Professional Documents
Culture Documents
RESEARCH REPORT
ON
OF
TO
(2017-18)
SRMU, Lucknow
TABLE OF CONTENT
Acknowledgement
Abstract
1. Introduction
3. Literature Review
4. Research Methodology
5. Suggestions/Recommendations
6. Conclusion
7. Limitations
8. Bibliography
2
ACKNOWLEDGEMENT
Every work constitutes great deal of assistance and guidance from the people
concerned and this
help.
Wish to place on record my sincere gratitude to Miss Nancy Gupta, Faculty Guide,
SRMU,
Lucknow, for his valuable guidance. Without his support and guidance taking this
would not
family members. At last, I would like to thank all the faculty of business
management to help me
Mirza
Danish Baig
Roll No.:
201510702110078
BBA – V
Semester
3
DECLARATION
I do hereby declare that the research report titled “Goods & Services Tax (GST)”
submitted by
work of mine and has not been obtained from any other part.
Mirza
Danish Baig
Roll No.:
201510702110078
BBA – V
Semester
4
PREFACE
In India, there exist a number of indirect taxes that are either levied by the
Central Government
or by the state government such as Excise Duty, Custom Duty, Service Tax, Sales
tax, Stamp
Duty, Octroi and many more. There have been various attempts of reforming the
indirect tax
structure for making tax system simple, stable and burdensome. In this process of
reform we
have already implement vat and service tax. For further significant improvement the
next logical
and Services Tax (GST). GST is a tax on goods and services with comprehensive
manner. It is a
multi-tier tax where ultimate burden of tax fall on the consumer of goods or
services. It is called
as value added tax because at every stage tax is being paid on value addition.
The present research paper is an attempt to study concept of goods and service tax,
how it works
5
INTRODUCTION
6
INTRODUCTION
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
The introduction of Goods and Services Tax (GST) would be a very significant step
in the field
a single tax, it would mitigate cascading or double taxation in a major way and
pave the way for
a common national market. From the consumer point of view, the biggest advantage
would be in
30%. Introduction of GST would also make our products competitive in the domestic
and
international markets.
It will lead to the abolition of taxes such as Octroi, Central Sales Tax, State
level Sales Tax,
Entry Tax, Stamp duty, Telecom License Fees, Turnover Tax, Tax on Consumption or
Sale of
Electricity, etc. It will also improve government's fiscal health as the tax
collection system would
become more transparent, making tax evasion difficult. CAG Mr. Vinod Rai in his
inaugural
address to the National Conference on GST put forth the concept as "An integrated
scheme of
taxation that does not discriminate between goods and services and is a part of the
proposed tax
reforms that centre on evolving an efficient and harmonized consumption tax system
in the
country."
GST stands for Goods and Service Tax. It was first initiated in 1986 by Vishwanath
Pratap
Singh 7th Prime Minister of India. After that in 2007, the current government
proposed to
implement GST and presented the same in Lok Sabha in 2011. In Dec 2014 GST again
presented
7
in Lok Sabha and in same is passed in 2015. After approval of Rajya Sabha same is
called as
101th amendment of the Constitution and is rolling out from 1 July 2017. After the
passage of 25
years of economic reforms in the indirect taxes is going for a revolutionary change
in the form of
GST.
GST is defined as the giant indirect tax structure designed to support and enhance
the economic
growth of a country. More than 150 countries have implemented GST so far. However,
the idea
of GST in India was mooted by Vajpayee government in 2000 and the constitutional
amendment
for the same was passed by the Loksabha on 6th May 2015 but is yet to be ratified
by the
Rajyasabha. However, there is a huge hue and cry against its implementation. It
would be
interesting to understand why this proposed GST regime may hamper the growth and
8
Objectives
9
GOODS AND SERVICES TAX (GST)
The Goods and Services Tax has revolutionized the Indian taxation system. The GST
Act was
passed in the Lok Sabha on 29th March, 2017, and came into effect from 1st July,
2017.
In simple words, GST is an indirect tax levied on the supply of goods and services.
GST Law has
So, before Goods and Service Tax, the pattern of tax levy was as follows:
Under the GST regime, tax will be levied at every point of sale.
10
MULTI-STAGE
There are multiple change-of-hands an item goes through along its supply chain :
from
Production or manufacture
Goods and Services Tax will be levied on each of these stages, which makes it a
multi-stage tax.
