-1877 shodh-chetana · issn : 2454-1877 shodh-chetana january – march, 2017. issue 01 volume...
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ISSN : 2454-1877
SHODH-CHETANA January – March, 2017. Issue 01
CHIEF EDITOR
Dr. Maheshchandra Joshi
EXECUTIVE EDITOR
Dr. Prashant Bhagat
VOLUME 03
SHODH-CHETANA Vol. III; Issue. 1 January – March 2017.
EDITORIAL BOARD
Prin.Dr.Maheshchandra P.Joshi
Prof.Baburao Hosur
Dr.Prashant H.Bhagat
Dr.Kanchan Fulmali
Dr.Kishori Bhagat
Prof.Manohar Borkar
Editor In Chief:
Dr. Maheshchandra Joshi.
Executive Editor:
Dr. Prashant H. Bhagat
Printed and Published By:
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of Commerce and Economics, Smt.
KusumtaiChaudhari College of Arts.
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Tel. no. 022- 26518584,
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E-mail:[email protected]
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Frequency of Publication:
Quarterly (4 Issues in year)
ISSN (2454 - 1877)
Copyright 2014., All rights
reserved. No part of this publication
may by reproduced or transmitted in
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Shodh-Chetana is a research journal
which is publishing quarterly and
will be available against subscription
only.
EDITORIAL
The introduction of Goods and Service Tax(GST) would be significant step in the reform of indirect
taxation in India in general and in particular in Maharashtra State. amalgamating several central and state
taxes into a single tax would mitigate cascading or double taxation, facilitating a common national
market. The simplicity of tax should lead to easier administration and enforcement.it has been proposed
to insulate the revenues of the states from the impact of GST. Today we have real challenge in boosting
GST Bill to common man into the economy. There is need to move beyond the existing tax system and
bring the revenue surplus for removing the revenue deficit from the country.
Goods and Service Tax(GST) is important because of its contribution in enhancing productivity at the
national level.
In recognition of the importance of the Goods and Service Tax(GST) in today’s globalised economy,
Chetana’s H.S.College of Commerce and Economics, Smt.Kusumtai Chaudhari College of Arts, Bandra,
Mumbai has organised the State Level Seminar on ‘Goods and Service Tax(GST)’ to draw the attention
of all academicians and researchers
As the Seminar Chairperson, I thank all the contributors for putting their analytical efforts to research on
all issues and aspects concerning skill development and entrepreneurship and arriving at some important
conclusion.
I invite every reader of this journal to benefit from the research work of the distinguished contributors
who have accepted our request and penned their valuable thoughts for this Seminar Publication.
I wish to record on this occasion my sincere gratitude to the chief Guest of the Seminar, other
distinguished dignitaries who graced the occasion, delegates who enthusiastically participated in the
proceedings, the management of Chetana educational Trust who wholeheartedly supported us in
organising the Seminar, who helped us in numerous ways to make this occasion a memorable one.
Dr.Mahaeshchandra P. Joshi
Principal & Conference Chairperson.
SHODH-CHETANA
VOLUME: 3 NUMBER: 1 JANUARY-MARCH 2017
CONTENTS
Sr.
No.
Research Title Author Page No.
01 Impact of Goods and Service Tax (GST) on Indian
Economy
Prof. Mihir. C. Shah 001 – 004
02 Impact of Goods and Service Tax (GST) on Indian
Economy
Prof.ravindra s. Netawate
Dr.dilip bhanagade
005 – 011
03 A Road map to : GST Dr. Jayesh K. Rana 012 – 014
04 Impact of Revised Draft GST Law CA. Sandeep sawant 015 - 022
05 Impact of GST in Automobile Industry Sector Mustafa Sapatwala 023– 035
s
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 1
ABSTRACT:
GST also known as the Goods and
Services Tax is defined as the giant
indirect tax structure designed to support
and enhance the economic growth of a
country. More than 150 countries have
implemented GST so far. However, the
idea of GST in India was mooted by
Vajpayee government in 2000 and the
constitutional amendment for the same
was passed by the Loksabha on 6th May
2015 but is yet to be ratified by the
Rajyasabha. However, there is a huge hue
and cry against its implementation. It
would be interesting to understand why
this proposed GST regime may hamper the
growth and development of the country.
