GST – A KEY TAX REFORM

AIS PRESENTATION
In Partial fulfillment for the
Pre-PhD Course Work

RITIKA SRIVASTAVA
2017006900
Department of Finance
Sharda University , Knowledge Park , Greater
Noida,201308

ADVISOR
(Dr. SUNIL
JOSHI )
 INTRODUCTION

• Overview Of GST ( Goods and Service Tax )

 GST is the biggest tax reform since Independence

 One-Country-One-Tax Regime
 Dual system of Taxation System consists of CGST & SGST
 Improve cost-competitiveness of Goods and services
 Reduce the tax burden.
 Brings down the manufacturing cost & decrease in production or distribution cost.
 Also helps to reduce corruption
 Increase tax collections due to wider tax base and better compliance
CGST & SGST

CGST :
 CGST, Central Goods and Service Tax is a part of goods and service tax and covered under
Central GST Act 2016.
 Taxes Collected under Central Goods and Service Tax will be revenue for Central
Government.
 CGST is expected to replace the existing central excise duty and services and also cover sale
transaction.
SGST :
 SGST would be levied on services and enable taxing of services by the State, the
Constitutional Amendment Act, 2016.
 SGST is to be administrated by the State Government
 The SGST payable could be set off from SGST credit.
 Challenges in Implementation of GST

1. Lack of adaptation
2. Lack of trained staff
3. Double registration can increase compliances and cost 
4. Lack of clear mechanism to control tax evasion 
5. Hard to estimate the exact impact of GST 
• HST(Harmonized Sales Tax)
 Combination of the(GST) and( PST).
 Total Tax Collected = Tax collected by consumers + HST

• HSN( Harmonized System Nomenclature) Code :

 is a multipurpose international product nomenclature
 developed by the WCO
 standardizes the classification of merchandise under section, headings, chapter, and subheading which in turn
results in a six digit code for a commodity.
 Mentioned in tax invoice
• Compliance Cost:
According to Sandford et al , “costs which are incurred by taxpayers or by third parties in meeting the
requirement of the tax system over and above the tax liabilities itself and over and above any harmful
distortions of consumption or production to which the tax may give rise.”
• The implementation of GST is expected to induce GDP by providing the government

revenue and continuously ensure the liquidity of the treasury.

• After analyzing the impact of GST on GDP growth rate of Asian Pacific Region, we

came to know about the fact that Only Jordan was successful in increasing the GDP

growth rate higher than the ten year average before GST implementation.

• Some other countries were also successful in increasing GDP rate in initial period but

later on lost their momentum.

 Background/Objective

• To know the whole concept of GST .

• To analyse the post effect of GST and Regression analysis of selected ASEAN
Countries.
• To know the realistic benefits for manufactures and Consumers.
• To know the impact of GST on GDP Growth rate of Asian Pacific Region.
• To estimate the compliance cost, at the time of implementation of GST
 Research Methodology

• Research Methodology used in Research paper- 5,6, and 11 is different from Research methodology used
in remaining research papers as these rest of the research paper applied Exploratory or Descriptive type
of research design and data collected from secondary source of data.
• In Research Paper 6 : Questionnaire Design & Data Collection through Probability sampling techniques
is used for research work.
Questionnaire Design- The first section consists of background of Companies including their main
business activity, turnover, profits and tax liability.
• The second section consists of a series of questions pertaining to respondents’ compliance costs including
external cost and internal cost. Several questions were asked including average hours spent by tax related
employees in a week, employee wages and salaries.
• The third section consisted of respondents’ perception, readiness and acceptance if GST were
implemented.
• The last section attempts to obtain data pertaining to the impacts of GST of Companies .
To be continued….

• Data Collection :
 proportionate stratified random sampling was applied as it allows an appropriate size of
samples to be drawn from the homogenous subsets of a population.
 Data was collected through a structured survey among companies in Malaysia.
Respondents were chosen randomly from various organizations based on inputs form SME
Corporation Malaysia.

In Research Paper 5 : The research is done with the help of Secondary data and panel data
analysis.
For panel data analysis, it is necessary to identify which model is appropriate to use to avoid
omitting variable bias. Fixed effect model or least square dummy variable model (LSDVM)
able to control omitted variable between cases but constant over time.
To be continued….