Value Addition
The manufacturer who makes shirts buys yarn. The value of yarn gets increased when
the yarn is
11
The manufacturer then sells the shirt to the warehousing agent who attaches labels
and tags to
each shirt. That is another addition of value after which the warehouse sells it to
the retailer.
The retailer packages each shirt separately and invests in the marketing of the
shirt thus
GST will be levied on these value additions i.e. the monetary worth added at each
stage to
DESTINATION-BASED
Consider goods manufactured in Rajasthan and are sold to the final consumer in
Karnataka.
Since Goods & Service Tax (GST) is levied at the point of consumption, in this case
Karnataka ,
12
HISTORY OF GST IN INDIA
The reform process of India's indirect tax regime was started in 1986 by Vishwanath
Pratap
Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the
Modified
Value Added Tax (MODVAT). Subsequently, Manmohan Singh,the then Finance Minister
under P V Narasimha Rao, initiated early discussions on a Value Added Tax 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 the then Prime Minister Atal Bihari Vajpayeeand his
economic
advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and
C
13
Rangarajan. Vajpayee set up a committee headed by the then finance minister of West
The Ravi Dasgupta committee was also tasked with putting in place the back-end
technology and
logistics (later came to be known as the GST Network, or GSTN, in 2017) 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
After the fall of the BJP-led NDA government in 2004, and the election of a
Congress-
led UPA government, the new Finance Minister P Chidambaram in February 2006
continued
work on the same and proposed a GST rollout by 1 April 2010. However in 2010, with
the Trinamool Congress routing CPI(M) 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 2014, the NDA government was re-elected into power, this time under the
leadership
of Narendra Modi. With the consequential dissolution of the 15th Lok Sabha, the GST
Bill –
approved by the standing committee for reintroduction – lapsed. Seven months after
the
formation of the 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, paving way for GST. However, the Opposition, led by the Congress,
demanded
that the GST Bill be again sent back to the Select Committee of the Rajya Sabha due
to
14
Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the GST
Bill and the
A 22-members select committee was formed to look into the proposed GST laws. State
and
Union Territory GST laws were passed by all the states and Union Territories of
India except
Jammu & Kashmir, paving the way for smooth rollout of the tax from 1 July 2017.
There was to
15
ADVANTAGES OF GST
16
WHY DO WE NEED GST
level.
raw material consumed is being allowed as input credit only. For other
taxes and duties
necessary that there should be a comprehensive system under which both the
goods and
At present, the service tax is levied on restricted items only. Many other
large numbers of
17
Justification at the State Level
A major defect under the State VAT is that the State is charging VAT on the
excise duty
paid to the Central Government, which goes against the principle of not
levying tax on
taxes.
In the present State level VAT scheme, Cenvat allowed on the goods remains
included in
Many of the States are still continuing with various types of indirect
taxes, such as luxury
18
WHAT ARE THE COMPONENTS OF GST?
There are 3 applicable taxes under GST: CGST, SGST & IGST.
IGST: Collected by the Central Government for inter-state sale (Eg: Karnataka to
Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
There will
only be one type of
tax
(central) in case of inter-
based
on the destination of
goods.
19
Illustration:
In such cases, the dealer collects Rs. 1800 and of this amount, Rs. 900 will go to
the Central
Now, let us assume the dealer in Maharashtra had sold the goods to a dealer in
Gujarat worth Rs.
10,000.
The GST rate is 18% comprising of only IGST. In such case, the dealer has to charge
Rs. 1800 as
Before GST, tax on tax was calculated and tax was paid by every purchaser including
the final
GST avoids this cascading effect as tax is calculated only on the value add. at
each transfer of
ownership. Understand what the cascading effect is and how GST helps by watching
this simple
video:
GST will improve the collection of taxes as well as boost the development of Indian
economy by
removing the indirect tax barriers between states and integrating the country
through a uniform
tax rate.
Illustration:
Say a shirt manufacturer pays Rs. 100 to buy raw materials. If the rate of taxes is
set at 10%, and
there is no profit or loss involved, then he has to pay Rs. 10 as tax. So, the
final cost of the shirt
to it. When he is adding labels, he is adding value. Therefore, his cost increases
by say Rs. 40.
On top of this, he has to pay a 10% tax, and the final cost therefore becomes Rs.
