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Journal of Advance Management Research, ISSN: 2393-9664
Vol.05 Issue-03, (August 2017), Impact Factor: 4.598
Double-Blind Peer Reviewed Refereed International Journal - Included in the International Serial Directories
Journal of Advance Management Research, ISSN: 2393-9664(JAMR)
http://www.jamrpublication.com email id- jamrpublication@gmail.com Page 76
“GST” -A HARBINGER OF CHANGE: PANACEA OR EXACERBATE
Dr Vijayendra S. Gupta1
; Mr Kalash Agarwal2
INTRODUCTION:
The GST is India's biggest tax reform to date and is expected to improve compliance levels, increase
governmental revenue, and bridge the divide between small and large businesses by amalgamating a
host of central and local taxes. Does this promise to be a unifying step in the right direction, or will it be
a half measure; with execution woes that may echo for years? Today, more than 116 crore of the
country’s total population of 1.25 crore have Aadhaar identification. About 108 crore people use
mobiles, while 50 crore operate smart phones. About 85 lakh are so far registered with the GST
department.
SOME BASICS ABOUT GST
Goods and service tax (GST) is a single rate of indirect tax to be applied in the country. It subsumes all
the central and state taxes levied presently in the country into one single tax rate. In India, GST Bill was
first introduced in 2014 as The Constitution (122nd
Amendment) Bill. This got an approval in 2016 and
was renumbered in the statute by Rajya Sabha as The Constitution (101st
Amendment) Bill, 2016.
India being a federal republic, GST will be concurrently levied at Central (CGST) and state (SGST) level.
The Union will prepare and implement a common base for both the levels. Destination principle will be
considered as a basis for the levy for CGST and SGST. Hence, exports will become zero-rated and import
taxes will equalise with domestic goods and services taxes. An Integrated Goods and Service Tax (IGST)
will be imposed on inter-state supplies in the country. IGST will be a sum of CGST and SGST of the
relevant state. GST council will be formed for solving all the issues and recommendations relating to
GST.
Also, an additional tax of 1% will be levied by the Centre for the supply of goods over and above IGST,
assigning the income earned to the origin states.
For an efficient and fruitful implementation of GST, the government will bear the losses incurred by the
states and provide with compensations for five years.
GST will reduce the administrative complications and simplify the indirect tax system in India. It will
result in a significant change, creating a single national market under one tax procedure.
SALIENT FEATURES OF GST
 The Union Government will be vested with all the powers to make the rules and regulations in the
matter of supplies in the system of inter-state trade. For intra-state transactions (including services)
the right to levy GST will be with states.
 GST will contain current Central and state-level taxes in itself. The Central taxes subsumed will
include service tax, excise duty, additional excise duty, additional customs duty (CVD) and special
1
Associate Professor, Sangam University , Bhilwara
2
Student , School of Management , Sangam University , Bhilwara

additional duty. State VAT, entertainment tax, central sales tax, luxury tax, entry tax (other than
Octroi) and purchase tax are state level taxes to be included in GST.
 Alcohol for human consumption will be kept away from GST.
 Integrated Goods and Service Tax (IGST) will be levied by the Centre on the inter-state goods and
services.
 Application of GST on petroleum and petroleum products might happen.
 Basic customs duty will be levied on goods imported.
 Provisions relating to removal of Octroi or entry tax across India will be made.
 GST Council comprising of Central and state ministers will administer the GST in India.
WHY GST CAN BE A BOON FOR THE INDIAN ECONOMY:
a. FROM COMPLEX TO EASY: GST simplifies the complicated taxation by eliminating 15-17 indirect
tax levies
b. E-COMMERCE BOOST: Some of the states tend to levy complex restrictions that c*an hamper
the E commerce business so much that some of the sellers avoid shipping products to particular
states. This will end with GST.
c. GDP UPLIFT: With the elimination of the cascading effect of tax rates, Economists hope that GDP
will improve by over Rs 100,000 crore.
d. BOOST FOR THE MANUFACTURING SECTOR: A clarity on taxing policies , switch from a
fragmented to a common market and fall in the logistics cost, will cumulatively provide a major
boost to the manufacturing industry.
e. EASE OF DOING BUSINESS: With multiple taxes like octroi, central sales tax, state sales tax,
entry tax, license fees, turnover tax etc subsuming into GST, doing business in India will become
much easier.
SOME POTENTIAL DRAWBACKS OF GST:
a. NOT AN IDEAL GST- An ideal GST should have the same rate across all the states. But this might
not be the case in the long run. States might ask for some additional levies or an exemption
depending on what they feel is right for their state.
b. REVENUE COMPENSATION TO THE STATES – It has been decided that the states will be
provided complete compensation for any revenue losses that they’ll incur due to tax changes.
The problem is that how these revenue losses will be calculated.
c. MISINTERPRETATIONS – There can be many misinterpretations when we shift from one tax
system to another. These can lead to disputes and litigations.
d. NOT A SINGLE TAX: GST is not a single taxation system. There are 3 parts to it.
i. Central GST – which will be levied by the centre
ii. State GST – which will be levied by the state
iii. Integrated GST – which will be levied by Central government on inter-state supply of
goods and services

