TITLE :GST

ABSTRACT

Currently, Goods and Services are taxed separately by different authorities at different sectors at
different rates which is more complex and time consuming and also becomes difficult for maintaining
records for businesses, traders and suppliers. At present, indirect tax increases the price of goods due
to cascading burden of ‘tax on tax’ and multiplicity of tax which create problems for the end user.

Goods and Services Tax (GST) is the current topic which is continuously in flash under the scenario.
It is a comprehensive Value – Added Tax (VAT) system which will ultimately ensure flow of
uninterrupted credit among different sectors whether in manufacturing of goods, sale or consumption
of goods and services. It is one indirect tax which will be levied on the supply or consumption of goods
and services at the national level which will make the entire nation (India), a unified single or common
market.

The paper will shed some light on the need of single taxation system in India. Whether single taxation
system would be beneficial by subsuming almost all indirect taxes at the Central as well as State
Government and what are the problems that would be faced after the implementation of single taxation
system in India will be dealt with in the paper. What makes single taxation system different from current
taxation system and what would be the rate of single taxation system in India, these are the questions
that the author intend to deal with in the paper with apt answers in the system.
Keywords: GST, Present Scenario of Indirect Taxes, Comparison, Need, Cascading Effect of Tax,
Multiplicity of Tax.

1. Introduction

Tax is the common burden which is imposed upon a person by the Government on income, commodity
or activity. Revenue earned by way of taxes are used for meeting the expenses of Government which
include provision of education, infrastructure facilities such as roads, dams, etc.[2]So, it is a major
source of revenue for the Government. It helps in the growth of economy and capital formulation for
the country.
Currently, Goods and Services are taxed separately by different authorities at different sectors at
different rates which is more complex and time consuming and also becomes difficult for maintaining
records for businesses, traders and suppliers. At present, indirect tax increases the price of goods due
to cascading burden of ‘tax on tax’ and multiplicity of tax which create problems for the end user.
Goods and Services Tax (GST) is the current topic which is continuously in flash under the scenario.

The concept of Goods and Services Tax was discussed by Dr. Man Mohan Singh in the mid 90’s. The
BJP Government under Atal Bihari Vajpayee started consulting about Goods and Services Tax and
formed a committee under AsimDasgupta for implementing GST. Goods and Services Tax was
recommended by Kelkar Task Force on FRBM Act in the year 2005. In the year 2011, The Constitution
(115th Amendment) Bill, 2011 was introduced in the Parliament for imposing of GST. But, due to the
dissolution of 15thLok Sabha, the bill was lapsed. Subsequently, in December 2014, The Constitution
(122nd Amendment) Bill, 2014 was introduced and passed by Lok Sabha in May, 2015 and referred to
the Rajya Sabha for examination.[3] Presently, it has also been passed by the Parliament. Goods and
Services Tax (GST) would be a Value-Added Tax (VAT) to be implemented in India from the 1stday of
July, 2017.
Goods and Services Tax (GST) is a comprehensive VAT system which will ultimately ensure flow of
uninterrupted credit among different sectors whether in manufacturing of goods, sale or consumption
of goods and services. It is one indirect tax which will be levied on the supply or consumption of goods
and services at the national level which will make the entire nation (India), a unified single or common
market. Almost all indirect taxes will be eliminated, once GST comes into power. One of the most basic
feature of Goods and Services tax is that consumers will have to pay the tax for one time at the final
level of the transactions on the supply of goods and services but not at the various levels. The thing
which is more interesting about Goods and Services Tax is that it will avoid both ‘cascading effect’ and
‘multiplicity’ of tax. Here, the word ‘cascading effect of tax’ means paying of tax on tax which is already
paid on previous purchase and the word ‘multiplicity of tax’ means multiple number of taxes at different
levels at different rates. The main objective for which the Goods and Services Tax is proposed is to
bring an uniformity in tax rates for the entire nation based on the principle “One Country, One Tax
Rate”. India has opted for a dual GST model as preferred in Brazil and Canada. Under the dual GST
system, both the centre and the state, shall have the concurrent powers to levy and collect taxes on
the supply of the goods and services.[4] If the,

1. Sale which is within the state (Intra-state sale),

 Central GST (CGST) – It will be levied and collected by the Central Government.
 State GST (SGST) – It will be levied and collected by the state Government.

