Student’s Name: Shivam Krishnan

Enrolment No: 20FLICDDN1042

Batch Name & Year: BBA LLB 4th Year
Topic- Analysis of goods and services tax
(gst) in India

Submitted By- Shivam Krishnan

Submitted to-
Surbhi Goyal Ma’am
 ANALYSIS OF GOODS AND SERVICES TAX (GST) IN INDIA

• INTRODUCTION
The word “tax” is derived from Latin word “taxare” meaning to estimate. A tax is not a
voluntary payment or donation, but enforced contribution, exacted pursuant to legislative
authority and is contribution imposed by the government. Taxation was first imposed in Ancient
Egypt around 3000 B.C.- 2800 B.C. Records indicate from that period that the Pharaoh would
conduct a biennial tour of the kingdom, collecting tax revenues from the people. Other data
indications are granary receipts on limestone flakes and papyrus. Taxes are the only way for
financing the public goods because of their inappropriate pricing in the market. It can only be
levied by the government, via funds collected from taxes. It is highly important that the taxation
system is designed in such an appropriate manner that it doesn’t lead to any sort of market
distortions and failures in the economy. The taxation laws should be highly competitive so that
revenue can be raised in a highly efficient and effective manner.

• THE INDIAN TAXATION SYSTEM - SCENARIO BEFORE GST

Tax policies play a vital role in any country’s progress and have a direct impact on any
country’s economy in terms of efficiency and equity. The entire framework to impose
indirect taxes comes under Constitutional provisions of India. Article 246, Seventh
Schedule gives the right to Central and State Governments to levy taxes and collect
indirect taxes on the basis of goods and services transactions. The taxation system
varies from manufacturer to manufacturer on point of sale or level of imports or exports.
Indirect taxation based collection systems are based on origin, and are designed to
impose tax and collect the same at the event of happening of any taxable activity.
Income Tax:
According to Income Tax Act 1961, every person who is an assessee and whose total
income exceeds the maximum exemption limit. Shall be chargeable to the income tax
at the rate or rates prescribed in the Finance Act. An assessee may be individual, HUF,
association of person, body of individuals, company, firm, local authority etc.
The residential status of an individual in India determines his total income. For tax
purposes, individuals may be a resident, non-resident or not ordinarily resident.
Sales Tax:
 Sales tax which is levied on the sale of all goods generally is payable by a dealer in the
course of trade whether it is inter-state, outside a state or in the case of import into or
export from India.
Value Added Tax (VAT):
It is a system of multi-stage tax on goods introduced where in tax is levied across
various stages of supply and production with credit given for tax already paid at each
stage of its value addition. Introduction of state level VAT is also the most significant
tax reform measure that has been brought at state level also. The state level VAT was
replaced by then existing state sales tax. All the state taxes on purchase or sales of goods
are now required to be subsumed in VAT system only.
Excise Duty:
Central excise duty is an indirect tax levied on goods manufactured in India. Excisable
goods have been defined as those, which have been specified in the central excise tariff
act as being subjected to the duty of excise.
Customs Duty:
Custom duty also known as import duties are levied by the central government of India
on the imported goods to into India.
The customs duly rate which is levied on the goods depends on the classification of the
goods that are determined under the Customs Tariff.
Service Tax:
Service tax in India was introduced way back in year 1994. It was started with mere
three basic services viz, stock broking, general insurance and telephone. Today almost
all the services come under the ambit of service tax barring those mentioned in negative
list. It has been observed a steady increase in the rate of service tax also.

