPLICABLITY AND MECHANISM

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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.

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.

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2.4 HISTORY OF GST

The idea of a nationwide GST in India was first proposed by the kelkar tax force on indirect
taxes in 2000. The empowered committee of state finance minister s prepared a design and

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roadmap, releasing the first discussion paper in 2009. The Constitution Amendment Bill was
introduced in 2011 but faced challenges regarding compensation to states and other
issues.After years of deliberation and negotiation between the central and state governments,
the constitution (122nd Amendment) Bill, 2014, was introduced in the parliament

The goods and services tax (GST) is a successor to value added tax (VAT) used in India on
the supply of goods and services. GST is a new era of taxation system of VAT which is
digitalized form of VAT where the goods and service both are included in the taxation system
of GST. It is a comprehensive, multistage, destination based tax. Goods and services tax
which is imposed on goods and services on the bases of five different slabs for collecting tax
like 0%, 5%, 12%, 18%, 28%. However petroleum products, alcoholic for drinks and
electricity are not taxed under GST. There is a special rate of 0.25% on rough precious and
semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28%
GST applies on several items like aerated drinks, luxury cars and tobacco products. Pre GST,
the statutory tax rate for most goods was about 26.5%, post-GST most goods are expected to
be in the 18% tax range. The main aim of this taxation system is to check the cascading effect
of other indirect taxes and it is applicable throughout India.

2.5 SALIENT FEATURES OF GST

 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.

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 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.

2.6 TYPES OF GST

 SGST (State goods and service tax )

Similar to CGST, SGST is levied on purchases of goods and services made inside a state

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 CGST (central goods and service tax )

Central goods and services tax it is levied by the central government on the intrastate
movement of goods and services, i.e, transactions within one country.

 IGST (Integrated goods and services tax)

Integrated goods and services tax means the tax levied under this act on the supply of any
goods or services in the course of inter-state trade or commerce and for the purpose.

 UTGST (Union Territory goods and Services Tax)

The tax is nothing but the GST applicable on the goods and services supply that takes place
in territory of India including,

Union Territory with state legislature:

Delhi, panducharry, Jammu and Kashmir.

Union Territory without state legislature:

Andaman and Nicobar Islands, Chandigarh, Daman and Diu and

Dadra and Nagar havell, Lakshadweep.

2.7 ADVANTAGES AND DISADVANTAGES OF GST

ADVANTAGES:

1. Decrease in the cost of goods

2. Ease of doing business
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3. Developing common national market

4. Reduction in tax evasion
5. Goods becoming cheaper
6. Attracting foreign investment
7. Take system becomes more transparent, regular and predictable.

DISADVANTAGES:

1. Increased costs due to software purchase

2. Not being GST compliant can attract penalties
3. GST will mean an increase in operational costs
4. Adapting to a complete online taxation system
5. SMEs (small and medium sized enterprises) will have a higher tax.

2.8 IMPACT OF GST ON MANUFACTURES, DISTRIBUTORS, AND

RETAILERS.

GST, the biggest tax reform in India since independence, also brought with it a host of
questions from all the different industrial sectors in the country. While efforts have been

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made to help every sector grow and flourish further, the impact of GST has been as diverse
as the demographics of the country.

GST AND MANUFACTURERS

The effect of GST on the manufacturing sector has been mostly positive. It has helped in
reducing the cost of production and simplified the entire tax system. Under the previous tax
regime, manufacturers were required to pay around 25%-26% more due to the cascading tax
effect. GST has eliminated this ‘tax-on-tax’ regime, enabling manufacturers to pay a single,
unified tax. This means that a large number of goods have got cheaper, leading to more sales.

GST IMPACT ON RETAILERS

More than 90% of the retail industry in India is unorganised and works on cash payments. As
GST is an online tax system which is levied at every stage where value is added to goods or
services, GST impact on small retailers has been positive too. The input tax credit facility and
easier entry into new markets have been some of the biggest advantages of GST for the
retailers.

IMPACT OF GST ON DISTRIBUTORS

Distributors, along with wholesalers, play a vital role in the nation's supply chain. The GST
impact on distributors and wholesalers is widely criticised as it is claimed to increase their tax
liabilities. This is not quite true in most Scases. It is just that the entire supply chain can be
tracked online with GST and this prevents tax evasion which was widely prevalent in
distribution and wholesaling in the past. While the GST impact on telecom distributors is
currently considered unfavourable due to the high GST rate on telecom services, it is
expected that the telecom sector would be moved to a lower GST tax bracket in the future.

CHANGING FACE OF INDIA UNDER NEW TAX REGIME

While the impact of GST on retailers, manufacturers, and distributors are not what many of
the industries were expecting, the unified tax regime is more focused upon the greater good
of the country. While there have been some hits and misses in the past two years, more
changes are expected in the future to help each member of the supply chain.

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INPUT TAX RATE

CEMENT 28%
Blocks of marbles granite 12%
Steel 18%
Marble and granite 28%
Lifts and elevators 28%
Sand lime bricks and fly ash bricks 12%
Natural sand, pebbles, gravels 5%

2.9 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

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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

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.

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 There is TDS & TCS mechanism under specified circumstances.

WHO CAN OPT 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 AVILING 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.

WHAT ARE THE ADVANTAGE 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

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➢ High liquidity as taxes are at a lower rate.

WHAT ARE THE DISADVANTAGE OF COMPOSITION SCHEME

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.

2.10 BENEFITS OF GST BILL IMPLEMENTATION

The tax structure will be made lean and simple.

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 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 consumers.

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.

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 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.

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CHAPTER 3

CA PROFILE

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BRIFE PROFILE

Name : CA Iranna N, Gobbur

Address : H. No. 3-26, Saraswati Godam, Super market Main Road,

Gajipur, Kalaburagi-585101, Karnataka

Qualification : B.com, ACA

Profession : Practicing Chartered Accountant

Status : Proprietorship

Established : Year, 2021

No of professional Associated – 3.3

Telephone : 9620906568

E-mail : cairannagobbur@gmail.com

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