RATIONALE BEHIND THE STUDY:
The traders and business community could be a part of the country’s ‘financial integration’ by facilitating
smooth implementation of Goods and Services Tax (GST). After attaining independence, the country
faced the daunting task of integrating 556 princely states. “Sardar Patel was given the responsibility of
integrating 555 states and he did it successfully. It is a good and simple tax regime that would pave the
way for removing barriers, which in turn will lead to reduction in prices of commodities. States like Bihar
with large consumer base are set to benefit from GST. The new tax regime would help India emerge as a
manufacturing hub.
The GST department is setting up Suvidha Kendras across the state to help businessmen file their
returns. Various efforts for change should always be accepted as they ushered in huge economic
reforms. “Gross domestic production of the country will scale up. Exhorting business and trade
community to adopt the new system is the need of the hour.
HOW ACTUALLY COMMON MAN VIEW “GST” IS ?
The GST will replace at least 17 central and state taxes to make way for a single, unified taxation system
and will impact almost all industries. The GST will introduce areas that will benefit the customers,
whereas there will also be areas where the consumers may have to sell out more. The concept of GST is
similar to having more than one sim-cards of all mobile service operators earlier in past to get all service
provider benefits and now to be replaced by only Jio mobile service operators in future, offering all
benefits in single 4G sim-card . By bringing all the taxes under single roof, we are simplifying our process
of referring rules under different taxes. Similarly, the tax burden will reduce same as the person
recharge amount reduces. But the important point is, by porting a number; he is changing the network
but not the number. In the same way, rules of various indirect taxes will not change. The only thing that
changes is the way of claiming input tax credit. Without GST, input excise or service tax cannot be
claimed against output VAT. But now, with the introduction of GST, it may become possible.
HOW IS GST LEVIED?
GST is a consumption-based tax. It is based on the destination / actual or final consumption point of
goods and services. GST is collected at each stage of purchase or sale in the supply chain. Manufacturer,
wholesaler or retailer have to pay the applicable GST rate and can claim input-GST through tax credit
mechanism. But being the last person in the supply chain, consumer will bear this tax. Hence, GST is a
last point retail tax.
EDUCATION INSTITUTION
A. UP TO HIGHER SECONDARY
There is no change made in any subject relating to education in the GST era, except to reduce tax rate
on certain items of education such as school bags etc. Mid-day meal scheme as well as security,
cleaning and housekeeping services performed in educational institutions up to higher secondary are
also exempt from GST. Services relating to admission and examination up to higher secondary are
exempt under GST. Services provided by an educational institution to students, faculty and staff are
exempt. Transportation of students, faculty and staff services provided to an educational institution
providing pre-school education, and education up to higher secondary school or equivalent are exempt
from GST. Thus Some items of daily use by students such as school bags, colouring books and notebooks
will become cheaper. Another major impact on students will be due to taxing of coaching fees. Till now,
students enrolling in coaching institutions to get into professional courses such as engineering paid 15%
tax. The new GST levy will be 18%.

