UNIVERSITY OF MUMBAI 22-23

PROJECT REPORT

ON
“A STUDY ON IMPACT OF GST ON INDIAN
FINANCIAL MARKET.”

A Project Submitted to
University of Mumbai for Partial Completion of the Degree OF

BACHELOR OF MANAGEMENT STUDIES

Under the Faculty of Commerce

By
JAYESH VIJAYKUMAR PAWAR

ROLL NO.: 40

UNDER THE GUIDANCE OF

PROF. JYOTSNA AGARWAL

VEDANTA COLLEGE
STATION ROAD NEAR RAILWAY SATATION
VITHALWADI

1
 UNIVERSITY OF MUMBAI 22-23

PROJECT REPORT

ON
“A STUDY ON IMPACT OF GST ON INDIAN
FINANCIAL MARKET.”

A Project Submitted to
University of Mumbai for Partial Completion of the Degree of

BACHELOR OF MANAGEMENT STUDIES

Under the Faculty of Commerce

BY
JAYESH VIJAYKUMAR PAWAR

ROLL NO : 40

UNDER THE GUIDANCE OF

PROF. JYOTSNA AGARWAL

VEDANTA COLLEGE
STATION ROAD NEAR RAILWAY
SATATIONVITHALWADI
2
 CERTIFICATE

This is to certify that MR. JAYESH VIJAYKUMAR PAWAR worked and duly completed
his Project Work for the degree of Bachelor of Management Studies under the Faculty
of Commerce in the subject of Project Work and her/his project is entitled, “A STUDY
ON IMPACT OF GST ON INDIAN FINANCIAL MARKET”,under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is his own work and facts reported by his personal findings and investigations.

Project Guide

(Prof. Jyotsna Agarwal)

Date of submission

3
 DECLARATION

I the undersigned MR. JAYESH VIJAYKUMAR PAWAR here by, declare that the work
embodied in this project work “A STUDY ON IMPACT OF GST ON INDIAN
FINANCIAL MARKET”, forms my own contribution to the research work carried out
under the guidance of PROF. JYOTSNA AGARWAL is a result of my own research work
and has not been previously submitted to any other University for any other Degree /
Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Mr. Jayesh Pawar

Certified By:

(Prof . Jyotsna Agarwal)

4
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. Sangeeta Kohli and Vice principal Dr.CA
Vishwanath Iyer providing the necessaryfacilities required for completion of this
project.

I take this opportunity to thank our Coordinator –Prof. Ridhhi Aswani for her moral
support and guidance.

I would also like to express my sincere gratitude towards my Project Guide Jyotsna
Agarwal whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.

5
 INDEX

SR. .
NO. CONTENTS PAGE NO.

1. 1. INTRODUCTION
7
1.1. ABSTRACT 8-10
1.2. INTRODUCTION TO THE STUDY 11-14
1.3. OBJECTIVES OF THE STUDY 15
1.4. TYPES OF TAXES UNDER GST 16-18
1.5. NEEDS AND IMPORTANCE OF GST 19-22
1.6. FEATURES 23-25
1.7. IMAPACT OF GST ON VARIOUS SECTOR 26-42

2. 2. RESEARCH METHODOLOGY 43
2.1. INTRODUCTION 44-46
2.2 OBJECTIVE OF STUDY 47-49
2.3. LIMITATION OF STUDY 50-53
2.4. HYPOTHESIS OF STUDY 54
2.5. MATERIALS AND METHODOLOGY 55-57

3. 3. REVIEW OF LITERATURE 58-64

4. 4. DATA ANALYSIS, INTERPRETATION 65

4.1. ANALYSIS BASED ON PRIMARY DATA 66-67
4.2. FINDINGS 68-69
4.3. ANALYSIS BASED ON SECONDARY DATA 70-76

5. 5. CONCLUSIONS AND SUGGESTIONS 77

5.1. CONCLUSION 78-79
5.2. FINDINGS 80
5.3. SUGGESTION 81
5.4. ANNEXURE 82-83

6
 CHAPTER. 1

INTRODUCTION

7
1.1 ABSTRACT:

This paper is an analysis of the impact of GST (Goods and Services Tax) on Indian Tax
Scenario. The Good and services tax (GST) is the biggest and substantial indirect tax
reform since the year 1947. The main idea of GST is to take over existing taxes like
value-added tax, excise duty, service tax and sales tax. GST will be levied on
manufacturing of sales and consumption of goods and services and is expected to address
the tumble effect of the existing tax structure and result in uniting the country
economically. Its main objective is to maintain a believed between the basic structure
and design of the CGST, SGST and SGST between states.

GST is a new story of VAT which gives a widespread setoff for input tax credit and
contains many indirect taxes from state and national level. The main aim of GST is to
create a single, unified market which will benefit in the development of country’s
economy. India is a democratic country and therefore the GST will be implemented
parallel by the central and state governments respectively. In this article, I have discussed
GST and highlighted on the objectives of it. Consequently, I also put a light on the
possible challenges, threats, and opportunities that GST brings to strengthen the free
financial market. Finally, the paper examines and draws out a conclusion.

On 1st July, 2017, India witnessed the launch of the Goods & Services Tax in India. It
was the historic moment of India which was the culmination of 14-year long journey
which began in December 2002 when the Kelkar’s Task force on indirect taxes
suggested a comprehensive Goods and service tax based on the value added tax
principal. Our study specifically focuses on the impact of GST on financial market.
Various stock indices data of BSE and NSE was taken before and after the
implementation of GST. Paired test was applied and found out that there is a significant
difference between pre and post implementation of GST.

Indian Financial market new tax reformed scheme was introduced to generate
government’s revenue equally between the state and center. This scheme was introduced
by the center government because of the conflicts made by the state governments
between the state and center. Although, it was necessary because of various types of tax

8
were implemented by the state governments which varies from one state to another state
of the country. Earlier policy was like a tax upon tax implemented on the goods and
services and it was again between producer and consumers, which we call it as one type
of monopoly, broken by the center government. This Goods and Service Tax introducing
in Indian financial markets reflects on the small scale and medium scale manufacturing
units. Generally, it was a slogan “One Nation, One Tax and One Market” and finally
termed as GST.

GST is considered as an indirect tax for the whole nation that would make India one
unified common market. It is a tax which is imposed on the sale, manufacturing and the
usage of the goods and services. It is a single tax that is imposed on the supply of the
goods and services, right from the manufacturer to the customer. The credits of the input
taxes that are paid at each stage will be available in the subsequent stage of value
addition which makes GST essentially a tax only on the value addition on each stage.
The final consumers will bear only the tax charged by the last dealer in the supply chain
with the set of Benefits that are at all the previous stages.

Taxes that the governments impose on its people and businesses would be the major
source of revenue for any country around the world. India is not an exception to it. India
too earns revenue from taxes, both direct and indirect taxes such as, Income Tax, VAT,
Service Tax, customs and excise duty among others. Indian financial market is
characterized by the presence of a distorted indirect tax structure leading to the biggest
obstacle hindrance to investors industries for doing business in India. Hence, it shall be
hampering the growth of the industries and contradict the National Program of 'Make in
India'. Efforts undertaken by the Government of India are aimed to increase the degree of
trust-worthiness for investors on Indian socio-economic scenario. In order to create an
investor-friendly tax-environment, there is a need for tax reforms in India. Goods and
Services Tax (GST) in India is proposed to be the maiden reform.

9
The proposed GST is a long pending and much awaited tax reform which India is
hoped to iron out the wrinkles in the existing indirect taxation system. This
comprehensive tax policy is expected to be one of the most important contributors to
the India growth story. The proposed reform through introduction of GST would
bring about a searching gain the legal provisions for imposing duty/tax liability in
stages of manufacture, sale (inter-state/intra-state) of goods, rendering of services and
shall stand replaced with the place of supply, where the final consumption enjoyment
and use of goods and services were made. Goods and Services Tax (GST) is an
indirect tax which was introduced in India on 1 July 2017 and was applicable
throughout India which replaced multiple cascading taxes levied by the central and
state governments. It was introduced as The Constitution (One Hundred and First
Amendment) following the passage of Constitution 122nd Amendment Act Bill.
Every economic decisions of the GST have an immediate impact on the price
behavior of the financial market. Hence, in the current study an attempt to investigate
the impact of implementation of the GST in India on 1July, 2017 on to the Indian
financial market.

The introduction of the Goods and Services Tax (GST) is a very significant step in
the field of indirect tax reforms in India. By amalgamating a large number of Central
and State taxes into a single tax, GST will mitigate ill effects of cascading or double
taxation in a major way and pave the way for a common national market. From the
consumers point of view, the biggest advantage would be in terms of reduction in the
overall tax burden on goods, which is currently estimated to be around 25%-30%. It
would also imply that the actual burden of indirect taxes on goods and services
would be much more transparent to the consumer. Introduction of GST would also
make Indian products competitive in the domestic and international markets owing
to the full neutralization of input taxes across the value chain of production and
distribution. Studies show that this would have a boosting impact on economic
growth. Last but not the least, this tax, because of its transparent and self-policing
character, would be easier to administer.

10
1.2 INTRODUCTION TO THE STUDY:

GST-
Goods and service tax (GST) is an indirect tax which was introduced in India on 1 st
July 2017 and was applicable throughout India which replaced multiple cascading
taxes levied by the central and state governments. It was introduced as the
constitution (One hundred and first Amendment) Act 2017, following the passage of
constitution 122ndAmendment Bill. The GST is governed by a GST council and its
chairman is the Finance Minister of India. GST was initially proposed to replace a
slew of indirect taxes with a unified tax and was therefore set to dramatically reshape
the country’s 2-billion-dollar economy. The rate of GST in India is between double
to four times that levied in other countries like Singapore.

The GST to be demanded by the center of intra-state supply of products as well as

administrations would be known as the Central Goods and Services Tax (CGST) and
that to be imposed by the states would be known as the State Goods and Services
Tax (SGST). Correspondingly Integrated Goods and Services Tax (IGST) will be
exacted and managed by Centre on each between state supply of products and
ventures.

GST is utilization-based duty i.e., the duty ought to be gotten by the state in which
the merchandise or administrations are devoured and not by the state in which such
products are made. IGST is intended to guarantee consistent stream of information
assess credit starting with one state then onto the next. One state needs to Bargain

11
state, in this manner making the procedure less demanding.

GST supply, once the color of the government, for which Centre provides color for
what the United States can call, CGST, GST. The disadvantages of such products,
the company logo GST logo in all colures under the Kedah Centre Application use.
Believing that we went according to the GST and Kedah in the state or goods that are
involved in color management is done in the color of the government. AUG
Government Loan Program color terrace use to provide consistent information.
Therefore, the process of applying, but not for everyone, the government should only
analyze the color of public spending.

Fundamentally, the $2.4-trillion economy is attempting to transform itself by doing

away with the internal tariff barriers and subsuming central, state and local taxes into
a unified GST. The rollout has renewed the hope of India’s fiscal reform program
regaining momentum and them widening the economy. Then again, there are fears of
disruption, embedded in what’s perceived as a rushed transition which may not assist
the interests of the country. Will the hopes triumph over uncertainty would be
determined by how our government works towards making GST a “Good and
Simple Tax.

The market where investment instruments like bonds, equities and mortgages are
traded is known as capital market. Capital market is a financial market in which
long- term productive is used. The primary role of this market is to make investment
from investors who have surplus funds to the ones who are running a deficit. The
purpose of these markets is to channel savings into is long-term productivity
investments.