1. Sale which is outside the state (Inter-state sale),

 Integrated GST (IGST) – It will be levied and collected by the Central Government.
 The GST bill, which was recently passed by the Upper House of the Indian Parliament, is said
to be the biggest tax reform in India’s indirect tax structure since the economy began to be
opened up 25 years ago. The GST Constitutional Amendment Bill has to now go back to the
Lok Sabha for ratification. Once it is approved by Parliament and 50 per cent of state
legislatures, an era of new tax regime would usher in. The bill will convert the country into a
unified market by replacing all indirect taxes with one tax. GST will do away with the complexity
of multiple tax-rates which is a burden on the common man. On August 12, 2016, Assam
became the first state to ratify the constitutional amendment bill relating to the GST.
 Dual GST means it will have a federal structure. The GST will basically have only three kinds
of taxes – Central, state and another one called integrated GST to tackle inter-state
transactions. During the passage of the Constitution (122nd Amendment) Bill, better known as
GST Bill on Monday, Prime Minister Narendra Modi said GST was “crucial” for ending tax
terrorism besides reducing corruption and black money. In the current tax regime, there is a
cascading effect of “tax on tax” burden as there are no set offs for taxes paid on inputs and
previous purchases. Presently, we had Value Added Tax(VAT) system both at the centre and
state levels which have their own limitations. The central VAT does not extend to value addition
by the distributive trade below the stage of manufacturing while the state VATs cover only the
sales. Once GST comes into effect, all central- and state-level taxes and levies on all goods
and services will be subsumed within an integrated tax having two components: a central GST
and a state GST. Under this the end-consumer will bear only the GST charged by the last
dealer in the supply chain, with set-off benefits at all the previous stages. There will be tax only
on value addition at each stage, with the producer/seller at every stage able to set off his taxes
against the central/state GST paid on his purchases.The GST will make no differentiation
between ‘goods’ and ‘services’ as it is levied at each stage in the supply chain. The problem
of double taxation was addressed by the apex court in the case of BSNL v. Union of India
(2006 (3) SCC-1). It was held that certain activities cannot be regarded as both goods and
services and therefore both service tax and VAT should not be applicable on the same set of
transaction.
 The GST Council
  The GST bill also seeks to set up a GST Council which would aim to develop a harmonized
national market of goods and services. The council will consist of the union Finance Minister
(chairman) and Minister of State incharge of Revenue; Minister in charge of Finance or
Taxation, or any other Minister, nominated by each state. The decisions of the GST Council
will be made by three-fourth majority of the votes cast. The centre shall have one-third of the
votes cast, and the states together shall have two-third of the votes cast.

 The GST Council will make recommendations on:

 1. taxes, cesses, and surcharges to be subsumed under the GST;
 2. goods and services which may be subject to, or exempt from GST;

 3. the threshold limit of turnover for application of GST;

 4. rates of GST;

 5. model GST laws, principles of levy,

 6. apportionment of IGST and principles related to place of supply; special provisions with
respect to the eight north eastern states, Himachal Pradesh, Jammu and Kashmir, and
Uttarakhand;
 7. and other related matters.
The GST councils can only make recommendations which are not binding. Each State/Centre
while making their GST law would be free. States which may have agreed while making
recommendations, may deviate from the same later on.

IMPACT OF GST IN INDIAN ECONOMY

There are various ways which helps GST to improve the e-commerce in India; GST will be a
game changing reform for whole India as well as for Indian economy by the means of developing a
common Indian market and reducing the cascading effect on the cost of goods and services. It will
also make impact over the tax structure, Tax incidence, Tax computation, Payment, Compliance,
Credits utilization and lots of Reporting leading to a complete overhaul of the current indirect tax
system. By the source, GST will have a far reaching impact on almost all the aspects of the business
operations in the whole country, for instance:-

 Pricing of products and services;

 Supply chain optimization;
 Information technology;
 Accounting and Tax compliance systems.

 GST is all about a simple plan which also includes companies, for both domestic as well as
international level. India is the biggest bet when it comes to e-commerce. Pegged at $16 billion
in 2015, and it is expected to cross the level of $100 billion by 2020. By an assumption, still, since
the beginning e-commerce firms have been facing problems under regulatory taxes and duties
differ in each time. After the implementation of GST, it will become simple to manage the CST
and VAT problems. Seller on e-commerce will have to pay tax in the state where the delivery
happens, like states such as Bihar, Assam and Meghalaya charge entry tax or octroi from a seller
if incase he doesn’t belong to that particular state.
According to Hari Menon, CEO, Bigbasket: – “In the long-run the creation of a unified marketplace
definitely will reduce the tax burden, inventory cost and logistical issues, and ensure across the
country”.