(110+40=) 150
Now, the retailer pays Rs. 165 to buy the shirt from the wholesaler because the tax
liability had
passed on to him. He has to package the shirt, and when he does that, he is adding
value again.
This time, let’s say his value add is Rs. 30. Now when he sells the shirt, he adds
this value (plus
the VAT he has to pay the government) to the final cost. So, the cost of the shirt
becomes Rs.
Cost = Rs. 165 + Value add = Rs. 30 + 10% tax = Rs. 195 + Rs. 19.5 = Rs. 214.5
So, the customer pays Rs. 214.5 for a shirt the cost price of which was basically
only Rs. 170 (Rs
110 + Rs. 40 + Rs. 30). Along the way the tax liability was passed on at every
stage of
transaction and the final liability comes to rest with the customer. This is called
the Cascading
Effect of Taxes where a tax is paid on tax and the value of the item keeps
increasing every time
this happens.
input. What happens in this case is, the individual who has paid a tax already can
claim credit for
In our example, when the wholesaler buys from the manufacturer, he pays a 10% tax
on his cost
price because the liability has been passed on to him. Then he adds value of Rs. 40
on his cost
price of Rs. 100 and this brings up his cost to Rs. 140. Now he has to pay 10% of
this price to the
government as tax. But he has already paid one tax to the manufacturer. So, this
time what he
he has paid already. So, he deducts the Rs. 10 he paid on his purchase from his new
liability of
Rs. 14, and pays only Rs. 4 to the government. So, the Rs. 10 becomes his input
credit.
When he pays Rs. 4 to the government, he can pass on its liability to the retailer.
So, the retailer
pays Rs. (140+14=) 154 to him to buy the shirt. At the next stage, the retailer
adds value of Rs.
30 to his cost price and has to pay a 10% tax on it to the government. When he adds
value, his
price becomes Rs. 170. Now, if he had to pay 10% tax on it, he would pass on the
liability to the
customer. But he already has input credit because he has paid Rs.14 to the
wholesaler as the
latter’s tax. So, now he reduces Rs. 14 from his tax liability of Rs. (10% of 170=)
17 and has to
pay only Rs. 3 to the government. And therefore, he can now sell the shirt for Rs.
(140+30+17)
22
Action Cost 10% Tax Actual Liability
Total
Manufactures @ 40 140 14 4
154
Total 170 17
187
In the end, every time an individual was able to claim input tax credit, the sale
price for him
reduced and the cost price for the person buying his product reduced because of a
lower tax
liability. The final value of the shirt also therefore reduced from Rs. 214.5 to
Rs. 187, thus
23
PROBLEMS IN IMPLEMENTATION OF GST
Vat or sales tax is levied and collected by the state government. Different state
government
charge different rate of taxes on different kind of goods traded within their
respective territorial
limits under the extreme power provided to the state under state list of the
Constitution. Whereas
CST central sales tax is levied by the central government and collected by the
state government
as per the concurrent list of the Constitution. Same the EXCISE duty as per central
excise act
1944 and service tax as per finance act 1994 is levied and collected by the central
government
through the extreme power provided under the union list of the Constitution.
Due to this distribution of power under the Constitution, no state government wants
to losses the
revenue source called VAT or Sales tax. GST is the subject matter of union list and
no state
agrees to bifurcate their income to the central government but now as the same
political party is
in majority in the state and central. All state government agreed to the proposal,
as a result, GST
Rollout.
24
LITERATURE REVIEW
25
LITERATURE REVIEW
India is a federal country and both Centre and States have their own rights to
collect taxes. Each
state is independent in levying and collecting taxes. The taxation powers are
defined clearly in
the Indian Constitution. Centre collects all the direct taxes (income tax,
corporate taxes etc)
along with the Indirect taxes like Service Tax, Excise duty and Customs duty. The
States collect
indirect taxes like VAT on goods, CST and Local Taxes. These revenues states keep
with
themselves. Earlier instead of VAT, States had sales taxes on various goods. Now
states have
replaced sales taxes with VAT. Each state has adopted its own structure of VAT with
different
In an earlier taxation system, people paid taxes at various levels. There was no
system of getting
a rebate on the taxes paid previously while paying the inputs. This is also called
as cascading
effect. Ideally the taxes should be based on value addition and the producer should
pay taxes on
whatever value he adds to the product. In the absence of such a system, producers
ended up
paying much higher taxes. Higher taxes are a barrier for business and discourage
business
activity. The businesses instead spend time trying to save taxes leading to
distortions and a
parallel economy. A large number of enterprises prefer to stay out of the taxation
system and
avoid paying taxes. High taxes also lead to lobbying activities where producers of
a certain
sector ask the government to lower/waiver taxes for their sector. This also leads
to multiple
taxation rates for multiple products and further increases inefficiency in the
system.