Introduction of GST would be a very significant step in the field of indirect tax
reforms in India. By amalgamating a large number of Central and State taxes into a
single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of
cascading and pave the way for a common national market. For the consumers, the
biggest gain would be in terms of a reduction in the overall tax burden on goods,
which is currently estimated at 25%-30%. Introduction of GST would also make our
products competitive in the domestic and international markets. Studies show that
this would instantly spur financial growth. There may also be revenue gain for the
Centre and the States due to widening of the tax base, increase in trade volumes and
improved tax compliance. Last but not the least, this tax, because of its transparent
character, would be easier.
12
Under the GST regime, an Integrated GST (IGST) would be levied and collected by
the Centre on inter-State supply of goods and services. Under Article 269A of the
Constitution, the GST on supplies in the course of interstate trade or commerce shall
be levied and collected by the Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be provided by Parliament
by law on the recommendations of the Goods and Services Tax Council. A GST
Council would be constituted comprising the Union Finance Minister.

The GST combines a number of Central and State taxes listed in Table 1. In some
ways, the reform is a unique experiment in both Central and State governments
giving up their tax autonomy in favors of harmonization of the domestic
consumption tax system. The GST comprises of a Central GST (CGST), State GST
(SGST) and Inter-state GST (IGST). The tax is designed to be destination based and
the revenue from inter-state transactions is put in the IGST account and eventually
distributed according to destination through a clearing house mechanism. The
Constitution was amended to create GST as a joint tax of the Centre and States
(Article 269 A), to be administered by a new Constitutional body – the GST Council
chaired by the Union Finance Minister and with Finance Ministers or other ministers
nominated by each of the States and Union Territories with legislatures as Members.
The Union Revenue Secretary is the Secretary of the Commission and a separate
Secretariat was set up to oversee the functioning of the Council. The decisions taken
in the council should have at least two-thirds majority.

The taxpayers are required to electronically file a single return for CGST, SGST,
IGST and GST Compensation cases. Initially, a fully automated system with 100 per
cent matching of invoices for ITC was envisaged with taxpayers required to submit
three returns GSTR -1, GSTR-2, and GSTR-3 every month and a final annual return
at the end of the year. GSTR -1 was required to furnish the details of outward
supplies. This information along with the information from tax deducted at source on
government transactions and e-commerce supplies are shared electronically with the
registered recipients in Form GSTR- 2A based on which GSTR- 2 was to be filed
containing information on inward supplies. GSTR – 3 was auto-populated with
information from the two forms.

However, the system failed because the businesses as well as service providers were
not ready and the system itself could not cope with the large number of registered
taxpayers. After repeated postponement, a separate simplified self-assessed summary
13
form GSTR-3B was to be filled as a temporary measure.

The GST has been implemented with very high expectations of achieving a simpler,
more transparent, more revenue productive and less distorting tax. Even after two
years of implementation, the tax has been evolving and is continuing to undergo a
number of changes through the decisions taken by the GST Council. Nevertheless,
the time is opportune to take stock of the progress in implementing the tax, analyses
its revenue implications and economic impact and identify further challenges and
reform areas to reach the goal of raising revenue productivity and minimizing the
three associated costs to the economy namely, administrative cost, compliance cost
and the distortion cost.

Section 2 briefly lays out the salient features of the GST implementation in India,
Section 3 analyses the productivity gains, saving on administration and compliance
costs and revenue implications of the tax, Section 4 examines the remaining
cascading elements in domestic consumption tax, identifies other distortions required
to enhance revenue productivity and reduce inefficiency from the tax. The reform
proposals are summarized in Section 5.Introduction of GST would also make our
products competitive in the domestic and international markets. Studies show that
this would instantly spur economic growth. There may also be revenue gain for the
Centre and the States due to widening of the tax base, increase in trade volumes and
improved tax compliance. Last but not the least, this tax, because of its transparent
character, would be easier to administer.

The GST is the proposed Indirect tax system which is levied on the manufacture,
sale and the consumption of goods and services. It will replace all the indirect tax
systems such as sales tax and value added tax. The main purpose of GST is to bring
about the single uniform system of taxation in the manufacture, sale and the
consumption of goods and services in India. The GST is said to reduce the level of
Tax evasion and the corruption and it also reduces the tax burden of the public.

14
 1.3 OBJECTIVES OF THE STUDY

❖ This study is based on the following objectives.1.

❖ To study About the concept of GST.2.
❖ To study about the need and the Importance of the Goods and Service Tax
❖ To study about the impact of GST on Various sectors in Indian economy.4.
❖ To provide suggestions and recommendations regarding GST
❖ To remove the cascading effect of taxes that is through this Single taxation system
❖ taxes will be removed easily.
❖ To reduce the Tax evasion and Corruption.
❖ To bring about the consumption-based tax instead of manufacturing.
❖ To absorb various Indirect taxes and to bring a single system of taxation.
❖ To remove the prices of goods by having an uniform system of taxation over the country.
❖ To increase the GDP by the exclusion of cascading effects of Taxation.

15
1.4 TYPES OF TAXES UNDER GST

Central Goods and Services Tax (CGST):

It is the GST levied on the ‘Intra -State’ supply of goods or services by the Centre.
CGST stands for Central Goods and Services tax. It replaced all the previous taxes
under the Central Government. Some examples of such taxes are central surcharges
& cess and central excise duty. CGST is levied on the movement of goods within a
state.

State Goods and Services Tax (SGST):

It is the GST Levied on the ‘Intra -State’ supply of goods or services by the State.
The GST collected by the State Government is known as SGST, which is applicable
on transactions within its geographical boundaries. Under the new tax regime,
previous state taxes like entertainment tax, VAT, and State Sales tax became non -
functional.

Union Territory Goods and Services Tax (UTGST):

It is the GST levied on the supply of goods and services that takes place in any of
the Union Territories of India.UTGST stands for Union Territory Goods and
Services tax, applicable to the transaction of goods and services in the Union
Territories. It is levied on the supply of products in Andaman and Nicobar Islands,
Lakshadweep, Daman Diu, Chandigarh, and Dadra and Nagar Haveli.

16
 Integrated Goods and Services Tax (IGST):

It is the GST levied on the ‘Inter-State’ supply of goods or services and is collected
by the Centre. IGST is the sum total of CGST and SGST/UTGST and is levied by
center on all interstate supplies. IGST stands for Integrated Goods and Services tax.
It is generally applicable during interstate transactions, i.e., transactions between two
different states. Among the types of GST, it’s levied on supplies of products and
services between two states and even on exports and imports.

STRUCTURE OF GST

GST Council has specified multi-tier tax structure of 0%, 5%, 12%, 18% and 28% as
applicable to different categories of goods and services. The latest category list is as
under:

(1) No Tax Category

It includes goods like sanitary napkin, deities made of stone, raw material used in
rooms, and fortified milk, fresh fruits & vegetables. It also includes services like
hotels and lodges who carry a tariff below Rs 1000.

(2) 5% Tax Category

It includes goods like skimmed milk powder, fish fillet, frozen vegetables, tea,
coffee, spices, pizza bread, kerosene, coal, fertilizers, electric vehicles and so on.
Services like railways and airways are also included.

(3) 12% GST Category

It includes good like frozen meat products, butter, cheese, ghee, pickles, sausages &
fruit juices, jewelry box, ayurvedic & homeopathy medicines, wooden frames for
painting and photographs. Business Class air tickets and movie tickets below Rs 100
also fall in this category.

(4) 18% GST Category

Preserved vegetables, flavored refined sugar, cornflakes, pasta, past ries and cakes,
detergents are some notable items in this category. It also includes services of

17
 restaurants located inside hotels with tariffs between Rs 2500 and Rs 7500 and
above, outdoor catering & movie tickets priced above Rs 100.

(5) 28% GST Category

This includes over 200 goods, mainly sunscreen, pan masala, automobiles,
dishwasher, vending machines. Services like five-star hotels with tariff exceeding Rs
7500.

Imports of Goods and Services will be treated as inter-state supplies and IGST 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 where the imported goods and services are consumed. Full and complete
set-off will be available on the GST paid on import on goods and services.

Exports will be treated as zero rated supplies. No tax will be payable on exports of
goods or services; however, credit of input tax credit will be available and same will
be available as refund to the exporters. The Exporter will have an option to either
pay tax on the output and claim refund of IGST or export under Bond without
payment of IGST or claim refund of Input Tax Credit (ITC). Securities have been
specifically excluded from the definition of goods as well as services. Thus, the
transaction in securities shall not be liable to GST.

It is some of these aspects of the proposed GST that are the subject matter of this
paper. We focus on the essential questions relating to the Dual GST design, and first
discuss the need for, and the objectives of GST reform. We then describe alternatives
to the Dual GST already endorsed by the Empowered Committee, not because they
are superior in any way to the Dual GST, but to allow a fuller discussion of the trade-
offs involved in the choice among them. Subsequent sections consider the question
of tax base and rate, and proper treatment of various components of the tax base
(e.g., food, housing, and financial services) in light of international best practices.
The last section provides a discussion of the issues that arise in the taxation of cross-
border transactions, both inter-state and international. An important question in this
regard is the feasibility of, and the rules for, taxation of inter-state supplies of
services.

18
1.5 NEEDS AND IMPORTANCE OF GST:

The deeper the understanding of Indirect tax, the earlier foothold can be made over
the competitor. Hence the study is very important.

The deeper the understanding, the earlier companies can understand the relief they
get for procurement of raw material the earlier they get the cost advantage

The study also helps the companies to understand the tax burden on consumers
which affects the sales.

The study will also help the companies to understand the experience and expectation
of the consumers related to the price.

GST is aimed at reducing corruption and sales without receipts.

GST reduces the need for small companies to comply with excise, services tax and
VAT.

The possibility of tax evasion is minimized completely with GST coming into action.

The Indian financial market where investment instruments like bonds, equities and
mortgages are traded is known as capital market. Capital market is a financial market
in which long- term productive is used.

The primary role of this market is to make investment from investors who have
surplus funds to the ones who are running a deficit. The purpose of these markets is
to channel savings into long-term productivity investments

To bring about the uniformity in the System of Indirect taxation.

To remove the cascading effects of Tax.

To bring about the economic integration. Generally, the Taxes are imposed at
various rates among various states in India. So there is a huge loss of revenue to the
central as well as state government. Through GST a uniform tax rate is followed all
over the country and so that there will no such loss of revenue.

Reduces complexities and increases more number of economic transactions.

The GST brings about a competitive pricing. As all the products are taxed uniformly

19
across the country, the various forms of indirect taxes will remove and which in turn
products and increases the consumption which in turn will be more beneficial for the
companies.

Generally, the main aim of GST is to bring about the single tax system which will
reduce the cost of production for the manufacturers, So that it will be a big boost for
those

producers who made their products at lower cost and involves in international trade
that is exports.

As it is the Single Tax system, the tax burden for starting industrial units will be
reduced; As a result, when more industries were created it will ultimately result on
more employment.

Through GST the government receives more amount of Tax revenue which will be
utilized for the services to the public

As there is more transparency in the system of GST and since it is a system of single
taxation, the chances of corruption will be very low.

The Country is said to have one market economy, as through GST the number of
numerous markets divided by various tax will be avoided. To avoid the Tax burden
of the common consumers and the public by making it into a single tax system.

Before state level VAT was introduced by States in the first half of the first decade
of this century, sales tax was levied in States since independence. Sales tax was
plagued by some serious flaws. It was levied by States in an uncoordinated manner
the consequences of which were different rates of sales tax on different commodities
in different States. Rates of sales tax were more than ten in some States and these
varied for the same commodity in different States. Inter-state sales were subjected to
levy of Central Sales Tax.

As this tax was appropriated by the exporting State credit was not allowed by the
dealer in the importing State. This resulted into exportation of tax from richer to
poorer states and also cascading of taxes. Interestingly, States had power of taxation
over services from the very beginning. States levied tax on advertisements, luxuries,
entertainments, amusements, betting and gambling.