Keywords
Goods and service tax; Indian economy
Introduction
The Goods and Services Tax (GST) is a
vast concept that simplifies the giant tax
structure by supporting and enhancing the
economic growth of a country. GST is a
comprehensive tax levy on manufacturing,
sale and consumption of goods and
services at a national level . The Goods
and Services Tax Bill or GST Bill, also
referred to as The Constitution (One
Hundred and Twenty-Second Amendment)
Bill, 2014, initiates a Value added Tax to
be implemented on a national level in
India. GST will be an indirect tax at all the
stages of production to bring about
uniformity in the system.
On bringing GST into practice, there
would be amalgamation of Central and
State taxes into a single tax payment. It
would also enhance the position of India in
both, domestic as well as international
market. At the consumer level, GST
would reduce the overall tax burden,
which is currently estimated at 25-30%.
Under this system, the consumer pays the
final tax but an efficient input tax credit
system ensures that there is no cascading
of taxes- tax on tax paid on inputs that go
into manufacture of goods.
In order to avoid the payment of multiple
taxes such as excise duty and service tax at
Central level and VAT at the State level,
GST would unify these taxes and create a
uniform market throughout the country.
Integration of various taxes into a GST
system will bring about an effective cross-
utilization of credits. The current system
taxes production, whereas the GST will
aim to tax consumption.
Objectives of the Study:
To study the concept of GST.
To study benefits of GST.
To study the statement Why no to
GST?.
To provide possible findings.
“Impact of Goods and Service Tax (GST) on Indian Economy”
Prof. Mihir. C. Shah
(M.Com.SET)
Assistant Professor, Dept.Of.Accountancy
Chetana College, Bandra, Mumbai-51.
Mobile no: 9969502166
E-mail:[email protected]
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 2
Research Methodology:
The study is based on secondary data. The
required data has been collected from
various sources i.e. research papers,
various reports on travel and tourism
sector in India, Publications from Ministry
Of Commerce, Govt. Of India that are
available on internet.
Experts have enlisted the benefits of
GST as under:
• It would introduce two-tiered One-
Country-One-Tax regime.
• It would subsume all indirect taxes at the
center and the state level.
• It would not only widen the tax regime
by covering goods and services but also
make it transparent.
• It would free the manufacturing sector
from cascading effect of taxes, thus by
improve the cost-competitiveness of goods
and services.
• It would bring down the prices of goods
and services and thus by, increase
consumption.
• It would create business-friendly
environment, thus by increase tax-GDP
ratio.
• It would enhance the ease of doing
business in India.
Why no to GST?
However, the question is: is the picture as
rosy as it is portrayed?
Wall Street firm Goldman Sachs, in a note
‘India: Q and A on GST — Growth Impact
Could Be Muted’, has put out estimates
that show that the Modi Government’s
model for the Goods and Services Tax
(GST) will not raise growth, will push up
consumer prices inflation and may not
result in increased tax revenue collections .
There appears to be certain loopholes in
the proposed GST tax regime which may
be detrimental in delivering the desired
results. They are:
India has adopted dual GST instead of
national GST. It has made the entire
structure of GST fairly complicated in
India. The centre will have to coordinate
with 29 states and 7 union territories to
implement such tax regime. Such regime is
likely to create economic as well as
political issues. The states are likely to
lose the say in determining rates once GST
is implemented. The sharing of revenues
between the states and the centre is still a
matter of contention with no consensus
arrived regarding revenue neutral rate.
Chief Economic Advisor Arvind
Subramanian on 4 December 2015
suggested GST rates of 12% for
concessional goods, 17-18% for standard
goods and 40% for luxury goods which is
much higher than the present maximum
service tax rate of 14%. Such initiative is
likely to push inflation.