A Value Added Taxation system is seen as a way to negate this cascading effect. VAT
taxes goods
VAT covers mostly goods and GST covers all goods and services. GST is an attempt to
get rid of
With a GST in place, all these indirect taxes should be merged into one tax.
Ideally, these taxes
will be collected by the Centre which will then be transferred to the States via a
rule/formula.
This will require changes in the constitution as Centre can only tax goods at
production stage and
on Services. The States can only tax sale of goods. Hence, States cannot tax
services and Centre
cannot tax sales of goods. The States cannot also tax imports. All this needs to be
changed with
the GST and hence would require amendments in the Indian Constitution. That is the
reason why
Hence, implementation of GST was always seen as a concern for States as they
surrender their
27
BRIEF HISTORY ABOUT GST IN INDIA
The idea of moving towards the GST was first mooted by the then Union Finance
Minister Shri
P. Chidambaram in his Budget for 2006-07. Initially, it was proposed that GST would
be
The Empowered Committee of State Finance Ministers (EC) which had formulated the
design of
State VAT was requested to come up with a roadmap and structure for the GST. Joint
Working
Groups of officials having representation of the States as well as the Centre were
set up to
examine various aspects of the GST and draw up reports specifically on exemptions
and
and between it and the Central Government, the EC released its First Discussion
Paper (FDP) on
the GST in November, 2009. This spells out the features of the proposed GST and has
formed the
Since then, discussion being held between Central and State Government to consensus
on certain
conflicting issues. However, till today no final agreement has been made between
Central and
State Government.
However, Central Government in view of implementing GST from 1 st April, 2016 all
over India
28
What is GST?
services at national level. The GST is expected to replace all the indirect taxes
in India. At the
centre's level, GST will replace central excise duty, service tax and customs
duties. At the state
level, the GST will replace State VAT. Integration of goods and services taxation
would give
India a world class tax system and improve tax collections. It would end the long
standing
Why GST?
GST is similar to VAT in terms of the value-added approach. The question that comes
to mind is
-India already has VAT then why should someone go for GST? Moreover, it seems to be
very
complicated and a difficult exercise, then what are the reasons? The key problems
of current
Taxation at manufacturing:
part of a composite works contract involving a supply of both goods and services,
and under
leasing contracts, which entail a transfer of the right to use goods without any
transfer of their
ownership.
29
Tax Cascading:
Oil and gas production and mining, agriculture, wholesale and retail trade, real
estate
construction, and range of services remain outside the ambit of the CENVAT and the
service tax
levied by the Centre. The exempt sectors are not allowed to claim any credit for
the CENVAT or
the service tax paid on their inputs. Similarly, under the State VAT, no credits
are allowed for the
inputs of the exempt sectors, which include the entire service sector, real
property sector,
agriculture, oil and gas production and mining. Another major contributing factor
to tax
cascading is the Central Sales Tax (CST) on inter-state sales, collected by the
origin state and for
businesses. The companies make goods in one state but on distribution inside the
country, end up
paying taxes in each state. They are supplying goods within the country and should
just be taxed
at one place.
only by Centre and that too is done selectively. The Services need to be taxed at
State level and
International Standard:
GST is becoming an international standard and it is important India also has one.
There are many
factors before international companies while choosing a country for its business
and taxation
system is one very important factor. With other countries having GST and India not
having one,
the companies are likely to opt for former ahead of India for locating their
businesses. Likewise
30
Indian companies may also prefer to increasingly set their bases in other countries
where tax
The GST system is based on the same concept as VAT. Here, set-off is available in
respect of
taxes paid in the previous level against the GST charged at the time of sale. The
GST model has
Two Components:
GST will be divided into two components, namely, Central Goods and Service Tax and
State
Goods and Service Tax. However, the basic features of law such as chargeability,
definition of
taxable event and taxable person, measure of levy including valuation provisions,
basis of
GST will lead merger of various taxes levied by Central and State
Governments. The
Dual GST:
31
The Central GST and the State GST would be levied simultaneously on every
transaction
of supply of goods and services except the exempted goods and services, goods which
are
outside the purview of GST and the transactions which are below the prescribed
threshold limits.