20
A report, titled "Reform of Domestic Trade Taxes in India", on reforming indirect
taxes, especially State sales tax, by National Institute of Public Finance and Policy
under the leadership of Dr. Amaresh Bagchi, was prepared in 1994. This Report
prepared the ground for implementation of VAT in States. Some of the key
recommendations were; replacing sales tax by VAT by moving over to a multistage
system of taxation; allowing input tax credits for all inputs, including on machinery
and equipment; harmonization and rationalization of tax rates across States with two
or three rates within specified bands; pruning of exemptions and concessions except
for a basic threshold limit and items like unprocessed food; zero rating of

exports, inter-State sales and consignment transfers to registered dealers; taxing inter-
State sales to non-registered persons as local sales; modernization of tax
administration, computerization of operations and simplification of forms and
procedures.

The taxable event under GST shall be the supply of goods or services or both made
for consideration in the course or furtherance of business. The taxable events under
the existing indirect tax laws such as manufacture, sale, or provision of services shall
stand subsumed in the taxable event known as ‘supply’.

The GST will reshape the indirect tax structure by dissolving majority of indirect
taxes like excise, sales and services levies prevailing in the country. This will
definitely do away with the complex indirect tax structure of the country; hence will
improve the ease of doing business in the country. According to the International
Monetary Fund, the adoption of the Goods and Service Tax (GST) could help raise

21
 India, term gross domestic’s product (GDP) growth to over 8 percent and create a
single national market for enhancing the efficiency of the movement of goods and
services. There is no doubt that the current structure of the GST is expected to lead a
temporary rise in inflation, but be assured that it will typically last for a year.
Because the inflation in the second year after GST implementation will benefit
favorably as the numbers would be compared to already-high figures of the first year
of implantation.

The traditional distinctions between goods and services (and for other items such as
land and property, entertainment, and luxuries) found in the Indian Constitution have
become archaic. In markets today, goods, services, and other types of supplies are
being packaged as composite bundles and offered for sale to consumers under a
variety of supply-chain arrangements. Under the current division of taxation powers,
neither the Centre nor the States can apply the tax to such bundles in a seamless
manner. Each can tax only parts of the bundle, creating the possibility of gaps or
overlaps in taxation. The second major concern with the exclusion of services from
the state taxation powers is its negative impact on the buoyancy of State tax
revenues. With the growth in per capita incomes, services account for a growing
fraction of the total consumer basket, which the states cannot tax.

Right now, the taxation structure in the Indian financial market is divided in two
forms.

❖ Direct Taxes

❖ Indirect Taxes

Direct taxes are levied where the liability cannot be passed on to someone else. For
Example- Income Tax, Income Tax is paid where you earn the income and you alone
are liable to pay the tax on it.

22
1.6 FEATURES:

❖ GST is applicable on ‘supply’ of goods or services as against the present concept on

the manufacture of goods or on sale of goods or on provision of services.

❖ GST is based on the principle of destination-based consumption taxation as against

the present principle of origin-based taxation.

❖ It is a dual GST with the Centre and the States simultaneously levying tax on a
common base. GST to be levied by the Centre would be called Central GST(CGST)
and that to be levied by the States would be called State GST (SGST).

❖ An Integrated GST (IGST) would be levied an inter-state supply (including stock

transfers) of goods or services. This shall be levied and collected by the Government
of India and such tax shall be apportioned between the Union and the States in the
manner as may be provided by Parliament by Law on the recommendation of the
GST Council.

❖ Import of goods or services would be treated as inter-state supplies and would be

subject to IGST in addition to the applicable customs duties.

❖ CGST, SGST & IGST would be levied at rates to be mutually agreed upon by the
Centre and the States. The rates would be notified on the recommendation of the
GST Council. In a recent meeting, the GST Council has decided that GST would be
levied at four rates viz. 5%, 12%, 16% and 28%. The schedule or list of items that
would fall under each of these slabs has been worked out. In addition to these rates, a
cess would be imposed on “demerit” goods to raise resources for providing
compensation to States as States may lose revenue owing to the implementation of
GST.

❖ GST would apply on all goods and services except Alcohol for human consumption.
❖ GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural
Gas) would by applicable from a date to be recommended by the GSTC.

❖ Tobacco and tobacco products would be subject to GST. In addition, the Centre
would have the power to levy Central Excise duty on these products.

23
❖ Tax Can be deposited by internet banking, NEFT / RTGS, debit / credit card and
over the counter.

❖ Concept of TDS for certain specified categories.

❖ Concept of TCS for E-Commerce Companies.

❖ Refund to be granted within 60 days.

❖ Provisional release of 90% refund to exporters within 7 days.

When considering GST and its impact on the Indian Financial Market, customs duty
on exporting goods has reduced. So now production units save money while
producing goods and also while shipping them. This two-way savings has lured
many production units to export their goods, increasing the export quantity.

There are many economic areas of state legislations, regulations and policies that
impact or inhibit competition in the markets. The existing complex and multilayered
indirect tax structure has fragmented Indian market into 29 state markets by tax
barriers which adversely affected India’s competitiveness. For example, while the

24
Central Sales Tax is a tax on the export of goods from one. state to another, the
levies such as entry tax and octroi are in the nature of taxes on import of goods into a
local area. Administration of these taxes requires the erection of check posts or
physical barriers and this violates the principle of common market within the
country.

The central and state governments also resort to granting plethora of product and
area-based tax exemption from time to time under pressure which create distortion
and hinder competition. For an instance at present 330 products are exempted under
central taxes (excise duty/ Customs duty) and nearly 100 products under state VAT.
Certain geographical areas exempt taxes on all products. The impact analysis of
these exemptions is not known as to whether they achieve stated objective in long
run. Whereas, the loss of revenue to the exchequer due to such tax exemptions leads
to fiscal deficit and high tax rates on other products and activities adding to market
distortion and inflation.

The Central and the State Governments need to undertake a review of existing
policies, laws or regulations from the competition perspective and also undertake a
competition impact assessment of proposed policy, law and regulations before these
are finalized. Coordinated calibration of tax reform, is extremely important to evolve
a competitive tax system in the country.

This report highlights the problems in existing tax structure and its adverse impact
on the Indian financial market and completion. It also suggests the way forward for
rational tax structure. With GST, taxes of the State and Central Government have
been merged. This has removed the cascading effect of taxes, reducing the burden on
the buyer and the seller. So even if it may look like one big chunk of tax to be paid,
you pay lesser hidden taxes.

25
 1.7. IMAPACT OF GST ON VARIOUS SECTOR

The GST is said to have a positive impact on the economy as a whole. But when it
comes to sectoral-wise classification, the GST have both positive as well as negative
impact on each of the sectors. Here are some sectors given and its GST is given
below.

1. Technology (Information technology and ITeS)

The GST system of indirect taxation has made the duty on the manufacturing goods
from 14% to 18-20%. As a result, the prices of the software products will be at high
which will give either a neutral or slightly negative impact on the Technology Sector
as a whole. But they will be benefited through the reduction of tax and benefits of
other industries and can somewhat mitigate it.

2. Telecommunications

The telecommunications sector is presently paying the tax at the rate of 14% which
is expected to be increased during the GST regime. And, it is assumed to be around
18% which will be expected to be passed over to the customers and this gives a
picture that GST will adversely affect this sector. Through the GST regime there will
be huge changes in the telecom industry.

3. Pharmaceuticals

Presently, the Pharmacy companies are paying taxes around 15-20%. Since, there is
no clear picture of tax treatment for Pharmacy if it is less than 15% it would be a
positive impact on the Sector but if it is above 15%then it will cause some slight
negative impact.

4. Automobiles

The Automobile industry is currently paying a tax rate of a range between 30-45%.
And it is expected that after GST the rate will be around 18% which will be a huge
positive for the automobile industry and which will be profitable to both the
Manufacturers/ dealers and the ultimate consumers. The standard and the social
status of the consumers get uplifted. There will be a huge boom in the Automobile
Industry as a result of implementation of Goods and Services Tax.

26
5. Financial Services

The Financial services such as banking, Stock Trading firms are currently paying
14.5% as VAT which is likely to be increased to 18 to 22% in the near future under
the GST regime. And the services are likely to be costlier.

6. Textiles

Currently, the Textile industry is paying the tax at the rate of nearly 12.5% plus
surcharges and which varies upon the MRP of the products. Since there is no clear
idea about the tax rate of this industry under the regime of GST it is expected at the
rates of 15% which will be having a moderate impact on the industry. This moderate
impact may either be neutral or slightly negative when compared to the other present
system of taxation. But they will be benefited through the reduction of cost in
transportation, savings etc.

7. Media and Entertainment

The tax rate for the Media is around 22% as of now and since the authority for the
levy of taxes remains to be the right of the local bodies, it is expected that the cinema
fares are expected to come down after the GST regime and the cost of DTH and
cable television services are likely to become costlier. There is somewhat either
neutral or slightly negative impact of GST on the Media and Entertainment Industry.

8. Consumer Durables

The current of tax rate of this industry is around the range between 23- 25 percent.
And under the GST regime it is considered to be lower around 15 – 18% which will
be positive impact to this industry.

9. Cement

The cement industry currently pays the tax at the rate of 25% currently. And, after
the GST regime, it is expected to be fixed at the rate of 18 to 20%. This will be a
major relief for the companies of that industry. And the logistics tax also is to be
reduced; it would be a double benefit for all the industries involved in
manufacturing.

27
10. Real Estate

Real estate contributes about nearly 7.3% of India’s GDP and it is the generator of
employment immediately after IT. Real estate is said to get a positive impact under
the GST regime immediately after its implementation. It is expected that since there
is a single system of Taxation under GST, all other forms of indirect taxation will be
removed which results on reduction of property prices and the cost of construction.
Thus, we can have a positive impact of GST on the Real estate sector.

10. Food sector:

The Indian restaurant business nowadays, is price a staggering INR 247,680 crores
and is developing at a yearly rate of 11 November – calculable to hit INR 408,040
crores by 2018. National restaurant Association of India Food Service Report 2016
estimates that by 2021 restaurant industry will alone contribute 2.1% to the GDP of
India. The total food service market today stands at INR 3.09 lakh crores and has
grown at 7.7% since 2013. This is projected to grow to INR 4.98 lakh crores at
CAGR of 10% by 2021. This year alone the Indian restaurant sector will create
direct employment for 5.8 million people and contribute a whooping INR 22,400
crores by way of taxes to the Indian economy.

Post GST, the government is seeing the chance to come up with an extra assortment
of INR 17,000 – 26,000 crores through nearer monitoring of tax levy and assortment
from the unorganized section. In short, the restaurant business is clearly a hot
section, and this needs an in-depth insight on the impact of GST on restaurants and
also the associated stakeholders – both owners, yet as food-lovers across the nation
who step out to dine once in an exceedingly while. GST tax system would affect the
restaurants and food service business in many ways such as:

28
❖ Before GST implementation the hospitality and restaurant industry were
overwhelmed by multiple taxes (Service tax, VAT and luxury tax). In Food and
beverages bills, service tax is applied on 40% of the bill or 5.8% apart from VAT. In
case of social functions, the applicable service tax rate after 30% abatement is
10.15%.

❖ Under GST, uniformity of tax rates and applicability of single rate is the single
largest advantage. GST helps in better utilization of input credit and it also benefits
to end user in terms of lower prices. GST helps restaurants industry in attracting
more and more customers and also leads to enhanced revenues to the government.

❖ With the growing organized food services industry and coming up of new food
ordering and delivery start-ups, the market is worth 2.5 Lakh crore and would
contribute significantly to the revenues of the country.

❖ Goods and Services Tax would be collected at every stage of selling and buying of
goods or services based on the input tax credit method. This method will allow GST
registered businesses to claim tax credit to the value of GST they paid on buying of
goods or services as part of their normal viable activity.