The proposed GST structure is likely to
succeed only if the country has a strong IT
network. It is a well-known fact that India
is still in the budding state as far as
internet connectivity is concerned.
Moreover, the proposed regime seems to
ignore the emerging sector of e-
commerce. E-commerce does not leave
signs of the transaction outside the internet
and has anonymity associated with it. As a
result, it becomes almost impossible to
track the business transaction taking place
through internet which can be business to
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 3
business, business to customer or customer
to customer. Again, there appears to be no
clarity as to whether a product should be
considered a service or a product under the
concept of E-commerce. New techniques
can be developed to track such
transactions but until such technologies
become readily accessible, generation of
tax revenue from this sector would
continue to be uncertain and much below
the expectation. Again E-commerce has
been insulated against taxation under
custom duty moratorium on electronic
transmissions by the WTO Bali Ministerial
Conference held in 2014 .
Communication is considered to be
necessity and one cannot do without
communication. In modern times,
communication has assumed the
dimension of telecommunication.
The proposed GST regime appears to be
unfavorable for telecommunication
sector as well
“One of the major drawbacks of the GST
regime could be the direct spike in the
service tax rate from 14% to 20-22%”
(GST: Impact on the
Telecommunications Sector in India).
The proposed GST appears to be silent on
whether telecommunication can be
considered under the category of goods or
services. The entire issue of
telecommunication sector assumes a
serious proportion when India’s rural
teledensity is not even 50% .
The proposed GST regime intends to
keep petroleum products, electricity,
real estate and liquor for human
consumption out of the purview of GST
It is a well-known fact that petroleum
products have been a major contributor to
inflation in India. Inflation in India
depends on how the government intends to
include petroleum products under GST in
future.
Electricity is essential for the growth and
development of India. If electricity is
included under standard or luxury goods in
future then it would badly affect the
development of India. It is said that GST
would impact negatively on the real estate
market. It would add up to 8% to the cost
of new homes and reduce demand by
about 12%.
The proposed GST regime “would be
capable of being levied on sale of
newspapers and advertisements
therein”
This would give the governments the
access to substantial incremental revenues
since this industry has historically been tax
free in its entirety” . It sounds ridiculous
but the provision of GST is likely to make
the supervision of operations by its
Board/senior managers across the
company’s offices in different parts of the
country a taxable service by allowing each
state to raise a GST demand on the
company.
Again there appears to be lack of
consensus over fixing the revenue rate as
well as threshold limit. One thing is for
sure, services in India are going to be
steeply costly if GST is fixed above the
present service tax rate of 14% which in
turn will spiral up inflation in India.
“Asian countries which implemented GST
all had witnessed retail inflation in the year
of implementation .
Conclusion
The proposed GST regime is a half-
hearted attempt to rationalize indirect tax
structure. More than 150 countries have
implemented GST. The government of
India should study the GST regime set up
by various countries and also their fallouts
before implementing it. At the same time,
the government should make an attempt to
insulate the vast poor population of India
against the likely inflation due to
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 4
implementation of GST. No doubt, GST
will simplify existing indirect tax system
and will help to remove inefficiencies
created by the existing current
heterogeneous taxation system only if
there is a clear consensus over issues of
threshold limit, revenue rate, and inclusion
of petroleum products, electricity, liquor
and real estate. Until the consensus is
reached, the government should resist
from implementing such regime.
References
1. The Economic Times (2009)
Featured Articles from The
Economic Times.
2. Gst India (2015) Economy and
Policy.
3. Mehra P (2015) Modi govt.’s
model for GST may not result in
significant growth push. The
Hindu.
4. Sardana M (2005) Evolution Of
E‐ Commerce In India Part 3.
5. TRAI (2015) Highlights of
Telecom Subscription Data as on
28th February.
6. Patrick M (2015) Goods and
Service Tax: Push for Growth.
Centre for Public Policy Research
(CPPR).