Further, both would be levied on the same price or value unlike State VAT which is
levied on the
value of the goods inclusive of CENVAT. While the location of the supplier and the
recipient
within the country is immaterial for the purpose of CGST, SGST would be chargeable
only when
the supplier and the recipient are both located within the State.
Rate:
There will be two tax rates for SGST– lower rate for necessary and basic
importance
items and a standard rate for all other goods. Further, there will be a special
rate for precious
metals and a list of exempted items. Rates charged across all states and the
central level will be
development, it has been agreed to include a floor rate with bands to allow States
the freedom to
Threshold limit:
Threshold exemption is built into a tax regime to keep small traders out of tax
net. This has
three-fold objectives:
incidence.
32
The present threshold prescribed in different State VAT Acts below which VAT is not
applicable
varies from State to State. The existing threshold of goods under State VAT is Rs.
5 lakhs for a
majority of bigger States and a lower threshold for North Eastern States and
Special Category
States. A uniform State GST threshold across States is desirable and, therefore,
the Empowered
Committee has recommended that a threshold of gross annual turnover of Rs. 10 lakh
both for
goods and services for all the States and Union Territories may be adopted with
adequate
compensation for the States (particularly, the States in North-Eastern Region and
Special
Category States) where lower threshold had prevailed in the VAT regime. Keeping in
view the
interest of small traders and small scale industries and to avoid dual control, the
States
considered that the threshold for Central GST for goods may be kept at Rs.1.5
crore.
Applicability:
GST will be applicable to all Goods and Services sold or provided in India, except
from the list
33
Payment:
GST will be charged and paid separately in case of Central and State level.
The facility of Input Tax Credit at Central level will only be available in respect
of Central
Goods and Service tax. In other words, the ITC of Central Goods and Service tax
shall not be
allowed as a set-off against State Goods and Service tax and vice versa.
Inter-state GST:
The Empowered Committee has accepted the recommendations of the Working Group of
concerned officials of Central and State Governments for adoption of IGST model for
taxation of
inter-State transaction of Goods and Services. The scope of IGST Model is that
Centre would
levy IGST which would be CGST plus SGST on all inter-State transactions of taxable
goods and
services. The inter-State seller will pay IGST on value addition after adjusting
available credit of
IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the
Centre the
credit of SGST used in payment of IGST. The Importing dealer will claim credit of
IGST while
discharging his output tax liability in his own State. The Centre will transfer to
the importing
State the credit of IGST used in payment of SGST. The relevant information will
also be
submitted to the Central Agency which will act as a clearing house mechanism,
verify the claims
GST on Imports:
The GST will be levied on imports with necessary Constitutional Amendments. Both
CGST and
SGST will be levied on import of goods and services into the country. The incidence
of tax will
follow the destination principle and the tax revenue in case of SGST will accrue to
the State
34
where the imported goods and services are consumed. Full and complete set-off will
be available
Each taxpayer would be allotted a PAN linked taxpayer identification number with a
total of
13/15 digits. This would bring the GST PAN-linked system in line with the
prevailing PAN-
based system for Income tax facilitating data exchange and taxpayer compliance. The
exact
Despite the sincere attempts being made by the Empowered Committee on the
determination of
States will gain from service taxes and how much they will lose on account of
removal of
cascading effect, payment of input tax credit and phasing out of CST. In view of
this, it would be
essential to provide adequately for compensation for loss that might emerge during
the process of
implementation of GST for the next five years. This issue may be comprehensively
taken care of
35
How does GST work?
Purchase
Particulars Tax Rate (%) Tax (In
Rs Lakh)
(In Rs Lakh)
Raw Material 200 10%
20
Machinery 400 10%
40
Total Input Tax paid
60
Now suppose he produces Papers worth Rs 800 lakh and adds Rs 200 lakh as profit. He
sells all
the goods to sole distributor in India. The manufacture will have to pay taxes on
selling his
papers. Now in a traditional system, he would pay the tax on the entire Rs 1000
Lakh and get no
input credit. So he pays a total tax of Rs 160 Lakh – Rs 60 Lakh on Input and Rs
100 Lakh on
Sales. This is called cascading effect and a producer pays the tax on each economic
transaction.