❖ Taxable product and services aren’t distinguished from each other and are taxed at
one rate during a provide chain until the products or services reach the buyer.
Administrative responsibility would typically rest with one authority to levy tax on
product and services. Exports would be zero-rated and imports would be levied
constant taxes as domestic product and services adhering to the destination principle.

❖ The introduction of goods and Services Tax (GST) would be a major step within the
reform of indirect taxation in India. Amalgamating many Central and State taxes into
one tax would mitigate cascading or double taxation, facilitating a standard national
market.

❖ The simplicity of the tax ought to cause easier administration and enforcement. From
the buyer point of view, the most important advantage would be in terms of a
reduction within the overall tax burden on product, that is presently calculable at
25%-30%, free movement of products from one state to a different without stopping
at state borders for hours for payment of state tax or entry tax and reduction in
paperwork to an oversized extent.

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 PRE-GST MECHANISM OF RESTAURANTS AND FOOD
SERVICE BUSINESSES:

Before implementation of GST, Value Added Tax (VAT) system was applied in all
the sectors of the economy. Value Added Tax (VAT) is levied on things that are
sold-out in an improved form, where value is added to an item before it’s sold-out to
you. One has to pay VAT on product and services at varied stages of their
production, distribution and sale. In restaurants, VAT isn’t indictable on pre-
packaged things like drinkable, bottled alcohol and food. However, it’s applicable on
food and drinks prepared within the restaurant kitchens. VAT varies from state to
state, and even inside the states, it differs based on the sort of product. It could be
anywhere between 5 to 20

Service tax is charged 14% and in tandoor with Swachh India cess of 0.5% the
amount adds up to 14.5% for us. With addition to Krishi Kalyan Cess of 0.5% from
1 June 2016 to this would create overall 15 % of the service tax. Ideally, service tax
ought to be obligatory solely on 400th of the value of the bill that is assumed to be
the quality service expense, as opposed to the remaining 60 minutes that’s the staple
of the food and beverages ordered by the client. This implies that the service tax is
indictable solely on 400th of the bill and not on the complete quantity. Thus, on the
complete bill, the service tax chargeable are 5.8% (6% from June 1).

A dealer with turnover up to `1 crore per year elect composition scheme under
preview of MPVAT and susceptible for payment of composition money @ 3% on
cooked food VAT is leviable @5% on cooked foods and snacks provided by a
restaurant.

❖ VAT is leviable @20% on Cold drinks and @14% on alternative nonfood items.

❖ Entry Tax is additionally payable @1% on staple and incidental product utilized in
the manufacture of cooked food.

❖ Luxury Tax is additionally payable by out of doors caterers @10% underneath

LEAT Act with the sale price being deducted on that tax is vulnerable to be duly
submitted under MPVAT Act here hospitals and academic institutions are exempted.

❖ Under MP VAT Act tax on sale of alcoholic liquor to customers is levied @ 5%

30
POST-GST MECHANISM OF RESTAURANTS AND FOOD
SERVICE BUSINESSES:

This new tax regime divides the product into 5 categories those that are excluded
from tax, 5%, 12%, 18% and 28%. Dinning at a restaurant was much simpler prior to
GST enrolment. There we’ve got our food, we have a tendency to pay the bill and we
leave. Back then, we had to pay 3 further charges: the service charge, Service tax and
value added tax (VAT). However, lack of data regarding GST, given a chance for
restaurant owners to dupe any customers by making them pay additional. To lead on
smarter front here’s what customers ought to understand.

Firstly the charge collected as service charge isn’t a tax. The restaurants do not levy
service charge by government order, they conduct it on their own. However if
customer don’t wish to pay, they don’t need to. It’s utterly customer’s decision
whether or not they wish to pay the charge or not. If restaurants forcing a customer
to pay service charge it is susceptible for being sued under a consumer court.

On the tax front, you’ve got to pay two taxes: service tax and value added tax. GST
has subsumed both of these taxes and replaced them. For eating in Non-AC
restaurant, tax of pay 12%is to be paid. This 12% comprises of 6% as Central GST
and 6% State GST. Local delivery restaurants are under the same rates. However, if
you’re in an AC restaurant, irrespective of the fact that alcohol is served or not, a
total of 18% of the tax is paid.

All pre-processed and packaged food/snack sold out from restaurant seek 12% tax
from customers. The restaurants having license to serve liquor (with full ITC) can
levy a tax of 18 per cent, whereas those not having the facility of air-conditioning or
heating system at any time throughout the year and not having license to serve liquor
(with full ITC) can levy tax of 12 per cent. The 5-star hotels can come back under
the highest slab of 28 per cent GST. The 6% service tax on liquor across segments
has been effectively withdrawn.

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IMPACT OF GST ON FMCG:

After Demonetization, GST has been one of the biggest transformations that India
has seen in years. Amidst the hustle bustle going around the nation, GST became a
game changer for the Indian Economy, certainly affecting the “Aam Aadmi” to the
Business Entrepreneurs as well. From boosting up the consumer goods-industry
(FMCG Industry) to bring forth varied benefits to the economy, the new Goods and
Services Tax (GST) regime can make the market go up within the shortest time.

It is quite evident that GST has made a visible change in the Indian Economy and
FMCG, fourth largest sector in the economy, is amidst one of them to witness the
same. The fact is undeniable that FMCG is one of the fastest growing sectors of the
Indian Economy. VAT, Service Tax, Excise duty, Central sales tax etc have to be
paid by the FMCG Sector under the current GST Regime. The Consumer Packed
Goods or we can say the FMCG (Fast Moving Consumer Goods) current tax rate is
nearly 22-24%; though the expected rate is 18-20%, which would be highly greeted
by the major FMCG industry players. For CST, CVD, and SAD there was no credit
available under the current tax regime; contrary to that, GST would include the input
credit for all the GST payments made in the course of business.

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FALL IN THE LOGISTICS COST:

The benefit under the GST Regime would be visible and considerable saving amount
of expenses on logistics can be seen in FMCG Industry. The total cost of the
distribution of the FMCG industry sums up to 2-7%, which might fall to 1.5% after
the complete implementation of GST. A huge impact and change will be seen in
terms of cost reduction owing to the payment of tax, smoother supply chain
management, removal of CST, claiming input credit, under the GST Scenario. The
result will lead to cheaper consumer goods.

WAREHOUSE:

33
Many of the companies, according to their convenience and to enjoy a lot of tax
benefits/holidays/exemptions, under the current tax regime set up their warehouses
in the states like Himachal Pradesh and Uttaranchal. The dilemma is still there, to
whether all the tax holidays, benefits and exemptions would be there or not, once
GST is implemented. Since the costing is one of the major parts of any company,
thus, major companies like ITC, Hindustan Unilever, Nestle, Dabur & Cadbury are
still anxious regarding the migration of Tax holidays/exemptions.

INFLATION IN THE EFFECTIVE TAX RATE:

Aerated beverages have been given the highest rate slab of 28% under GST, with an
additional tax of 12%. According to the varied Beverage companies, 40% is the
effective tax rate for the sweetened aerated water and flavored water, which is not in
line with the stated policy of maintaining uniformity with the existing weighted
average tax that is below 40%. This has been very disappointing for varied
companies like Coca-Cola India, Dabur India Ltd, Red Bull India Pvt. Ltd, Pepsi Co
India Holdings Pvt. Ltd, and Pearl Drinks Ltd, as stated by the Indian Beverages
Association (IBA).

Estimates by Euro ministers International, a market research firm, states that

Carbonated Beverages in Indian Market is projected to grow by 3.7% every year
between 2017 and 2021. A different study shows by research firm Nielsen, a
consumption of 5.9 billion liters of soft drinks was seen in the year 2015.

34
IMPACT OF GST ON TELECOM SECTOR:

India's telecom industry has created nothing short of a revolution when it comes to
connecting the country. India had 1 billion active mobile connections in January
2018 and as per a survey conducted by IMAI-Kantar IMRB, mobile internet users
are expected to reach 500 million by June 2018.

However, over the last few years, the industry has been hit with a double whammy.
First, the entry of Reliance's Jio led to a shakeout with several small players exiting
the business and a squeeze on operator margins. More recently, the introduction of
the Goods and Services Tax in 2017 led to collective groans as the GST rate on the
telecom industry was set at 18%, 3% more than the 15% paid under the previous tax
regime. While the headline rate is high, Central Telecom Minister Manoj Sinha had
stated that the tax rate after accounting for input credits will be closer to 16%.
Telecom operators have so far been compelled to absorb the costs due to the
aforementioned hypercompetitive conditions. The additional compliance load on the
service providers is also quite extensive for the players to be unenthusiastic about the
new tax regime.

The Effect of GST on the Telecom Industry can be mainly classified under
additional monetary costs and compliance procedures.

35
MONETARY IMAPCT

FUEL NOT UNDER GST

India's 75% of cell towers are still run on diesel. Diesel attracts taxes of ~100% and
hence is a huge component of the fuel costs. Since fuel has been kept outside the
ambit of GST, India's telecom infrastructure companies cannot set-off their tax
liabilities against the taxes paid on fuel.

LIABILITIES DUE TO REVERSE CHARGES MECHANISM (RCM)

As per the GST provisions on RCM, if a registered dealer purchases goods or

services of more then Rs 5,000 per day from an Unregistered Dealer (URD) within
the state, the registered dealer is liable to pay GST on behalf of the URD. While this
provision has been suspended up to 30th June 2018, if implemented, it puts a
substantial monetary and compliance cost on large registered dealers and especially
for telcos as they regularly employ services of small dealers for the maintenance of
cell towers.

COMPLIANCE IMPACT

CIRCLE VS STATE

Telcos are required to acquire licenses from the Department of Telecom for
providing various services. While International Long Distance (ILD) and National
Long Distance (NLD) licenses are provided on a pan-India basis, some telephone
licenses are provided on a circle basis. These circles may include several states or
parts of them. For example, Mumbai city is one circle while Maharashtra & Goa (ex-
Mumbai) is a separate circle. Companies so far have maintained circlewise accounts
to accurately account for license charges, fees, etc. To comply with the GST tax
filing rules, they have had to change their accounting and apportion costs and fees.

FILING TAX RETURNS IN EVERY STATE OF OPERATION

Previously, each telecom operator had one central tax registration number and filed
returns 2-3 times a year. However, under the GST norms, telecom operators are
required to obtain a GST Registration Number for each of the states they have
operations in and file 2-3 returns in every state per month.

36
GST BENEFICIARIES

The products that are widely consumed inclusive of toothpaste, hair oil, soaps, all
have been enclosed in the 18% slab, which is lower than the 22-24% tax rate.
Keeping the Frozen Vegetables and Branded Cheese have been under the 5% rate list
that are largely neutral with the previous rates were around 3-4%. Cereals have been
exempted, so are likely to become more affordable. Being already in the bracket of
4-6%, Coffee, Tea, and Sugar have not seen any impact on the prices. Most of all
items are in the 18% tax bracket or might be below that. The minor category falls in
the 28% tax slab.

IMPACT OF GST ON E- COMMERCES:

As per the study conducted by the Internet and Mobile Association of India, the e-
commerce market is estimated to have crossed Rs. 211,005 Crore in December 2016,
followed by a report that online retail revenue of $100 billion is expected to be
generated by the year 2020.

The pace, with which the Electronic Commerce in India has grown, resulted in the
conception of online marketplaces. An e-commerce platform owned by the E-
commerce Operator inclusive of the Flipkart, Snapdeal and Amazon are included in
the marketplace. Scroll down to see some of the features of a marketplace model:

37
❖ Allows Third-party Sellers to register and simultaneously selling online on their
platform.

❖ Benefit for the third-party sellers as they gain access to larger customer base that are
registered with the marketplace.