• In research Paper 11, Hypothesis testing , t-test , is used for the research work.
Hypothesis Formulation :
• For the purpose, average GDP growth rate of pre GST implementation period of five countries
in the region are taken and they are analyzed with GDP growth rate after the implementation
of GST.
Ho= µ = X
Ha= µ < X
where ,Ho= Null hypothesis, µ= average GDP growth rate after in post GST implementation
period,
Ha= alternative hypothesis, X= average GDP growth rate in pre GST implementation period.
• As the sample size in all the following case less than or equal to 30, t test is used to
test the hypothesis by using the formula :
 Results

• In Research Paper 11, hypothesis testing is used so, the results arrived in this research work
are as follows,
We compare the 10 years GDP growth rate of different Asian Pacific Region against the
implementation of GST :
• Table value is higher than calculated value, so null hypothesis is accepted and alternative
hypothesis is rejected in case of Jordan. Result is that GST implementation had resulted in
increase in GDP rate, in rest of the Countries the null hypothesis is rejected.
• The analysis also finds that, out fifteen years of GST implementation, in 8 years the GDP rate
was higher than the 10 years average GDP growth rate before implementation of GST. In 7
years GDP growth rate was lesser than the 10 years average GDP growth rate before
implementation of GST.
• A detailed study of the GDP growth rate after the GST implementation shows that the average
GDP growth rate was good for first ten years after GST implementation and later on the
average rate is lesser than rate before GST implementation.
• Only Jordan was successful in increasing the GDP growth rate higher than the ten year
average before GST implementation.
 Outcomes

• Benefits for Manufacturers:

It will reduce manufacturing cost and manufacturing sector become globally competitive.
Under the existing framework of GST a company having a turnover more than Rs 10 lakhs, would be liable to pay tax
against Rs. 1.5 crores. 
The key beneficiary of GST will be sectors such as batteries, footwear, plywood, electrical appliance , fast moving
consumer goods, textile industries, and paints, where the unorganized sector accounts for 35% to 70% of total market size.
• Impact on Macro Economy: :
Flawless GST will, increase productivity of all factors of production and hence enhances GDP and it will also cause
poverty reduction.
It is estimated that the gain in exports is to vary between 3.2% and 6.3% with absolute value range as Rs 24,669 crores
and Rs 48661 crores while imports are expected to gain between 2.4% and 4.7% , the unorganized sector accounts for 35% to
70% of total market size.
• Impact on Consumers:
Under GST, several taxes would be subsumed and this would eliminate the impact of double taxation resulting in fall in
prices and relief for the consumers.
The implementation of GST will result in a sharp decline in the prices of cotton textiles, wool, silk and synthetic fibre
textiles.
Primary Food articles like rice or wheat and any other cereals items would be exempt from GST.
 Conclusion

Government believes in introducing or implementing One-Country-One-Tax Regime for making tax

structure more efficient and transparent and avoid multiple taxes. It will also improve cost-competitiveness
of Goods and services and creating business-friendly environment. At the time of implementation of GST
in India, Supply of food and beverages & services has faced a number of amendments. Services and Goods
imported by SEZ unit or developer for authorized operation are exempt from GST. EOU can import goods
without payment of whole of custom duty. The largest portion of compliance cost is represented by internal
cost at 58.87% of total compliance cost. The external cost is at 26.01% followed by the smallest portion of
additional cost at 15.12% after the implementation of GST in Malaysia. When GST is implemented in
Malaysia ,the potential compliance cost would increase the external source of GST service for tax
computation followed by tax computation and tax planning as well as tax planning . Effect of the post GST
differs in countries; Philippines and Thailand show significant negative relationship with their nation’s
development. Meanwhile, Singapore shows a significant positive relationship.
 List of Papers Downloaded

• GST- A Key Tax Reform

• Impact of GST on Indian Economy
• GST: Positive and Negative Effect on Common Man in India
• Comparative Study of GST in India and other countries
• Implementation of GST- An Analysis on ASEAN states using least square dummy
variable model
• Elements of Compliance Cost – A lesson from Malaysian Companies towards GST
• Controversies in Supply of Food and Beverages
• Disastrous Consequences for opting the GST deemed export notification
• Concept of SEZ and EOU in GST
• Transition in GST Regime : Rationale and Impasse
• Empirical Study on the Effect of GST on GDP growth, Evidence from Asian Pacific
Region
• GST in INDIA and Beyond.