The end result is much higher taxes by the producer leading to lack of incentives
by the producer.
However with a GST system, the producer gets an input tax credit of Rs 60 Lakh. As
he had paid
Rs 60 Lakh on the inputs, it gets deducted from the tax bill. On net basis, the
Producer pays Rs
36
Now let us see the books of the all India distributor. Let’s say he pays Rs 50 lakh
to the transport
tax on the same. Hence total value of his goods becomes Rs 1050 Lakh. His input tax
payable is
Rs 105 Lakh.
The Distributor sells the papers to the consumers. The same input tax output tax
calculation
applies here as well. Without a GST system he pays a total of Rs 235 Lakh as taxes.
With a GST
Without GST
With GST
Purchase
Particulars Tax Rate (%) Tax (In Rs
Tax (In Rs
(In Rs Lakh)
Lakh)
Lakh)
Sales (Cost 1050+
1300
Profit 250)
Total Output Tax 10% 130
130
Less: Input Tax 0
105
Tax Paid 105
25
Total Tax paid
(Input Tax + 235
130
Output Tax)
Benefits of GST
The implication of GST assures a single taxation system in the entire country for
all goods and
services making tax compliance easier and more effective. The belief that trade and
industry will
benefit from implementation of GST is widely accepted. Because the GST will give
more relief
to industry, trade and agriculture through a more comprehensive and wider coverage
of input tax
37
set off and service tax in subsuming of several Central and State taxes in the GST
and phasing
out CST. The transparent and complete chain of set-off which will result in
widening of tax base
and better tax compliance may also lead to lowering of tax burden on an average
dealer in
To Economy:
It will simplify India's tax structure, broaden the tax base, and create a common
market across
states. This will lead to increased compliance and increase India's tax-to gross
domestic product
expected to increase economic growth by between 0.9 per cent and 1.7 per cent.
Exports are
expected to increase by between 3.2 per cent and 6.3 per cent, while imports will
likely rise 2.4-
To Corporate:
It will be beneficial for India Inc. as the average tax burden on companies will
fall. Reducing
production costs will make exporters more competitive.
To Exporters:
The subsuming of major Central and State taxes in GST, complete and comprehensive
setoff of
input goods and services and phasing out of Central Sales Tax (CST) would reduce
the cost of
locally manufactured goods and services. This will increase the competitiveness of
Indian goods
and services in the international market and give boost to Indian exports.
To Industry:
Manufacturing sector in India is one of the highly taxed sectors in the world. A
complex and high
38
economies such as India. GST when enforced would eliminate complexities in the
present
taxation structure and consequently prevent the loss of nearly 50% of the advantage
of lower
Approximately Rs 900 billion a year of profits are predicted by the government with
the
To Common Consumer:
With the introduction of GST, all the cascading effects of CENVAT and service tax
will be more
retailer’s point than what was possible under the prevailing CENVAT and VAT regime.
Certain
major Central and State taxes will also be subsumed in GST and CST will be phased
out. Other
things remaining the same, the burden of tax on goods would, in general, fall under
GST and that
39
CHALLENGES IN IMPLEMENTATION OF GST
The actual challenge before the Finance Minister is not of drafting a model GST but
of its proper
implementation and smooth transition from the prevailing system. The challenges
which the
Legislative Challenge:
The Constitution provides for delineation of power to tax between the Centre and
States. While
the Centre is empowered to tax services and goods upto the production stage, the
States have the
power to tax sale of goods. The States do not have the powers to levy a tax on
supply of services
while the Centre does not have power to levy tax on the sale of goods. Thus, the
Constitution
does not vest express power either in the Central or State Government to levy a tax
on the
‘supply of goods and services’. Moreover, the Constitution also does not empower
the States to
empowering the Centre to levy tax on sale of goods and States for levy of service
tax and tax on
The first issue major issue of implementation of GST is to the inclusion of taxes
within the ambit
motor spirit and high-speed diesel (GSD), and octroi or entry tax in lieu thereof.
The foodgrain
surplus states have been levying the purchase tax, the burden of which is exported
to non-
residents.
The states are reluctant to bring motor spirit and high speed diesel within the
ambit as presently
the tax is levied at a floor rate of 20% and the states derive about 35% of their
sales tax
collections from these petroleum products.