❖ Items purchased by the customers on such platforms/marketplaces are either shipped

by the third party seller /merchant or through the well-curated fulfilment centre
managed by the Marketplace Operator.

❖ Such marketplaces charge a subscription fee on the sale value from listed sellers.

❖ Customers gain access to varied sellers and prices for desired products.

An initiative taken by government to allow foreign direct investments under this kind
of model to promote the e-commerce marketplace business:

The emerging dominance of the marketplaces has provided retailers with an

additional channel of sales and reaches which was beyond belief for an offline user.
A huge section of sellers along with the millions of Stock Keeping Units (SKUs) are
affiliated with the marketplaces. Specific to this section, GST has come up with its
own rules and regulations as well, since there is a significant increase in the number
of sellers and their business.

38
ISSUES THAT ARE BEEN FACED IN THE GST SCENARIO

KEY ISSUES

HIGHER COMPLIANCE COSTS:

With the introduction of the Model GST Law, the same casts an obligation on every
electronic commerce operator for the collection of tax at source and deposit
applicable GST when the payments are to be made to the suppliers. These scenarios
will surly increase the responsibility and the burden on electronic commerce
operators owing to their large vendor base. Since, the current GST regime considers
the e-commerce players as services providers and thus are required to comply with
one central services tax -legislation. Under GST, additional compliances will also be

required by the electronic commerce operators, in the state where the supplier is
located.

Availability of Credit only when Tax is paid:

The Credit can only be claimed on taxes that have to be paid to the credit of the
government.

Tax on the Stock Transfers:

With the implementation of GST, under this model, some of the specific transactions
without the considerations would also be treated as supplies. Subject to GST, the
Intra-state and inter-state stock transfers, amidst the branches/warehouses of a single
e-commerce unit, would be deemed to be supplies; though the tax paid would be
available as credit to the entity, hence resulting in cash flow blockages.
39
 Discounts on Pre-Supply:

Discounts at the time of supply or even before that, which are permitted in the
normal course of trade practice and reflected in invoices will not be a part of the
transaction value.

Discounts on Post-Supply:

Discounts on after effective supply are included in the 'transaction value' only in
cases where such post-sale discount, as per agreement, is known at or before the time
of supply, and specifically linked to relevant invoices. Under the VAT Regime, VAT
authorities are focused on insisting to include these discounts in the assessable value
and e-commerce retailers in general, so as to avoid disputes on the charge VAT on

non-discounted price.

With the introduction of the regulations requirements, the online seller community
has compelled the same to embrace GST regime. Scroll down to check the
compliance:

❖ No threshold for GST registration

❖ No Benefit under Composition Scheme

❖ Tax Collection at Source by Marketplace Operator

❖ The government has taken steps to simplify the tax constitution by the introduction
of GST & promoting trade followed by keeping a check on tax evasion. Scroll to
know how Implementation of GST will impact E-commerce marketplaces:

❖ Standard Pricing with Standard taxes

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❖ Blocked Working Capital issue faced by Online marketplaces

❖ Separating out Unregistered merchants from e-commerce

❖ Compliance issue in case of returns and refunds

WINDING UP:

GST may bring greater compliances for e-commerce players, along with this comes
significant benefits. The removal of restrictions on cross utilization of credits will
show a significant gain in the e-commerce sector. At present, the credit of service tax
paid on input services such as warehousing, logistics and commission of marketplace
has been denied by the traders, simultaneously the claim credit of VAT paid on
goods that are used for providing output services has not been allowed by the service
providers. The cascading effect results in a significant blocked unit tax cost for this
sector due to the fact that VAT is applicable on the output side, while most input
costs are services. But flipping the coin, this will surely result in the reduction of
cascading effect of taxes.

In the present scenario, there are differential rates of VAT in different states even for
the same products along with the further fragmenting of VAT Rate as well.
However, the rates at Central and State Level are expected to be uniform that would
ultimately reduce the disputes.

41
 PROBLEMS IN IMPLEMENTING GST

There are certain challenges and problems in implementing the GST in India. Some
of them are as follows.

1. There is no such clear picture about the GST both to the government and to the
general public.

2. There is no cooperation between the Central government and the state government in
implementing the GST. Even though, if implemented the levy of Tax remains on the
part of the state.

3. The State government generally refuses to accept it. As the states levy taxes on the
Destination principle i.e. (the state in which the product or service is sold or
rendered), so in order to lose the revenue they were avoiding it.

4. The Revenue Neutral Rate (RNR) is the key factor responsible for the effective
implementation of GST. But under GST, we could not say that the revenue remains
same as that of the current system of taxation.

5. Loss of revenue to the state. If we buy any product the VAT @ 14.5% is included
towards it, after the GST regime, there will be no VAT then it results on the loss of
revenue to the state.

6. Even though the government said that they will pay the loss of revenue to the state
government, it will be again imposed on the general people in some other forms.

7. It involves massive cost on the training of the staff of the Taxation department.

8. Lack of political support. The Bill must be passed in the Rajya Sabha for its
successful implementation.

9. IT is the backbone of GST which would connect the various stakeholders through
the Virtual platform. So, government must show keen interest on the development of
portal for GST and successfully achieves it.

10. There is a large debatable question in implementing the GST such as whether the
small entrepreneurs and small firms will be helpful through the GST regime, whether
the government and the Public ready for such a change

42
 CHAPTER. 2

RESEARCH METHODOLOGY

43
UNIVERSE

SAMPLING METHOD 1. SIMPLE RANDOM

SAMPLING METHOD
2. CONVENIENT
SAMPLING
METHOD
SAMPLE SIZE 30

METHODS OF DATA COLLECTION 1. PRIMARY

2. SECONDARY
PRIMARY DATA 1. QUESTIONAIRE
2. OBSERVATION
SECONDARY DATA 1. JOURNALS
2. MAGAZINES
3. ARTICLES
METHODS OF DATA ANALYSIS PIE CHARTS & GRAPHS

2.1. INTRODUCTION :

The study focused on comprehensive study of secondary data collected from

various books, National and International journals, government reports
published from various website which focused on various aspects of Goods and
Service tax. The term ‘supply’ is wide in its import covers all forms of supply of
goods or services or both that includes sale, transfer, barter, exchange, license,
rental, lease or disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. It also includes import of
service. The model GST law also provides for including certain transactions
made without consideration within the scope of supply.

A good research design has characteristics viz, problem definition, time required
for research project and estimate of expenses to be incurred the function of
research design is to ensure that the required data are collected and they are
collected accurately and economically. A research design is purely and simply
the framework for a study that guide the collection and analysis data. In this
project the two basic types of research design aroused.

44
The present research is exploratory in nature. Since GST is a new phenomenon
in India, there are hardly any studies in this area. Especially there is a huge gap
of empirical and behavior studies on GST in India. The study tries to find the
significance of popular perception regarding GST. Research is a logical and
systematic search for new and useful information on a particular topic. Research
methodology is a systematic way to solve a problem. It is a science of studying
how research is to be carried out. Essentially, the procedures by which
researchers go about their work of describing, explaining and predicting
phenomenon are called research methodology.

All research projects must start with exploratory research. This is a preliminary
phase and is absolutely essential in order to obtain a proper definition of
problem in hand. The major emphasis on the discovery if ideas and in sights.
The exploratory study is particularly helpful in breaking broad and vague
problems in to smaller, more precise sub problem statements. Exploratory
research is also used to increase the familiarity with the problem under
investigation.

It is the design that one simply describes something such as demographic

characteristics of people.The descriptive study typically concerned with
determining frequency with which something occurs or how two variables very
together.

The period cover in the present study is from 2016-17 to 2020-21 i.e. the
implementation of demonetization and GST and after. This paper is based on
45
secondary data. The Study is completely descriptive and analytical based on
Journals articles, News Papers, RBI reports, CMIE reports, research papers, a
review paper is used. The present paper aims to identify and

discuss a no of critical issues related to demonetization and GST. This paper

tries to find out the cost and benefits bear by the Indian economy due to the twin
blow of Demonetization and GST implementation as well. The paper also tries
to find out the expected rate of growth of the economy after the Demonetization
and GST. Finally, the study tri es to conclude that how it would be disrupted and
benefits the economy in the long run.

The demonetization and GST were the two powerful strokes taken by the
government of India to solve the emerging issue which persisted in the country.
Both Demonetization and GST can be regarded as game-changers of India's
Financial Market. The motive behind the Demonetization is to remove
corruption as well as improve the cashless payment system in the country. On
the other hand, the main motive behind the introduction of GST is to remove the
cascading effect of tax on the cost of goods and services. It was believed that
demonetization and GST would change the future path of the Indian economy.

All research in a major GST only focuses on the process of law and the impact
on the general consumer market in primary India. However, in the current study,
the impact of the GST on the industry had occurred. This study is descriptive in
nature and it used the exploratory technique. The data for the study were
gathered from the secondary sources such as journals, articles published online
and offline on various newspapers and websites. Present tax system allows is
diversity of taxes, the introduction of GST is likely to unique it. Many areas of
Services which are untaxed. After the introduction of GST they will also get
covered.

46
 2.2. OBJECTIVE OF STUDY

To understand the impact on both Primary as well as Secondary market.

To understand the impact on various sectors of market.
To understand the benefits as well as the problems faced by both small
scale and large organizations.
To compare the expected impact with the actual impact.
To understand impact on pricing due to subsumed taxes.
To study the short term and long-term impact of GST on Indian financial markets.
To study the challenges and benefits of implementation of GST.
GST application and research issues.
The main objective of the GST in the center of the country, the country is to the
Production
GST, one of the main ones, eliminate all taxes (VAT), income tax and VAT.

GST has replaced multiple indirect taxes, which were existing under the
previous tax regime. The advantage of having one single tax means every state
follows the same rate for a particular product or service. Tax administration is
easier with the Central Government deciding the rates and policies. Common
laws can be introduced, such as e-way bills for goods transport and e-invoicing
for transaction reporting. Tax compliance is also better as taxpayers are not
bogged down with multiple return forms and deadlines. Overall, it’s a unified
system of indirect tax compliance.

GST is expected to create one unified market for most goods and services in the
country. It means that for every producer in the economy the size of the market
will expand. There shall be an uninterrupted flow of ‘input credits. So that, the
incidence of taxation does not cascade. The traders and the industrialists can
claim ‘input credit’ themselves while filing GST returns. A cut in taxation
would enhance competitive power of the traders and the industrialists in the
international goods market.

Tax-exemption on many commonly used items would offer a more favorable

market environment to the to the small traders who deal in these items. GST Act
provides that the

47
common items of consumption of the common man remain tax-free. Thus, no
tax is levied on items like milk, curd, fresh fruits, vegetables and the like. This
should give a big relief to the common man. To analyze the impact of Goods
and Service Tax on the share price return during the pre and post announcement
period. To test the return performance of stock price during the pre and post
announcement of Goods and Service Tax.

Composite supply is a supply consisting of two or more taxable supplies of

goods or services or both or any combination thereof, which are bundled in
natural course and are supplied in conjunction with each other in the ordinary
course of business and where one of which is a principal supply. For example,
when a consumer buys a television set and he also gets warranty and a
maintenance contract with the TV, this supply is a composite supply. In this
example, supply of TV is the principal supply, warranty and maintenance
service are ancillary.

Mixed supply is combination of more than one individual supply of goods or

services or any combination thereof made in conjunction with each other for a
single price, which can ordinarily be supplied separately. For example, a
shopkeeper selling storage water bottles along with refrigerator. Bottles and the
refrigerator can easily be priced and sold separately. Aggregate turnover does
not include value of supplies on which tax is levied on reverse charge basis, and
value of inward supplies. The value of goods after completion of job work is not
includible in the turnover of the job-worker. It will be treated as supply of goods
by the principal and will accordingly be includible in the turnover of the
principal.

