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GOOD AND SERVICE TAX (GST)
AND ITS OUTCOME IN INDIA.
Presented By-
Dr. Sakharam Mujalde Avi Vani
Sr. Lecturer Student
School Of Economics, School of Economics,
DAVV, Indore DAVV,Indore.
INTRODUCTION --
 GST is the indirect tax reform. Indirect taxes are levied on manufacturing of
goods provision of service and consumption.
 GST is the comprehensive value added tax on various good and services. It is the
single tax rate to be levied at national level.
 Presently there are indirect taxes like central excise, VAT, service tax, luxury tax
etc. which would get subsumed under GST.
 GST is to abolish the cascading effect of taxation i.e. tax on tax. This is a single
tax which will be levied on the product or service which is sold.
 World over, GST has been implemented in over 150 countries.
 Goods and Service tax bill is officially known as the constitution (one hundred
and twenty second amendment) bill, 2014. The GST implementation in India is
„Dual‟ in nature, i.e. it would consist of two components: one levied by Centre
(CGST) and another levied by States and Union Territories (SGST).
OBJECTIVES --
To study the features of GST.
To study the impact of GST on Indian
economy.
To study the advantages and challenges
of GST.
METHODOLOGY --
The research paper is an attempt of research,
based on the secondary data sourced from
journals, Internet, articles, previous research
paper which focused on the various aspects of
goods and service act. According to the
requirements of the objectives of the study the
design is descriptive type. The accessible
secondary data is used only for study.
Present indirect tax structure of India.
FEATURES OF PROPOSED GST --
Intra State
Taxable
Supply
Excise and
Service Tax
will be known
as CGST
Local VAT &
Other taxes
will be known
as SGST
Inter State
Taxable
Supply
CST will be
replaced by
Integrated
GST (IGST)
Approx. Sum
Total of CGST
and SGST
Import From
Outside
India
Custom Duty
In Place of
CVD and SAD,
IGST will be
charged
Range of GST-
 GST to be structured on the destination principle so that the tax base shifts from production to
consumption whereby imports will be liable to tax and exports will be relieved of the burden of
GST. Consequently, revenues will accrue to the State in which the consumption takes place or is
deemed to take place.
 CGST and SGST would be comprehensively applicable to all goods and services up to the final
consumer. CGST and SGST would be applicable to all transactions involving supply of goods and
services made for a consideration (except alcoholic liquor for human consumption) and the
exempted goods and services, goods which are outside the purview of GST and the transactions
which are below the prescribed threshold limits.
 Tabaco products are included in GST along with central excise tax.
 Initially the following products are exempted but GST on following products shall be levied from
a date to be notified by the GST Council
• Petroleum Crude
• High Speed Diesel
• Motor Spirit (commonly known as Petrol)
• Natural Gas
• Aviation Turbine Fuel
 The GST tax rate is expected to be around 17-18% and can be assumed as a tax neutral rate.
Input tax credit –
 At present, under various state VAT laws, there is no uniformity and clarity on the
quantum of ITC to be availed in case the goods are finally sold at a discounted value.
Many states like Tamil Nadu, have specific provision for reversal of excess ITC
availed by dealers in such cases. Under GST regime full ITC should be allowed
without any correlation to the price of output sale.
 The facility of Input Tax Credit at Central level will only be available in respect of
Central Goods and Service tax. In other words, the ITC of Central Goods and
Service tax shall not be allowed as a set-off against State Goods and Service tax and
vice versa.
Compensation to states –
 For maximum of 5 years union will compensate states for the revenue losses arising
out of GST implementation.
 This compensation will be made on the recommendation of GST Council.
Transaction Current system GST
Cost of raw material 100 100
Tax on raw material 10 10
Value added by
manufacturer
20 20
Tax payable by
manufacturer
2( CENVAT : 10% of 20) 2( GST : 10% of 20)
Retailers cost 132 132
Retailers margin 20 20
Tax payable 15.2(sales tax : 10% of
152)
2(GST : 10% of 20)
Final price paid include
taxes
167.2 154
Of which taxes 27.2 14
TABLE - Comparison of tax under the current indirect tax system and the
GST regime
IMPACT OF GST ON INDIAN ECONOMY --
 It is likely to improve the country’s tax to GDP ratio and also inhibit inflation. While giving
financial muscle to the government for increasing the capital expenditure which will help the
economy grow.
 The one per cent tax that has been proposed as a sop to appease the States for compensating
their loss of revenue from the inter-state CST is likely to play a spoil sport. It is probable that
it may affect the GDP adversely.
 With the implementation of GST the FMCG sector would really change. The multiplicity of
the taxation influences the company’s decision on manufacturing location and distribution of
Goods. FMCG companies will now shift towards the areas where they can have the benefits
of tax.