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Rationalization of GST rate:
Another issue to be decided is the rates of central and state GSTs to be levied. It
is expected that
the tax rates would be revenue neutral. This implies that in the short term, there
would not be any
revenue loss or gain, but over time the revenue productivity is expected to
increase due to better
Rates charged across all states and the central level will be uniform along with
the regulations,
between Central and State Government, it has been agreed to include a floor rate
with bands to
To get the full benefits of GST, it is necessary to rationalize threshold limit and
exemption limits.
However, there are dispute between Central Government and State Government
regarding
Place of Supply:
One of the main challenges in introducing in GST is defining the place of supply in
respect of
certain services and intangible properties. In the existing tax regime, place of
supply is not a big
issue because service is taxed by the Centre and the place of levy does not affect
revenue
receipts. In GST, however, the place of supply will have to be clearly defined to
avoid disputes
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Time of Supply:
Time of supply will explain the point at which tax would be levied invoice date,
due date or
payment date. Currently, different taxes are levied by the Centre and the states at
various stages.
The dual GST model will widen the tax net by taxing every economic supply in the
distribution
network. This will lead to rapid increase in assesses. It will require some of the
businesses to
the Government will have to ensure that the ultimate consumer is not burdened with
tax beyond
his capacity.
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Impact of GST on Indian Economy
The studies assessing impact of GST are limited as the design of GST was not clear
till the First
Discussion Paper. Thirteenth Finance Commission has undertaken a study with NCAER,
a Delhi
were:
GST could to increase India’s GDP somewhere within a range of 0.9% to 1.7%. The
comparable
dollar value increment is estimated to be between $9.5 billion and $18.6 billion
respectively.
The additional gain in GDP, originating from the GST reform, would be earned during
all years
in future over and above the growth in GDP which would have been achieved
otherwise. It
estimates present value of total gain in GDP between $325 billion and $637 billion.
This is
Export gains:
GST will lower the overall tax inputs in supply chain of goods and services leading
to lower
prices of Indian goods and services. This will increase the competitiveness of
Indian goods and
services in the international market and give boost to Indian exports. The
uniformity in tax rates
and procedures across the country will also go a long way in reducing the
compliance cost. These
gains are expected to vary between 3.2 % - 6.3% with corresponding absolute value
range
between $5.4 billion - $10.7 billion, respectively. Imports are expected to gain
somewhere
between 2.4 and 4.7% with corresponding absolute values $6.9 billion and $13.6
billion,
respectively.
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Others:
GST would lead to efficient allocation of factors of production. The overall price
level would go
down. It is expected that the real returns to the factors of production would go
up. NCAER
results show gains in real returns to land ranging between 0.42 and 0.82 per cent.
Wage rate gains
vary between 0.68 and 1.33%. The real returns to capital would gain somewhere
between 0.37
and 0.74%. Kelkar adds that GST could help add productive employment of as much as
4 to 5
million. Barring impact on economy, GST could help the consumers as well. The lower
taxation
However, going by the above international experiences there could be two additional
problems.
Inflation:
Most of the international case studies show an inflation spurt in initial months of
GST
implementation. In main reason for spurt in prices of goods which consumers thought
would
become expensive after the GST. Much of blame for inflation is accorded to the
various
regulatory bodies and uncertainty over the new tax regime. The inflation situation
stabilizes as
inflation could be critical as unlike developed countries, India has far more
inefficiencies in
supply chain in local markets. The Indian GST reform is far larger in scale
compared to above
asymmetry on probable impact of GST could push inflation higher in initial days of
RBI in the State Finances Report (2010-11) said the revenue implications of GST are
likely to
vary across states. The Centre and the States are still discussing various aspects
of GST like
taxation rates, revenue sharing model between Centre and States etc. As there is
still uncertainty
over the final blueprint of GST, it is difficult to estimate the impact of GST on
state finances. The
report points that VAT led to improvement in tax revenue for most states. However,
just like VAT
there could be some short-falls in revenues in some states over a short term.
The central government has already proposed a Rs 50,000 Cr fund to help the states
which suffer
from the short-fall. However, a higher shortfall could lead to both Centre and
States to borrow
more from the markets. This will be critically watched as it has further
ramifications on fiscal
45
OBJECTIVES & SCOPE
OF THE STUDY
46
OBJECTIVES & SCOPE OF THE STUDY
To know about the Tax audit and law related to tax audit.