48
If during the process of verification, one of the tax authorities raises some query
or notices some error, the same shall be communicated to the applicant and to
the other tax authority through the GST Common Portal within 3 common
working days. The applicant will reply to the query rectify the error answer the
query within a period of seven days from the date of receipt of deficiency
intimation.

Only a moderate tax of 5% is levied on items like tea, coffee and medicines
which is another set of items being commonly used by most people of the
country. Briefly, the essentials of life of a common man are either tax -free or
moderately taxed. With the growth of market size, GST is expected to raise the
level of economic activity in the economy. Implying faster GDP growth. It
would also mean faster generation of the opportunities of employment.

Committee on Integration of Accounting Systems

As the TDS (Tax Deduction at Source) provisions came into force, a need was
felt to study the integration of accounting systems of the states with GSTN. This
Committee was tasked with such study.

Road Transport Committee

As the GST regime eliminated fixed check posts on the roads with provision of
e-ways bills, it was felt that the momentum could be carried forward to remove
other check posts that the impediments in the road transportation. Accordingly,
this committee was set up to suggest further roadmap.

Fund Settlement Committee

This Committee was formed to prepare guidelines, methodologies for the

settlement, apportionment of funds collected under different heads between the
States and the Center.

49
2.3. LIMITATION OF STUDY:

Although the study was carried out with extreme enthusiasm and careful
planning there are several limitations which handicapped the research viz.

TIME CONSTRAINTS: The time stipulated for the project to be completed is

less and thus there are chances that some information might have been left out,
however due care is taken to include all the relevant information needed.

SAMPLE SIZE: Due to time constraints the sample size was relatively small
and would definitely have been more representative if I had collected
information from more respondents

ACCURACY: It is difficult to know if all the respondents gave accurate

information; some respondents tend to give misleading information.

VALIDITY : GST rates may vary in future and the policies will keep changing
so data does not provide foresee of what the impact will be on the financial
markets after the changes

Every scientific study has certain limitations and the present study is no more exception.
These are:

❖ The sample size was small and cannot be applied to the entire population.

❖ GST is new launched tax system so some complications are faced by the
peoples.

❖ The sample size is very small compared to the total population of the
region.

❖ The study was conducted with the basic assumption that the information
given by the respondent is factual and represents their true feelings and
behavior.

❖ It is very difficult to check the accuracy of the information provided.

❖ Since all the products and services are not widely used by all the customers

50
❖ it is difficult to draw realistic conclusions based on the survey

Tax experts claimed that the previous practice of tax on tax – for example, VAT
was being charged on not just cost of production but also on the excise duty that
was added at the factory gate leading to production cost building up but now all
had been gone when GST is rolled out. The prices of consumer durables,
electronic products and ready-made garments will be available at low price after
rolled out GST. In other aspects, for goods which were taxed at low rate, the
impact of GST brings price increment. Services bearing essential ones like
ambulance, cultural activities, pilgrimages etc. were exempted from levy are
same. India has seen the strongest tax reform that aims to do away with various
– tax system on goods and services and bring them under one rate. We can draw
the following impact of GST on price.

The present study is based on secondary data. The secondary data were
collected through well designed plan formulated for this study purposes. So, the
data were collected from internet, e-journals, union budget speech, working
papers etc. The collected data were classified according the scope of analysis
and tabulated for the purpose of interpretation and presentation of data. The

51
 purpose of analysis of secondary data, various statistical tools like percentage,
mean, deviations etc. were used. GST is an indirect tax which will include
almost all the indirect taxes of central

Government and states governments into a uniform or whole tax. As the name
suggests it will be levied on both goods and services at all the stages of value
addition. It has dual model including central goods and service tax (CGST) and
states goods and service tax (SGST). CGST will subsume indirect taxes like
central excise duty, central sales tax, service tax, special additional duty on
customs; counter veiling duties whereas indirect taxes of state governments like
state vat, purchase tax, luxury tax, octroi, tax on lottery and gambling will be
replaced by SGST.

The GTMA approach allows for analysis of highly directed graphs with many
nodes in place, and the complexity of the graph is high, to draw any useful
results from the actual visualizations. Many software allows for the matrix
approach application for handy and easy computations. This particular approach
is chosen for its compatibility with any number of nodes and attributes. The
concept fully characterizes the considered selection problem, as it contains all
possible structural components of the attributes and their relative importance
Rao (2007). In the case of even small deviations in permanent functions may
lead to significant changes in satisfaction index, and thus allowing for natural
ranking of factors for in the descending order of satisfaction or ascending order
of index of places with necessary improvement.

❖ A single registration for both CGST & SGST will reduce transaction costs and
also unnecessary wastages. To make this more effective Government has to
provide necessary IT infrastructure & integration of States level with the
Union.

❖ With the introduction of GST, Tax on Tax i.e., multiplicity of taxation will be
eliminated. A number of taxes currently levied on each level of transaction
will be reduced. This will help clearing the confusion created by existing
indirect taxes and also reduce the paper work associated with them.

52
❖ Consumers will be benefitted the most as the average tax burdens will be
reduced with the introduction of GST. Implementation of GST will help
reduce the corruption in the country, because GST reduces the multiple tax
system

The present paper is based on descriptive as well as exploratory research. It is

descriptive in the sense that proper description has been made regarding the
concept of GST in India.It is exploratory in the sense that various impacts of
GST on Indian economy which can be positive as well as negative have been
identified. The present study is based on secondary data and the various
secondary sources includes books, journals, magazines, newspapers, websites
etc.

Financial markets have become a central aspect of our daily lives due to
deregulation and liberalization in national economies and financial and
technological innovation in the last few decades. The amounts traded in
financial markets daily, monthly, annually, are sometimes at par and
sometimes much bigger than the GDPs of the five biggest economies in the
world. The immense growth in financial markets affects our daily lives not
only during times of crises but also on a daily basis because of their ups and
downs. A phenomenon so pervasive in daily life has brought great interest
from different fields of social sciences. This paper looks at how the social
sciences study financial markets by making a very short survey of Financial
Economics, Behavioural Finance, Sociology and International Political
Economy in an attempt to comment on disciplinary boundaries.

53
2.4. HYPOTHESIS OF STUDY

❖ NULL HYPOTHESIS
There is no significant difference between the abnormal returns of stock
between pre and post GST in India.

❖ ALTERNATE HYPOTHESIS
There is a significant difference between the abnormal returns of stock between
pre and post GST in India.

NEED OF THE STUDY

GST is the concept of bringing about the uniformity in the taxation system of a
country since, it has-been in operation on many countries this is somewhat new
to India. So, this enables a person to clearly understand the concept of GST and
its impact on the price of various products. This study focus is to make a
common man to have a basic idea about the Goods and Service Tax.

DIRECTION OF FUTURE RESEARCH

All the above Studies in GST have said only about the legal procedures and
their General impact on the Indian Consumer market as a whole. But in the
Current study, the GST’s impact on certain selected industries has been shown
in specific. This study provides way for the future researchers, students and
academicians to have an understanding of the concept of the GST and through
this any researcher can identify, analyze the changes in the GST future rates
with that of the present rates.

54
2.5. MATERIALS AND METHODOLOGY

This research paper uses primary sources of data such as survey and analysis of
the data collected. The secondary sources such as books, journals and articles
are also referred for this research. This research paper uses empirical type of
research and data is collected by random sampling method.

The comparison is performed on different levels of influence subjected to the

discussed factors by their inclusivity on the drafting of the act. The draft in itself
is devised on some factors which are to be concerned for significant welfare on
the scale for the majority of the populace and future aspect of amendment and
execution ability. The approach towards the comparison of these different
factors to find the inclination of the executed GST and future aspects for the
improvement to attain stability and prospects for initiating a smoother
globalization trend for the Indian economy.

Several of the factors are to be considered for the selection of an approach to

achieve nearer to actual results based on the collected facts and evidence. In
case the factors thought on which the study is scaled are in total disjoints Rao &
Padmanabhan (2007) to each other, approaches such as TOPSIS and AHP are
selected algorithms. However, the factors suggested are not in total disjoints to
each other about a certain level of influence upon each other. Thus the approach
proposed is not suitable for the same. DEA Toloo (2011) algorithm is suitable
for higher accuracy but requires large computations and deviates profoundly
from the accurate answer for more numbers of factors. ANP Yang (2011) fails
in cases of hierarchical relationships for the computations. Thus the method
used for the computations selected is Graph Theory and Matrix Approach
(GTMA) Agrawal et al. (2016), which is not bound by any limitations
mentioned previously above.

Further, these rankings can be used to find the relative influence each of them
may hold on others to devise natural executing amendments for maximizing
results. Because of all these advantages discussed above, the proposed study has
applied GTMA for the selection of disposition alternatives. The examples of
applications of GTMA in fields of vast technology and finance results to draw
various conclusions. Jain et al. (2016) used the process to create a model to
55
analyze the performance variables of a flexible manufacturing system (FMS).
RV Rao (2007) used the principal of GTMA for analysing Operational
Performance Evaluation of Competing Companies. Wagner et al. (2010) used
the same for assessing the vulnerability of supply chains using graph theory
Muduli et al. (2013) used the algorithm to model and analysed identified and
ranked the barriers to the green supply chain in the Indian mining industry.

The main elements of the GTMA model are the elements of the graph, i.e.,
Nodes and Edges. Each edge act to form a directional vector connecting two
nodes depicting the nature of interactions between the two nodes in the
observation at the time. Each node is a representation of a single attribute or
factor in the discussion. The directional graph (or digraph) is prepared, which is,
in turn, used to understand the relations between each attribute or factor which
is capable of influencing the satisfaction index. Numbers of nodes (M) in the
digraph are taken to be equal to the number of attributes considered for the
study, and arrow or directed edge connecting two nodes represents their relative
importance. A systematic approach, based on the method discussed by Malik
(2015), is developed for the study.

The matrix formed is a type of transformed digraph in the representation only.

The matrix formed is Relative Importance Matrix Slack et al. (1994) where all
off-diagonal elements discuss the relative preference of one attribute to the
other. The diagonal elements give relative satisfaction or improvement
alternative. Since the digraph or matrix is variable changing with the number of
the attribute in observation, a standard matrix function is devised for the same.
The function is called Permanent Function is computed rather than the
determinant of the matrix.

This study is descriptive in nature and it used the exploratory technique. The
data for the study were gathered from the secondary sources such as journals,
articles published online and offline on various newspapers and websites.

This is a descriptive cum conceptual research paper, which studies the concept
and framework of GST based on past literature, books, journal, magazines,
research papers and articles etc. The study is based on secondary sources of data
or information. Different books, newspapers and relevant websites, Govt.

56
LEGISLATIVE HISTORY OF GST BILL IN INDIA

The GST Bill was initially proposed by the committee under the then Prime
Minster Atal Bihari Vajpayee during the year 2000 which headed by Asim
Dasgupta, the Finance Minister of West Bengal. Later on2004, The Kelkar Task
force which was instrumental in the implementation of Fiscal Responsibility and
Budget Management Act (FRBM) Act, 2003 suggested about the
implementation of GST under the principle of VAT. On 2006, the then Finance
Minister of Union P.Chidambaram, announced the target date for the
implementation of GST in India as 1st

April, 2010. During 2007, an empowered committee was formed by the

finance ministers of each state to submit the roadmap for GST and they have
submitted it. On 2008, that Empowered Committee submitted a report entitled
“A Model and Roadmap for Goods and Services Tax (GST) in India” containing
the roadmap for the implementation of GST in India. They also made some
suggestions with regard to that report. Later on November 2009, the EC
submitted the first paper and conducted a debate with regard to gather the
opinion of all stakeholders. In 2010, the then finance minister Pranab Mukarjee
assured that effective implementation of GST Billon

April 1, 2011. And on 2011 the 115 Amendment Bill was passed in Lok Sabha
in order to implement the GST Bill for certain goods and services and it was
sent to the standing committee. In 2013 the standing committee submitted its
report. But later it was lapsed due to some political discrepancies. On 2014,
Union Finance Minister Arun Jaitley has passed a 122 Amendment on
December 17, 2014.Later, on the budget the Finance Minister said that the Bill
will be passed on 1 st April 2016, and which could not happen and as of during
the budget of 2016, Arun Jaitley said that the GST bill will be implemented
through the One Hundred and One Amendment Bill officially known as The
Constitution (One Hundred and One) Amendment Act 2016 will be in force
from 1st July, 2017.Since, then though there were many changes in the GST date
of implementation But, the Government finalized its implementation from the
July 1, 2017.