 The Indian infrastructure sector largely comprises power, road, port, railways and mining.
And the indirect tax levy is different and unique for each of them, and this is complex in
nature. After implementation of GST the system of multiple taxes will not exists,
 With the collection done at point of sale , both components will be charged on the
manufacturing costs and therefore leading to decrease of prices which in turn will benefit the
consumer and further leading to increase in the consumption of goods which further will
increase the profits of the companies.
 . GST is expected to reduce fiscal deficit
ADVANTAGES OF GST --
Expected: A 6% rise in capital goods investment, 2%
overall. Instead of maintaining big records, returns and
reporting under various different statutes, all assesses will find
comfortable under GST as the compliance cost will be reduced.
 It will also help to build a transparent and corruption-free tax
administration.
Reduction in multiplicity of taxes.
Mitigation of cascading/ double taxation.
More efficient neutralization of taxes especially for exports.
Improved compliance & revenue collections (tax booster).
Simpler Tax system.
CHALLENGES OF GST --
 If the rate of GST will be over 15 % the all the services will be costlier.
 Life, health & motor insurances will begin to cost more from April 2017 as taxes will
go up by up to 300 basis points.
 Analysts say that real estate market will be cramped by GST and it may result in 12%
down turn in demanded of new houses because of increased cost up to 8%.
 As per the Constitutional Amendment Bill placed in the Lok Sabha, it was proposed
that states would be allowed to levy an additional 1% non-vatable tax on inter-state
supply of goods for the initial two years, in order to compensate the states for loss of
revenue while moving to GST. This was supported by a few states,
 Some states still lack in IT infrastructure.
 Extensive training to tax administration staff.
 Dispute settlement authority – An independent authority will be required to settle
disputes.
CONCLUSION --
 A single rate would help maintain simplicity and transparency by treating all
goods and services as equal without giving special treatment to some
‘special’ goods and/or services.
 It can also be used as an effective tool for fiscal policy management if
implemented successfully due to nation-wide same tax rate.
 It will also encourage an unbiased tax structure that is neutral to business
processes and geographical locations Researcher’s observation is in support
of GST system, experience of other countries strengthen the belief that it will
be a milestone in the development of Taxation in India.
 Though there are bottlenecks in adapting and ruining the system in India
though it be political or growth and more research is yet to be done.
 Implementation of GST would also greatly help in removing economic
distortions caused by present complex tax structure and will help in
development of a common national market.
Good and service tax (gst)

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Good and service tax (gst)

  • 1. GOOD AND SERVICE TAX (GST) AND ITS OUTCOME IN INDIA. Presented By- Dr. Sakharam Mujalde Avi Vani Sr. Lecturer Student School Of Economics, School of Economics, DAVV, Indore DAVV,Indore.
  • 2. INTRODUCTION --  GST is the indirect tax reform. Indirect taxes are levied on manufacturing of goods provision of service and consumption.  GST is the comprehensive value added tax on various good and services. It is the single tax rate to be levied at national level.  Presently there are indirect taxes like central excise, VAT, service tax, luxury tax etc. which would get subsumed under GST.  GST is to abolish the cascading effect of taxation i.e. tax on tax. This is a single tax which will be levied on the product or service which is sold.  World over, GST has been implemented in over 150 countries.  Goods and Service tax bill is officially known as the constitution (one hundred and twenty second amendment) bill, 2014. The GST implementation in India is „Dual‟ in nature, i.e. it would consist of two components: one levied by Centre (CGST) and another levied by States and Union Territories (SGST).
  • 3. OBJECTIVES -- To study the features of GST. To study the impact of GST on Indian economy. To study the advantages and challenges of GST.
  • 4. METHODOLOGY -- The research paper is an attempt of research, based on the secondary data sourced from journals, Internet, articles, previous research paper which focused on the various aspects of goods and service act. According to the requirements of the objectives of the study the design is descriptive type. The accessible secondary data is used only for study.
  • 5. Present indirect tax structure of India.
  • 6. FEATURES OF PROPOSED GST -- Intra State Taxable Supply Excise and Service Tax will be known as CGST Local VAT & Other taxes will be known as SGST Inter State Taxable Supply CST will be replaced by Integrated GST (IGST) Approx. Sum Total of CGST and SGST Import From Outside India Custom Duty In Place of CVD and SAD, IGST will be charged
  • 7. Range of GST-  GST to be structured on the destination principle so that the tax base shifts from production to consumption whereby imports will be liable to tax and exports will be relieved of the burden of GST. Consequently, revenues will accrue to the State in which the consumption takes place or is deemed to take place.  CGST and SGST would be comprehensively applicable to all goods and services up to the final consumer. CGST and SGST would be applicable to all transactions involving supply of goods and services made for a consideration (except alcoholic liquor for human consumption) and the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.  Tabaco products are included in GST along with central excise tax.  Initially the following products are exempted but GST on following products shall be levied from a date to be notified by the GST Council • Petroleum Crude • High Speed Diesel • Motor Spirit (commonly known as Petrol) • Natural Gas • Aviation Turbine Fuel  The GST tax rate is expected to be around 17-18% and can be assumed as a tax neutral rate.