B. AFTER HIGHER SECONDARY ( University / Institute/ Higher Studies level )
At the college and university level, the services offered will now be taxed at 18%, three per cent more
than what was charged earlier. So, increased taxes will take a toll on students who do not come from a
financially strong background. Any institution providing education above higher secondary in cases
where degree is not recognised under law would not be able to claim input credit. Industry had
represented to the government on this issue. The biggest factor will be the tax on services offered to
educational institutions. Most educational institutions buy services like security, transportation, catering
and housekeeping from third-par*ty service providers. These will now attract 18% GST levy, which will
reflect in higher fees. Students will also have to pay more for laundry, food in hostel mess, medicine,
stationary and other services and products they buy on the campus. All such services will now attract a
levy of 18 percent. To put it in figures, if a student pays Rs 1 lakh in a year for a course in a top college,
he pays Rs 3,000 as tax. After July 1, he will have to pay Rs 15,000 more in tax. The overall cost of
education after GST is set to increase. This is certainly not a good thing in a country where the youth are
not only trying to help their families, but are also aiming at taking the nation forward.
FMCG
The new Goods and Services Tax (GST) regime will bring several benefits for the economy, and could
particularly vitalise the fast-moving consumer goods (FMCG) industry. Impact of the GST on FMCG firms
will depend on their product mix, given that the tax rates have gone up for some products and have
fallen for others.
Source: Axis Capital
The FMCG companies, whose tax incidence has come down under the GST regime, are likely to pass it
on to the consumers in the form of lower prices. “With the anti-profiteering clause in place, companies
would be required to pass on the benefit of tax rates to the consumer in the form of lower prices.
For most other FMCG majors, the GST rate structure is likely to be neutral or marginally positive, as their
broad portfolios would see a mixed impact. In case of HUL, for instance, tax incidence has reduced for
soap, toothpaste and tea, but increased for detergent, shampoo and skin care. For Godrej Consumer
Products, lower tax incidence on soaps and insecticides is a positive, but higher tax rate for hair dye is a
negative.

PHARMACEUTICAL
India is the largest producer for generics and the country’s Pharmaceutical Industry is currently the 3rd
largest in the world in terms of volume and ranks 14th
in terms of value. As the population continues to
grow, the need for better Healthcare Services is also growing. Currently, 5 percent of the country’s GDP
is expended on the Healthcare sector. The healthcare sector is expected to touch $150 billion by end of
2017, from $80 billion in the year 2012. Finished medicines come under the 12 per cent slab of the
recently announced GST rates. And the pharmaceutical industry is worried that transition troubles may
be around the corner, if the government does not act soon enough to tackle them.
GST would help the industries by streamlining the taxation structure since 8 different types of taxes are
imposed on the Pharmaceutical Industry today. An amalgamation of all the taxes into one uniform tax
will ease the way of doing business in the country, as well as minimising the cascading effects of
manifold taxes that is applied to one product. Moreover, GST would also improve the operational
efficiency by rationalising the supply chain that could alone add 2 percent to the country’s
Pharmaceutical industry. GST would help the Pharmaceutical companies in rationalising their supply
chain; the companies would need to review their strategy and distribution networks. Furthermore, GST
implementation would also enable a flow of seamless tax credit, improvement the overall compliance
create an equal level playing field for the Pharmaceutical companies in the country. The biggest
advantage for the companies would be the reduction in the overall transaction costs with
the withdrawal of CST (Central Sales Tax). GST is also expected to lower the manufacturing cost. There is
an uncertainty if the life-saving drugs, Healthcare services, and medical devices would continue to be
tax-free once GST comes into force. Till now, life-saving drugs are exempted from the Excise and
Customs Duties. Some of the States charge 5 percent taxes on the medicines; it might change once GST
comes to play.
HEALTHCARE
Though healthcare was out of GST ambit, there were several services provided by doctors, like providing
intraocular lens to patients during a cataract surgery, etc. which indirectly ensured that clinical
establishments also came under the GST purview. For selling a product to patients, by way of medicine
or allied products like a pair of glasses, should get a GST registration done to avoid being on the wrong
side of law.
FINANCE SECTOR
The banking and financial sector is one such area that is being predicted to get a little more expensive
for the consumers compared to what it is today after the implementation of GST. GST for banks and
financial services will require a shift from centralized compliance to state-based compliance and will
have a noteworthy impact on financial products and IT systems. The impending implementation of GST
would undoubtedly impact one’s personal finances especially when it comes to financial services, albeit
marginally. From the present rate of 15 percent, the GST on banking, insurance and investments such as
real estate, mutual funds will see a hike of 3 percent as the GST will now be 18 percent on them. GST
applies to all services where this a supply for consideration. So, in banking transactions such as credit
card payments, fund transfer, ATM transactions, processing fees on loans etc., where the banks are
levying charges, increased tax rates would apply. This would have a slight inflationary impact.
GST AND INSURANCE
Primarily, there are three major kinds of life insurance products – Term insurance plans, Ulips and
Endowments (including money back). The applicability of service tax (in the current format) on their
premium is not similar in all three of them. The premium paid in life insurance policies represents two
portions – risk coverage and savings. The service tax is only on the risk portion of the premium and not
on savings portion.