57
 CHAPTER.3

REVIEW OF LITERATURE

58
 ABSTRACT:

GST that is Goods and Service Tax is the latest kind of Indirect Tax which is
proposed to be in force from 1st July, 2017 which is already in force on many
countries around the world and they all were considering it as their sales Tax
system. The GST will be the levied on the manufacture, sale and the
consumption of goods and services in India. It is said to be the biggest form of
reform in the indirect taxation aspect ever since 1947.The council of the GST
will be headed by the Union Finance Minister that is currently Arun Jaitley. The
main purpose of GST is to bring about the single tax system for the manufacture
and the sale of goods at the both central and the state level in the country.

The GST is mainly implemented to remove all other taxes like VAT (Value -
Added Tax), Excise duty and Sales Tax. The Tax will be very much useful for
the consumers in the aspects of payment of Taxes that is, we all have to pay
separate tax at state level and at central level for the goods and services
purchased and after the GST there will be only one tax to be paid for the goods
and services consumed which is the Goods and Services Tax (GST). This paper
brings out about the overview of the concepts of GST and its impact and
implications on the various Industries in the Indian Economy. Through this
paper we can be in a position to understand about the concepts, objectives,
impact and the implications of the Goods and Service Tax in India.

KEYWORD:
Indirect Taxation, Goods and Service Tax

INTRODUCATION

GST is the crucial form of Indirect Taxation which is said to be the indirect
taxation reform ever since our Independence. The GST is said to bring about the
economic integration said by our Union Finance Minister Arun Jaitley during
the Budget speech at 2016. The Goods and Service Tax is levied on the
manufacture, sale and consumption of the goods and services. Through the
implementation of GST, all other taxes like Value-added Tax, Sales Tax will be
removed and a uniform tax system on goods and services will be followed.
Goods and Services Tax is basically destination based consumption tax levied
59
LITERATURE REVIEW

Monika Sherawat et al. (2015)

Have studied about the various features and the challenges associated with
Goods and Service Tax well known as GST. They have found out that the legal
procedures in implementing, consent from all the states, proper literacy on the
concept of GST are the challenges associated with the implementation of
GST.Akanksha Korana et al. (2016) have made a research work about the
impact of GST on Indian economy. They have found out that the GST will
improve the input tax credit to the manufacturers which would result in reduced
cost of goods. They have suggested that the government must provide
awareness about the concepts of GST to the public .Garg et al. (2014) and
Kumar et al. (2014) have said that the GST has positive impact on the present
scenario of Indian economy. The Indirect Taxes Committee of Institute of
Chartered Accountants of India (ICAI) has said that the Goods and Service Tax
have positive impact on Indian Tax System.

G. Garg, 6 (2014)

Analyzed the impact of GST on Indian tax scenario. He tried to highlight the
objectives of the proposed GST plan along with the possible challenges and
opportunity that GST brings. He concluded that GST is the most logical steps
towards the comprehensive indirect tax reform in our country since
independence. GST is leviable on all supply of goods and provision of services
as well combination thereof. All sectors of economy i.e the industry, business
including Govt. departments and service sector shall have to bear impact of
GST. All sections 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 – the
Goods and Service Tax (GST) is all set to integrate State economies and boost
overall growth. GST will 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
60
Pinki et al., 7 (2014)

The authors in the paper have explored the concept of GST, the need to
introduce it in India, the hurdles in introducing it in India and suggestions to
overcome the same. The paper also discusses the benefits of introducing GST at
the earliest. The authors have discussed the options to introduce the dual GST in
India which could be Concurrent Dual GST, National GST or State GST. Under
the concurrent dual GST the better option was the one where GST is applied on
both goods and services. The other option explored was whether the Central
GST would be on goods and services but state GST would be only on goods
since state to collect GST in services is difficult to determine. This option also
recommended one single return with both CGST and SGST details and PAN
based registration. The authors have also discussed the constitutional
amendments required if GST is ever to be introduced since without the
amendment taxing both goods and services using one tax is not possible. The
paper also highlights the issues in the credit mechanism in the CGST/SGST
model since it is difficult to practically implement in terms of determination of
place where service is taxable. The other challenges to introduction of GST in
India highlighted are the availability of strong IT network, infrastructure and
programmes, agreement on other provisions like basic threshold, exemption to
goods/services, rates to be applied, etc.

Rashid et al., 8 (2014)

In this paper the authors study impact of GST in Malaysia since it is proposed to
introduce GST in Malaysia in 2015. The GST is being introduced mainly so as
to increase the revenue collections of the government and reduce the deficit. The
authors have studied the impact of the introduction of this GST and its relation
to certain indicators like the consumer price index and the structural balance.
For this the relation between these factors and the GST are studied for
Singapore, Thailand and Indonesia so that whilst implementing GST in
Malaysia the administration can adopt the best practice. The paper recommends
transparency in implementing GST and review of the rates/base of GST after 5
years and rectification based on the 5 year experience.

61
N. Kumar, 9 (2014)

Concluded that GST will help in eradicating economic distortion by current

Indian tax system and is expected to encourage unbiased tax structures which
will be indifferent to geo locations.

Jaiprakash ( 2014)

In his research study mentioned that the GST at the Central and the State level
are expected to give more relief to industry, trade, agriculture and consumers
through a more comprehensive and wider coverage of input tax set-off and
service tax setoff, subsuming of several taxes in the GST and phasing out of
CST.

Saravanan Venkatachalam, 10 (2014)

Has analyses the post effect of the goods and service tax (GST) on the national
growth on ASEAN States using Least Squares Dummy Variable Model
(LSDVM) in his research paper. He stated that seven of the ten ASEAN nations
are already implementing the GST. He also suggested that the household final
consumption expenditure and general government consumption expenditure are
positively significantly related to the gross domestic product as required and
support the economic theories. But the effect of the post GST differs in
countries.

Shaik et al , 11(2015)

Studied the concept and impact of GST on Indian economy. The study also
focused on some aspects of GST models. This study also covered the
advantages and working of GST. The study concluded that GST in Indian
framework will lead to commercial benefits which were untouched by VAT
system and would essentially leads to economic development.

Sehrawat & Dhanda, 12 (2015)

Conducted a study focused on advantages and challenges of GST faced by India

in execution. They concluded that a simplified and transparent tax system was
the need of Indian economy. Pointing out the various advantages they said that
62
GST will provide India a world class tax structure and a seamless tax system but
it will depend upon effectiveness of its implementation.

Munde & chavan , 14 (2016)

Conducted a study to discuss the pros and cons of GST and accordingly make
suggestions to minimise loopholes and make it more effective. They concluded
that if the probable loopholes are dealt effectively, tax payers will accept the
change brought upon and if procedures in GST proves to be simple and assures
the involvement of interest of all stakeholders then definitely it will lead to
economic development and rationalization of prices.

Kumar, R., 15 (2016),

In his paper ‘Comparison between Goods and Services Tax and Current
Taxation System – A Brief Study’ differentiate the GST framework and
previous taxation system and highlighted the impact of GST on Indian
economy.

Khurana, A. And Sharma, A., 16 (2016),

In their paper ‘Goods and Services Tax in India – A Positive Reform for
Indirect Tax’ highlighted the objectives of GST and reforms in indirect taxation
system in India. And conclude after implementation of GST, manufacturer,
wholesaler and retailer can be easily recovered input taxes in form of tax credit.

Shefalidani, 17 (2016)

stated impact of GST on Indian economy in the study in which some benefits of
GST such as one nation one tax, free from cascading effect, increase
consumption due to cascading effect, transparency and GDP growth are studied.
Petroleum products, real estate, and liquor are free from GST.

Dani, S., 18 (2016)

In her research study revealed that GST being a system replacing all indirect
taxes might hamper the progress of the country as the attempt to implement it is
not being made whole heartedly.

63
Lourdunathan F and Xavier P., 19 (2016)

studied inexplicit opinion of manufacturers, traders and society. It also included

challenges and prospectus of GST in future in India. Centre and state level taxes
also discussed in this paper. Various states are shown in which GST is followed
for growth of economy. Some issues such demonetisation issue, inappropriate
time, polictical issues, rate for manufacturers and traders, impact on working
and cash flow and implementation in unorganised sectors became some main
issues in path of GST.

Mujalde, S. and Vani, A., 21 (2017),

In their research paper on ‘Goods and Services Tax (GST) and its outcomes in
India’ focused on the features of GST, impact of GST on Indian economy and
discussed possible advantages and challenges of GST.

Nath, B., 22 (2017),

In his paper on ‘Goods and Services Tax: A Mile Stone in Indian Economy’
discussed benefit and impact of GST on Indian economy and also conclude that
GST has a positive impact on various sectors and industries.

B, MitraPriya, 27 (2017)

Stated GST as a Game changer in Indian Economy. The paper showed that GST
reduced complexity of various taxes and also removed cascading effect. Tax
structure shown in paper in which various tax rates included. Impact on Tax
incidence included various sectors such as Telecom, E- Commerce, Automobile,
real estate, banking and consumer goods. Impact on input tax credit showed that
there would be availability of cross credit utilization in CGST and SGST.

64
 CHAPTER.4

DATA ANALYSIS INTERPRETATION

AND PREPRATION

65
4.1ANALYSIS BASED ON PRIMARY DATA

IMPACT ON AUTOMOBILE SECTOR:

Before GST implementation and unification of taxes, we had a series of indirect

taxes in India, wherein every state had their own indirect tax structure. Now,
after GST implementation, all these taxes have been subsumed to one tax.

Impact of GST on automobile sector particularly is considered as a positive

thing as manufacturers of automobiles will have to pay reduced taxes and
ultimately customers will also be benefited. Before GST, various taxes such as
sales tax, road tax, sector tax, VAT, motor vehicle tax, registration duty, etc.
were imposed. All of these have been subsumed to GST on automobile services.

GST IMPACT ON AUTOMOBILE SECTOR

GST tax on automobiles has significantly reduced the cost of transporting

goods, as transportation anywhere in India doesn’t pass through check posts or
various taxes. It has, in fact, reduced the price of automobiles across the country
when compared to the prices before GST.

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IMPACT ON HOSPITALITY SECTOR :

According to a report, demystifying the Indian Online Traveler, Indian hotel

industry is expected to observe a growth of USD 13 billion by the year 2020.
Another data says that foreign tourist arrival (FTA) observed an increase to
10.66 Lakh in January 2018 as compared to 9.83 Lakh in January 2017.

Both the statistics show that the Indian hotel industry is one of the fastest
growing sectors of the country. However, GST impact on hospitality sector is
both good and bad. On the one hand, it is expected to attract more customers
because of decreased rates for end-users. On the other hand, the complicated
compliance structure is being frowned upon.

Although the unified tax regime may have long-term benefits, it is still receiving
high criticism from around the country. Most of the hotels have to pay 18%
GST, which is the second highest tax slab available.