To know the perception of tax payers regarding the tax filling, auditing and
GST.
47
RESEARCH METHODOLOGY
studying how research is done scientifically. In it, we study the various steps
that are generally
adopted by a researcher in studying his/her research problem along with the logic
behind them.
It includes:
Research Design
Data Collection
Data Analysis
a) RESEARCH DESIGN:
Primary Source.
Secondary Source.
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c) TYPE OF DATA COLLECTION
i. PRIMARY DATA:
a. Internet
49
LIMITATIONS
Although all efforts have been taken to make the results of survey as accurate as
possible but the
4) Mostly respondents don’t want to give accurate information and act rudely.
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CONCLUSION
51
CONCLUSION
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
agriculture through a more comprehensive and wider coverage of input tax set-off
and service
tax set-off, subsuming of various Central and State taxes in the GST. The
transparent and
complete chain of set-offs which will result in widening of tax base and better tax
compliance
may also lead to lowering of tax burden on an average dealer in industry, trade and
agriculture.
The subsuming of major centre and state taxes would reduce the cost of locally
manufactured
goods and services. This is likely to increase the competitiveness of Indian goods
and services in
GST is expected to bring many benefits to the Indian economy. Though, all these
benefits are
based on the assumption that overall taxation structure is less bureaucratic and
cumbersome than
all these state-wide inefficiencies and then implement GST. However given the
challenges in
India, the policymakers are hoping GST will help ease these inefficiencies and
eliminate them
Implementation of GST is one of the best decision taken by the Indian government.
For the same
reason, July 1 was celebrated as Financial Independence day in India when all the
Members of
Parliament attended the function in Parliament House. The transition to the GST
regime which is
52
accepted by 159 countries would not be easy. Confusions and complexities were
expected and
will happen. India, at some point, had to comply with such regime. Though the
structure might
not be a perfect one but once in place, such a tax structure will make India a
better economy
favorable for foreign investments. Until now India was a union of 29 small tax
economies and 7
union territories with different levies unique to each state. It is a much accepted
and appreciated
regime because it does away with multiple tax rates by Centre and States. And if
you are doing
any kind of business then you should register for GST as it is not only going to
help Indian
government but will help you also to track your business weekly as in GST you have
to make
The taxation of goods and services in India has, hitherto, been characterized as a
cascading and
can be effectively addressed by shifting the tax burden from production and trade
to final
consumption. A well designed destination-based value added tax on all goods and
services is the
most elegant method of eliminating distortions and taxing consumption. Under this
structure, all
the tax essentially ‘sticks’ on final consumption within the taxing jurisdiction.
A ‘flawless’ GST in the context of the federal structure which would optimize
efficiency, equity
on invoicecredit method.
53
SUGGESTIONS &
RECOMMENDATIONS
54
SUGGESTIONS & RECOMMENDATIONS
implementation.
Uniform Implementation of GST should be ensured across all states (unlike the
staggered
who comply with GST and states who are not complying with GST.
55
BIBLIOGRAPHY
56
BIBLIOGRAPHY
REFERENCES:-
http://www.cbec.gov.in/deptt_offcr/gst-status-18032014.pdf
http://www.empcom.gov.in/content/188_1_PhasingoutofCST.aspx
Abisheka Rastogi (2009), Illustrated Guide to Goods and Services Tax (GST)
http://www.taxmanagementindia.com/wnew/detail_rss_feed.asp?ID=1226
www.goodsandservicetax.com
M.Govinda Rao (2014), GST in India: Challenges and prospects, extracted from
prospects.html
Sherry (2007), Goods & Service Tax (GST) in India - A move towards tax reforms,
Service Tax
Today
Verma A(2008), Goods and Service Tax: eagerly awaited in India, Service Tax Today
CA Rajat Mohan (2013, August 13), Goods and Services Tax (GST) - A step forward,
extracted
from http://articles.economictimes.indiatimes.com/2013-08-13/news/
41374977_1_servicestax-state-gst-goods-and-services/2
WEBSITES:-
http://www.businessalligators.com/gst-impact-rates-type-conclusion/
https://www.omicsonline.org/open-access/a-research-paper-on-an-impact-of-
goods-and-
service-tax-gst-on-indianeconomy-2151-6219-1000264.php?aid=82626
57