GST AND BANKING
Transaction fees in financial services are likely to increase as the government has put these under the
18% tax bracket in the new GST regime. These services were so far taxed at 15% and the hike in the tax
rate means that individuals will have to pay Rs 3 more for every Rs 100 paid as charges/fees for banking
transactions.
GST AND MUTUAL FUNDS
The impact of GST on the returns of mutual funds will be largely marginal. The levy of GST will be on the
total expense ratio (TER) of the mutual fund. The TER, commonly known as expense ratio of mutual fund
houses, will also go up by 3 per cent. Expense ratio is the measure of the cost incurred by an investment
company to operate its mutual fund.
Even though the hike will be nominal, taken together for all the insurance covers, the increase in the
outflow could be something to account for by many policyholders. For someone paying annual premium
for car, household, health, term plan, personal accident cover, a total of say Rs 50,000 a year could see a
jump in premium outflow by Rs. 1,500 a year, with no additional risk coverage or benefits.
GST AND REAL ESTATE
Real estate sector is marred with plethora of taxes both at the state and central level. GST hopefully will
put in a more streamlined tax structure in place. “The heavily taxed real estate sector welcomes a single
stable 12% GST rate, inclusive of the value of land and with full input tax credits.
TEXTILE SECTOR
In the textile sector, the mood is upbeat. Analysts of all hues and leanings are convinced that the Goods
and Services Tax (GST) regime is a harbinger of glad tidings for all. The reform process received a major
boost on August 7, 2015, when PM launched the India Handloom Brand. It was aimed at promoting high
value handloom products with new design, zero defect (in fabrics), zero effect (on environment) and
assurance of genuineness and quality of the products. Textile industry body Confederation of Indian
Textile Industry (CITI) has termed the government's move to impose 18% Goods and Service Tax (GST)
on manmade fibre and yarn a 'severe blow' to the synthetic sector. Small and Medium Enterprises
(SMEs) and unorganized mills will face severe challenges as their profits are very low. The apex industry
association of the textile sector urged the government to reduce the levy to 12% to save the sector
whose growth rate is stagnated due to high price, higher cost of manufacturing due to high input prices
and competition from China, South Korea, Indonesia and Thailand.
SUMMING UP:
A "lot of disparities" have been sorted out by the government ahead of the GST rollout. The introduction
of the GST model is a significant development that is set to transform how the Indian taxation system

works. However, considerable work needs to be done and the implication of GST for banks and financial
services needs to be understood. The government should also ensure the GST legislation addresses the
complete concerns of banks and financial services so that the GST reform turns into a success for
everyone involved. The net increase on the common man will be "very negligible”.
REFERENCES
 http://ideasmakemarket.com/2016/08/*gst-boon-bane.html
 http://www.gstindia.com/tag/education-sector/
 http://economictimes.indiatimes.com/news/economy/policy/gst-wont-make-a-difference-to-
education-finance-ministry/articleshow/59496904.cms
 http://www.caclubindia.com/articles/gst-boon-or-bane-to-indian-economy-25606.asp
 http://economictimes.indiatimes.com/articleshow/58895024.cms?utm_source=contentofinterest&
utm_medium=text&utm_campaign=cppst
 https://www.icicibank.com/knowledge-base/tax/gst.page?
 http://economictimes.indiatimes.com/wealth/personal-finance-news/9605238.cms
 http://economictimes.indiatimes.com/wealth/personal-finance-news/how-gst-impacts-fmcg-
firms/articleshow/58868546.cms
 https://cleartax.in/s/gst-impact-on-healthcare-pharma-sector
 http://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/gst-provides-a-
strong-fibre-for-textiles/articleshow/59496440.cms
( ALL LINKS ACCESSED BETWEEN MARCH 2017 TO JULY 2017)

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