Although the unified tax regime may have long-term benefits, it is still receiving
high criticism from around the country. Most of the hotels have to pay 18%
GST, which is the second highest tax slab available.

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4.2. FINDINGS
Positive Impact of GST on MSMEs

Low Rates Taxes

With the application of GST, industries having a turnover between Rs.10 and 50
lakh have to pay levies at lower rates, thereby, getting an enormous relief from
tax burdens.

Reduction in Logistics Cost and Time

GST enactment reduced time and money required for Interstate movement as
their duties got eliminated. Also, this diminishes costs of retaining large
stocks due to ease in free movement of goods.

Creating a Uniform Platform

GST levies taxes on stock transmissions and neutralizes the impact of
contributed taxes through the input credit too, thus, removing all tax
differentiation and bringing small and medium businesses to par with large-
scale industries.

Negative Impact of GST on MSMEs

Burden of Lower Threshold

GST bill has improved the threshold limit from 10 lakh to 20 lakh generally and
from 4 lakh to 10 lakh for North-eastern states, due to which any service
provider or retailer is subject to the tax levy. Earlier, the central expunge
threshold was INR 1.5 crore. Now, as the threshold is low, most MSMEs have
to pay a lump sum of their investment towards tax in the near, foreseeable
future.

Lack of Tax Differentiation for Luxury Items and Services

The GST implementation has the function of tax neutrality, which though
beneficial in other areas, does not differentiate between luxury
and normal items and services. Unlike earlier, when the state and central
government levied greater duties on luxury goods and services, the GST

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Tax Structure

Simplification of the tax structure is one of the major pillars of the GST regime.
With its introduction, the practice of charging differential tax rates on goods
(excluding fuel) across various states came to an end. Keeping the 'One Nation
One Tax' adage in mind, goods are broadly classified into 4 tax-slabs.
Moreover, several essential goods of mass consumption have been declared tax-
free.

It is important to note that all types of fuel have been kept out of the ambit of
GST as taxes on fuel serve as a huge contributor of tax for the central and state
governments and used by them to manage fiscal positions. Any major reduction
in these taxes would put a considerable strain on the government's ability to
manage national and state finances.

Increase in the Number of Registered Tax Payers

Another reason for implementing GST was to formalize the economy and bring
more traders under the tax net. The Economic Survey result released in January
2018 has revealed that 34 lakh businesses registered for a GST number during
the first 6 months of GST. This has increased the number of taxpayer’s base by
50%. Besides the immediate registrations, several unregistered dealers are also
expected to obtain GST numbers as enterprises continue to show preference
towards registered entities.

Elimination of the Cascading Effect of Taxes

As per the GST rules, a trader can claim credit for the taxes he has paid on
goods and services used for his goods. This is beneficial to the final customer as
they are paying taxes on just the final goods and not a double tax, i.e., the tax
paid by the trader on the input materials and on the final product as well.

This has made several goods such as textiles, daily consumables like soap, and
construction material like cement and paints cheaper.

To make sure that the benefits of lower taxes are passed on to the consumers,
the government has constituted a National Anti-profiteering Authority.

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4.3.ANALYSIS BASED ON SECONDARY DATA

DATA ANALYSIS AND INTERPRETATION OF DATA:

The total sample was categorized on the basis of age into four major segments
.Out of 98 respondents, 43.9% were between 20 – 30 years age span , 16.3%
were below 20 years, 27.6% were between 30-40 years. And 12.2% were above
60 years.

Out of the total 98 respondents 43.9% were having positive view when asked
whether introduction of GST has affected the Indian Financial Market., 33.7%
were having Negative view and 22.4% were having diplomatic view stating it

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Out of the total 101 respondents that responded on the questionnaire, 57.4%
were female respondents and about 42.6% were Male respondents.

Out of the total 100 respondents, 74% respondents answered “yes” when asked
if implementing GST will cause any change in Indian Financial markets and
26% respondents were having an opposite view.

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Out of the total 101 respondents, 52.5% respondents were of the view that
GST will burden the Indian Financial Markets, rest 47.5% were having a
contradictory view.

Out of the total 101 respondents, 56.4% were of the view that Indian
Financial Market was not ready for implementing the GST system. Rest
43.6% respondents were having a positive view.

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Out of the total 85 respondents, 42.4% respondents were expecting GST to
be applied after 3 years, 35.5% respondents were expecting after 1 year and
rest 22.4% were having different views.

Out of the total 101 respondents, 73.3% were of the view that any change in
the GST will be reflected in the stock price and its demand and rest 26.7%
were having an opposite view.

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Out of the total 100 respondents, 51% were facing some or the other issues
in stock trading while 49% respondents didn’t find any issues.

Out of the total 100 respondents, 44% respondents were having a

satisfactory i.e an average experience in Indian Financial Market after the
implementation of GST, 36% were having a good experience and rest 20%
respondents were having a bad experience.

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Out of the total 101 respondents, 67.3% were of the view that the Indian
Financial Market apply the GST laws fairly and rest 32.7% were having a
contradictory view.

Out of the total 101 respondents, 42.6% were not having a diplomatic stance
when asked whether the GST will burden the people in Indian Financial
market, 29.7% answered “NO” and rest 27.7% answered with a “YES”.

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Out of the total 98 respondents 66.3% were of the view that GST in Indian
Financial Market will be easier to comply with and rest 33.7% were having a
contradictory view.

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 CHAPTER.5

CONCLUSION AND SUGGESTIONS

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5.1. CONCLUSION:

GST has affected the entire economy and markets with cost of production going
high in all the sectors. As the cost goes high the profit lowers so the companies
raise the prices of the products and services in order to cover the cost that has
increased due to these taxes. Whereas in some cases the tax rate which was
earlier charged is seen to be lowered by GST, but the GST panel may increase
the tax rate in such items in the coming days. It has affected various sectors of
financial markets as the profits are hit by the Indirect Tax reform. This has also
led to volatility in the stocks of some companies.

The proposed GST regime is a half-hearted attempt to rationalize indirect tax

structure. More than 150 countries have implemented GST. The government of
India should study the GST regime set up by various countries and also their
fallouts before implementing it. At the same time, the government should make
an attempt to insulate the vast poor population of India against the likely
inflation due to implementation of GST. Efficient formulation of GST will lead
to resource and revenue gain for both Centre and States majorly through
widening of tax base and improvement in tax compliance. It can be further
concluded that GST also have a positive impact on various sectors and industry.
Although implementation of GST requires concentrated efforts of all stake
holders namely, Central and State Government, trade and industry. Thus,
necessary steps should be taken.

The GST is very crucial tax reform since independence of India, so it must be
better handled with utmost care and analyzed well before implementing it. And,
the government both central and state have to conduct awareness programmed
and various literacy programmed about GST to its various stakeholders.
Although the GST implementation aims to upsurge the taxpayer base, largely
SMEs into its opportunity, it presents a problem of compliance and related
charges for them. Nevertheless, GST will make the MSMEs more competitive
in the long run and will make the playing arena level between big enterprises
and them. Additionally, the Indian MSMEs would be able to compete with the
international market goods and competition coming from cheap price epicenters
such as China, Philippines, and Bangladesh and actually thrive in the world
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market scenario..

After a thorough analysis of the above literature it can be concluded that GST
will provide relief to producers and consumers by subsuming the several
indirect taxes in India. The Study of literature indicates that the implementation
of Goods and Services Tax helps in better utilization of resources and makes the
taxation system environment friendly. The taxes for both Centre and States will
be collected at the point of sale. Both will be charged on the manufacturing cost.
Individuals will be benefited by this as prices are likely to go down. The lower
price of goods increases consumption and more consumption leads to higher
production thereby leading to economic growth and development of the country.

It is therefore suggested that there be provided a suitable clarification that in

cases where registration is taken only for the purpose of section 9(3) i.e.
payment of tax under reverse charge the provisions of section 9(4) will not be
triggered.

It is suggested that it be suitably clarified that in case a dealer receives interest

the he would be eligible for opting Composition Scheme. Similar clarity is also
required for inclusion/exclusion of non-operational income e.g.
interest/dividend while calculating aggregate turnover for computing limit of
Rs. 20 L for registration purpose u/s 22 & 24 of CGST Act,2017. Section 2(30)
of the CGST Act, 2017 defines Composite supply as a supply made by a taxable
person to a recipient consisting of two or more taxable supplies of goods or
services or both, or any combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary course of business, one
of which is a principal supply.

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5.2.FINDINGS:

There is not much of primary data for my study in this project so I had to study
the secondary data and come to the conclusion and suggest an opinion on how
the implementation of GST could have been a much better Indirect Tax reform.
However when I collected some Primary Data from my Family, Friends and
colleagues I could understand how the consumer in India is affected by the new
indirect tax that I prepared the conclusion based on the behaviour of consumer
towards the new indirect tax and not by the behaviour of investor towards the
new indirect tax.

However when I spoke to some investors already holding stake in the

companies in the above mentioned industries, I understood that only a few
investors noticed the impact of GST in their holdings

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 5.2. SUGGESTIONS

To provide literacy and awareness about the GST Effective spending on

efficient Tax administration staff Well maintenance and frequent follow ups of
GSTN (Goods and Service Tax Network) portal for better relationship with
various stakeholders. In order to avoid the unnecessary loss of revenue to the
state government, the central government may think about the considerable
percentage of GST which will be helpful for all stakeholders of GST. Consent
from all states and suggestions from every state for betterment of GST and the
source of Tax revenue. The government should take care about the RNR which
should not affect the tax revenue to any government either central or state. The
loss of Tax revenue should be managed and compensated properly through
proper diversification of funds without burden to anyone. The Central and the
State government should be in proper understanding and cooperative with each
other for the successful implementation of GST. All the Tax Professionals and
general merchants involved in the Business should be given training and basic
knowledge about the Goods and Services Tax.
It is suggested that in case where the person wishing to opt for Composition
Scheme holds such goods in stock which have been purchased in the course of
inter-State trade or commerce or imported from a place outside India or received
from his branch situated outside the State or from his agent or principal outside
the State, he be allowed to opt for Composition Scheme upon payment of
appropriate applicable tax under GST.

It is clarified that whether caterer or banquet hall may claim composition

scheme as it has been raised by such industries as Government in the press
releases announce for the Restaurant only
where in law does not stop it.

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 5.3. ANEXXTURE (QUESTIONAIRE):

(1) Gender:
o Female
o Male

(2) Age
o Below 20 years
o 20 to 40
o 40 to 60
o Above 60

(3) Do you think implementing GST will cause change in Indian Financial
Market?
o Yes
o No

(4) Do you think GST will burden the Indian Financial Markets?
o Yes
o No

(5) Do you think Indian Financial Market is ready for implementing GST
system?
o Yes
o No

(6) If your answer is No, then when would you expect GST to be applied ?
o More than 1 year
o More than 3 years
o Other

(7) Will any change in GST change the stock price and its demand?
o Yes
o No

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(8) How do you feel the introduction of GST has affected the Indian
Financial Market?
o Positively
o Negatively
o No impact

(9) Are you facing any issues in stock trading after the implementation of
GST?
o Yes
o No

(10) How was your experience in Financial Market after implementation of

GST?
o Good
o Bad
o Average

(11) Does the Indian Financial Market apply the GST laws fairly?
o Yes
o No

(12) Do you think GST in Indian Financial Markets will burden the people?
o Yes
o No
o Maybe

(13) Do you think GST in Indian Financial Markets will be easier to comply
with or difficult?
o Easy
o Difficult

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BIBLIOGRAPHY:

1. www.cleartax.com
2. www.wikipedia.com
3. www.moneycontrol.com
4. www.economictimes.com
5. www.timesofindia.com
6. www.investopedia.com
7. www.quora.com
8. www.services.gst.in

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