 Moreover, it is necessary for e-commerce firms to make significance changes in the ways of
auditing and technology is made by. There should be real-time information to the tax collectors
of goods sold in any particular state. It will be an interesting times in front of with a considerable
changes to the enterprise resource planning (ERP) systems of e-commerce players to make an
accommodate for the requirements of GST. It definitely brings an extent change in doing business
in whole India. By the source of Advocacy for best practices, gearing up for changes in processes,
training teams and for developing IT systems for being GST compliant are the key areas to be
assessed.
 GST enhances the easy way of compliance for business and industry: A robust and
comprehensive IT system would be the foundation of the GST regime in India. It will help the tax
payer services such as registrations, returns, payments, etc. It would be available to the taxpayers
for online, which would make their more compliance easy and transparent.
 Uniformity of tax rates and structures will inanity and increase certainty and ease of doing
business.
 A new system of seamless tax-credits throughout the chain-value, and various across boundaries
of states, it would ensure that there is minimal cascading of taxes by the removing cascading
which would reduce the hidden costs of doing business in India.
 Reduction in the transaction costs for doing business would eventually lead to an improved
competitiveness for the trade of India.
 Also establish a collective Gain to manufactures and exporters.
 To improve in better tax compliance due to a robust IT infrastructure is based on the better
controls on leakage.
 By the proper higher revenue efficiency, GST is expected to decrease the cost of collection of tax
revenues of the government, and therefore, it will lead to higher revenue efficiency for consumer
with a clear way of transparency of taxes paid by them.

These are the various factors which increase the e-commerce in India in a very smooth way. According
to this GST introduced very faster, Assam became the first state in the country to ratify the constitution
Amendment bill on goods and services Tax. And also Bihar becomes the second state to ratify the
122ndconstitutional amendment bill. Basically, the main aim for passing this bill is to streamlining the
tax structure throughout the nation by subsuming several central and state levies and envisages an
efficient taxation system. For whole nation, it is one indirect tax, which will definitely make India one
unified common market. GST is a single tax on the supply of goods and services, right from the
manufacturer to the consumer. So, a good way to startup the market.

 OBJECTIVES OF GST:
One of the main objective of Goods & Service Tax(GST) would be to eliminate the doubly
taxation i.e. cascading effects of taxes on production and distribution cost of goods and
services. The exclusion of cascading effects i.e. tax on tax till the level of final consumers will
significantly improve the competitiveness of original goods and services in market which
leads to beneficial impact to the GDP growth of the country. Introduction of a GST to
replace the existing multiple tax structures of Center and State taxes is not only desirable
but imperative. Integration of various taxes into a GST system would make it possible to
give full credit for inputs taxes collected. GST, being a destination-based consumption tax
based on VAT principle.

GST will simplify India of its complex and complicated indirect tax structure and will ensure
a single unified tax regime, which will be reshaping India’s indirect tax structure.
Tax experts and Economists see it as one of the biggest tax reform since independence.

The existing taxes on most of the consumer goods is on the higher side. Most of the goods
(for e.g. electronics, beauty products, non-luxury automobiles) attract an excise duty of
12.5% and a state levy of VAT at 12.5% to 15%. Additionally, in the current scenario, there is
numerous cascading effect i.e. tax on tax on the account of CST, VAT, Octroi, entry tax, local
body tax, etc till the product reaches the ultimate end-customer.

A combined effect of such indirect taxes leads to an effective tax rate of 25% to 30% and the
burden is solely on the end customer. With the unified rate of GST, the prices of the most
goods would reduce significantly in the overall indirect tax cost. This decrease in indirect tax
can lead to decrease in manufacturing cost and increase in baseline profits, giving ample
space for reducing prices and benefiting end-users.

Conclusion
While the Model GST Law contains a specific chapter on transition provisions for the new GST law, it
is also necessary that the tax payers devote a substantial amount of time and resources on
understanding the finer nuances of this new indirect tax regime so that the transformation and
transition process is both smooth and hassle free.

SUBMITTED BY:

NAMRATA BHATIA
COLLEGE :B. B. D UNIVERSITY
YEAR :4 YEAR

COURSE:B. A LLB