• PROVISIONS OF CONSTITUTION REGARDING TAXATION

The power to levy and collect taxes emerges from the constitution of India. The
following are the significant provisions of the constitution regarding taxation:
1. Article 265: It states that no tax shall be levied or collected except by authority of
law. In fact, it prohibits arbitrary collection of tax.
2. Article 246: The authority to enact law and levy taxes and duties is given by
constitution vide
Article 246. The Parliament may make laws for the whole of India or any part of the
territory of India, the State legislature may make laws for whole or part of the State.
 3. Seventh Schedule (to Article 246): The Seventh Schedule contains three lists which
enumerate the matters under which the union and the State Governments have the
authority to make laws.
• GOODS AND SERVICE TAX (GST):
GST is a single tax policy on supply of goods and services from the manufacturer to
the ultimate consumer. Credits of input taxes paid at each stage from manufacturing to
ultimate consumption will be available in the subsequent stage of value addition, which
makes GST essentially a tax only on the value addition at each stage. It is the final
consumer who will only bear GST charged by the last dealer in the supply chain, with
set-off benefits at all the previous stage.
The following taxes are being subsumed at the central level:
1. Additional Excise Duty
2. Service Tax
3. Central Excise Duty
4. Additional Customs Duty commonly known as countervailing duty and
5. Special Additional Duty on Customs
At the state level, the following taxes are being subsumed:
1. Subsuming of State Value Added Tax/Sales Tax
2. Entertainment Tax 3. Octroi and Entry Tax
4. Purchase Tax
5. Luxury Tax, and
6. Taxes on lottery, betting and gambling
Advantages of GST:
The GST, Goods and Service Tax subsume many of indirect taxes which centre and
state were
imposing such as excise, VAT and service tax. GST is levied on both goods and
Services that are sold in the
country. The following are the advantages of GST
1. Composition scheme for small business
2. Eliminates the cascading effect of tax
3. Simple and easy online procedure
4. Saving more money
5. Unorganized sector is regulated under GST
6. Easier to do business
 7. Reduction in logistics cost and time taken across states
8. Higher exemptions to new business
9. Financial Inclusion
10. Increase revenue

• STRUCTURE OF GST
There are different taxes levied under the structure of GST in India. To help you
understand what this mean, we will explain each one of them here:

Description
Tax Type

Central GST or CGST is the tax incorporated by the central government.

Central GST This tax is imposed on the movement of goods and services within the
(CGST) state.

State GST or SGST is the tax levied by the state government. This tax is
appropriated in the state where the transaction occurs or where the goods
State GST (SGST) are sold and consumed.

For interstate supplies, there is a tax included in the GST structure in

Integrated GST India called the integrated GST or IGST. This tax is imposed on all the
(IGST) goods and services between two or more states or union territories.

If there is a supply of goods and services within the Indian Union

Union Territory Territories, which the central government governs, a tax called Union
GST(UTGST) Territory GST or UTGST is imposed.

1. Introduction to zero rate in GST

Zero rate in GST means a nil tax rate levied on the goods and services. In other words,
a zero rate is equivalent to tax exemption. The government decides the goods and
services that are eligible for a zero-tax rate. Some examples include fresh fruits, bread,
milk, curd. Also supplies made to SEZ developers or Special economic zones and
overseas come under zero-rate tax.
2. Lower rate (5%)
 A lower rate means 5% GST is applied to commodities and services. Some examples
include footwear under Rs. 500, clothing under Rs. 1000, packaged food items, branded
paneer, cream, skimmed milk powder, etc.
3. Standard rate (12-18%)
The standard rate comes into play when a 12-18% GST is applied. The standard rate of
12% includes butter, cheese, frozen meat products, ghee, animal fat, sausages, packaged
dry fruits, namkeen, fruit juices, ketchup & sauces, etc. 18% GST is applied for pastries,
pasta, cakes, hairdryers, panels, vacuum cleaners, wires, telecom services, IT services,
etc.
4. When will a higher rate (18% and 28%) of GST apply
A higher rate is applied when luxury items are considered. For items such as paint,
washing machines, cement, automobiles, shampoo, aerated water, sunscreen,
motorcycles, etc., a 28% GST is applied. Some items are under the 28% slab for which
the government fixes an additional cess.

• IMPACT OF GST ON THE INDIAN ECONOMY: ADVANTAGES AND

CHALLENGES OF GST IMPLEMENTATION

(1) IMPACT OF GST ON THE INDIAN ECONOMY:

GST will impact the overall taxation system of the Indian economy. It will improvise
the country’s GDP ratio and also control inflation to a certain extent. However, the
reform will mainly be advantageous to the manufacturing industry, but will make some
things challenging for the service sector industry. GST is expected to raise the GDP
growth from 1% to 2%, but these figures can only be analyzed after successful
implementation. Some countries have faced a mixed response in growth like New
Zealand saw a higher GDP as compared to countries like China, Thailand, Australia,
and Canada (Shokeen, Banwari, & Singh, 2017). The GST rate is implemented in
various slabs like 5%, 12%, 18%, and 28%, which will automatically provide great tax
increments to the government and the manufacturing sector will face immense growth
with reduction in tax rate. There is definitely something good for everyone. Various
unorganized sectors which enjoy the cost advantage equal to tax rate which will be
brought under GST. This will make various sectors like Hardware, Paint, Electronics
etc. under the tax slab. GST requires everything to be planned meticulously for
organized rate of taxation. There are still lots of sectors which are to be discussed under
GST and this requires proper planning. For the common man and different companies,
the collection of Central and State taxes will be done at point of time when sales
originate, both components will be charged on manufacturing costs and price of the
product will downgrade and consumption will thereby increase (Shokeen et al., 2017).

(2) IMPACT OF GST ON VARIOUS SECTORS:

Goods and Services Tax will unite the Indian economy into one common market under
a single umbrella of taxation rates, leading to easiness of starting and doing businesses,
leading to increase in savings and cost reduction among various sectors. Some
industries will be empowered by GST because of reduction in tax rates, while some
will lose because of higher rate of GST interests. In this section, we discuss various
sectors and elaborate the impact of GST on them:

(i) IT Companies: GST will allow more implementation of digital systems and
services. GST will increase the rate of tax from 14 -15% to 18%, which will increase
the cost of electronic products like mobile phones, laptops, etc.
(ii) FMCG Industry: GST will have a significant impact on the FMCG sector. Some
food items are exempted under GST like grains and cereals, milt, meat, fish, fruits and
vegetables, candy etc. Before GST, FMCG companies paid 24- 25% tax including
Excise Duty etc. With GST, the rate of return would be 17-19% leading to strong impact
in production and consumption.

(iii)Online Shopping: With the introduction of GST, various Ecommerce companies

will face much burden of work in rate of filling taxes and cost will be increased.

(iv) Telecom Sector: With the current VAT charges of 15% being replaced by18% GST
rate, the price of mobile calling, SMS, and broadband services would be impacted. This
will have a negative impact for big telecom giants like Airtel, Vodafone, Idea, etc.
(v) Automobiles: GST will provide reduction on on-road price of vehicles to max by
8% as per the latest report. Lower prices mean various automobile companies can boost
up volumes and sales and have tremendous opportunities for expansion in India. (vi)
Small Scale Enterprises: There are three categories: (a) below threshold, need not
register for GST, (b) between threshold and composition turnovers will have the option
to pay a turnover based tax or opt to join the GST regime, (c) above threshold level,
will be within the GST framework. Manufacturers and traders will pay less tax after
GST Implementation. (vii) Entertainment: With GST, taxes can do down by 2 - 4%, but
the rate of tax for cinema lovers will be increased. GST will soon comprehend with
demands and bring best for boosting up the film industry’s business.

(3) CHALLENGES OF GST IMPLEMENTATION:

The following are some of the major challenges for GST implementation in India:
(i) Nature of Taxes: In India, there are various taxes like Central Excise, VAT, CESS,
and other state level taxes which will all be removed and come under one tax, that is,
GST, but still lots of states and union territories have other taxes out from GST which
has to be worked upon.
(ii) Types of GST: As GST would be of two types: Central GST and State GST and
further division is required on the basis of utmost necessity and property based like
need, location, geography, and resources which has to be worked upon.
(iii) Rates of Tax: Still the tax rate is not fully finalized and lots more has to be worked
upon considering the standard of living of people, etc.
(iv) Tax Management and Technology Infrastructure: It is utmost necessary that proper
management of tax and infrastructure is required to implement proper policies and
plans.
• CONCLUSION
Primarily, the concept of GST was introduced and proposed in India a few years back,
but implementation has been done by Indian government under the able leadership of
Prime Minister Shri Narendra Modi on July 1, 2017. The new government was in strong
favor for the implementation of GST in India by seeing many positive implications as
discussed above in the paper. All sectors in India - manufacturing, service, telecom,
automobile and small SMEs will bear the impact of GST. One of the biggest taxation
reform- GST will bind the entire nation under a single taxation system rate. As
forecasted by experts, GST will improvise tax collections and boost up India’s
economic development and break all tax barriers between Central and State
Governments. No doubt, GST will give India a clear and transparent taxation system,
but it is also surrounded by various challenges as discussed in this paper. There is need
for more analytical based research for successful implementation.