  • 8. Input tax credit –  At present, under various state VAT laws, there is no uniformity and clarity on the quantum of ITC to be availed in case the goods are finally sold at a discounted value. Many states like Tamil Nadu, have specific provision for reversal of excess ITC availed by dealers in such cases. Under GST regime full ITC should be allowed without any correlation to the price of output sale.  The facility of Input Tax Credit at Central level will only be available in respect of Central Goods and Service tax. In other words, the ITC of Central Goods and Service tax shall not be allowed as a set-off against State Goods and Service tax and vice versa. Compensation to states –  For maximum of 5 years union will compensate states for the revenue losses arising out of GST implementation.  This compensation will be made on the recommendation of GST Council.
  • 9. Transaction Current system GST Cost of raw material 100 100 Tax on raw material 10 10 Value added by manufacturer 20 20 Tax payable by manufacturer 2( CENVAT : 10% of 20) 2( GST : 10% of 20) Retailers cost 132 132 Retailers margin 20 20 Tax payable 15.2(sales tax : 10% of 152) 2(GST : 10% of 20) Final price paid include taxes 167.2 154 Of which taxes 27.2 14 TABLE - Comparison of tax under the current indirect tax system and the GST regime
  • 10. IMPACT OF GST ON INDIAN ECONOMY --  It is likely to improve the country’s tax to GDP ratio and also inhibit inflation. While giving financial muscle to the government for increasing the capital expenditure which will help the economy grow.  The one per cent tax that has been proposed as a sop to appease the States for compensating their loss of revenue from the inter-state CST is likely to play a spoil sport. It is probable that it may affect the GDP adversely.  With the implementation of GST the FMCG sector would really change. The multiplicity of the taxation influences the company’s decision on manufacturing location and distribution of Goods. FMCG companies will now shift towards the areas where they can have the benefits of tax.  The Indian infrastructure sector largely comprises power, road, port, railways and mining. And the indirect tax levy is different and unique for each of them, and this is complex in nature. After implementation of GST the system of multiple taxes will not exists,  With the collection done at point of sale , both components will be charged on the manufacturing costs and therefore leading to decrease of prices which in turn will benefit the consumer and further leading to increase in the consumption of goods which further will increase the profits of the companies.  . GST is expected to reduce fiscal deficit
  • 11. ADVANTAGES OF GST -- Expected: A 6% rise in capital goods investment, 2% overall. Instead of maintaining big records, returns and reporting under various different statutes, all assesses will find comfortable under GST as the compliance cost will be reduced.  It will also help to build a transparent and corruption-free tax administration. Reduction in multiplicity of taxes. Mitigation of cascading/ double taxation. More efficient neutralization of taxes especially for exports. Improved compliance & revenue collections (tax booster). Simpler Tax system.
  • 12. CHALLENGES OF GST --  If the rate of GST will be over 15 % the all the services will be costlier.  Life, health & motor insurances will begin to cost more from April 2017 as taxes will go up by up to 300 basis points.  Analysts say that real estate market will be cramped by GST and it may result in 12% down turn in demanded of new houses because of increased cost up to 8%.  As per the Constitutional Amendment Bill placed in the Lok Sabha, it was proposed that states would be allowed to levy an additional 1% non-vatable tax on inter-state supply of goods for the initial two years, in order to compensate the states for loss of revenue while moving to GST. This was supported by a few states,  Some states still lack in IT infrastructure.  Extensive training to tax administration staff.  Dispute settlement authority – An independent authority will be required to settle disputes.
  • 13. CONCLUSION --  A single rate would help maintain simplicity and transparency by treating all goods and services as equal without giving special treatment to some ‘special’ goods and/or services.  It can also be used as an effective tool for fiscal policy management if implemented successfully due to nation-wide same tax rate.  It will also encourage an unbiased tax structure that is neutral to business processes and geographical locations Researcher’s observation is in support of GST system, experience of other countries strengthen the belief that it will be a milestone in the development of Taxation in India.  Though there are bottlenecks in adapting and ruining the system in India though it be political or growth and more research is yet to be done.  Implementation of GST would also greatly help in removing economic distortions caused by present complex tax structure and will help in development of a common national market.