7. SKP (2014) GST: Impact on the
Telecommunications Sector in
India.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 5
Introduction:-
In India Numerous types of tax
levied by the government, charging tax is a
good activity of the government from the
point of view of nations development, but
several times it is found that , very few
people pay the tax and maximum people
vanished fron the tax process , to bring
Uniform process in tax system the present
government has brought the bill to pass the
act On GST. Before that the congress
government had introduced its bill for the
discussion but it was not passed later on
Vajpayee government had set up the
committee on GST in 2000. I The Finance minister P. Chidambaram
had announce the Implementation of GST
on 1st April 2010. Before that in 2008 the
committee has submitted the report on
GST to the government. In 2009 first
discussion was released on GST .
GST is based on Indirect Tax , it is also
value added tax. Several times the
manufacturers and the retailers have to pay
the tax on one products at a different ,
different places , it was an exploitation of
the sellers and manufacturers ultimately it
was the loss of the common consumers ,
because when the tax is paid then the
sellers have increased the prices of the
product and there were no infirmity in
charging the tax and fixing the prices of
products.
According to this GST The state
government can collect central excise
duty, additional excise duty , service tax.
The tax rate has been framed in the four
slab 5%, 12%, 18% and 20% . assam is the
first state who have support this bill,
Maharashtra state also supported to the bill
but in south and north state has not been
supported on this bill, Kerala, Karnataka,
Zarkhand and Jammu &Kashmir.
The Finance Minister Mr. Arun Jaitely
Submitted the GST bill with 122nd
Amendment on 19th Dec. 2014 . On 3rd
August 2016 the rajya sabha has passed
the bill later on it was passed in Loksabha
l on 8th. August 2016. This GST Act was
passed according to the provision of
Article 360. But the Implementation of
this bill is still not started dut to some
objections from the stakeholders.
Statement of The Problem:-
Before introducing GST There was no
uniformity in tax levied , on several stages
the manufacturers and sellers have to pay
the taxes , on one product they have to pay
three to four times duty , if it cross the
“Impact of Goods and Service Tax (GST) on Indian Economy”
DR.DILIP BHANAGADE
Hod, dept of commerce
research guide
Dnyansadhana college, thane
PROF.RAVINDRA S. NETAWATE
Hod, Dept Of Commerce
D.G.Ruparel College Of Arts, Science & Commerce
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 6
state then the sellers have to pay the taxes
more than this , it was very uncomfortable
to the sellers, manufacturer as well as to
the consumers , ultimately consumers will
have to pay high prices , Due to GST ,
the sellers and manufacturers will have to
pay tax only once on the particular
product, it helps to stabilize the products
prices . There for the GST is the New light
towards the development of nation.
Review Of Literature:-
According to Mr. Hasmukh Adhia
Revenue secretary of Union Finance
Ministry , In the article of Indian Express,
that the propose GST , To pay the taxes ,
the consumers have no need to open their
account with the government bank , they
can make the payment directly with their
Debit or Credit card, NEFT, RTGS and so
on . all payment will be made online .
According to Mr. Vijay Kelkar the
former finance secretary and Chairman of
the 12th Finance commission In the articles
of Indian express said that the recent
proposal of the government to have a a
four rate slab for the GST rate was
disappointing as it Robs the GST of its
efficiency enhancing potential .
According to ENS economic Bureau ,
The government has agreed to refund as
much as 905 of their duty claims just
within a week Under GST even the
exporter offer interest on the refund claim
if its unduly delayed .
According to Mr. Ashok Lavasa , In his
articles published in the Indian Express
That there is a system by which the
additional tax burden of compensating the
states is not being passed to consumers in
a way it would have otherwise passed on
in terms of taxes.
According to Mr. Santosh Dalvi Partner
Indirect Tax KPMG The ideology to come
up with the rate structure is to avoid any
negative impact on the consumers inflation
from inflation perspective.
According to G.P. Hinduja Global Co-
Chairman Hinduja Group of companies
Sufficient time to be given to the
companies to comply with the tax after
the rules are finalized and made public and
that the levy of Cess would not lead to
inflationary pressure.
According to Krishan Arora partner
Grant thornton company , The government
would need to ensure that multiple rate
proposed for Goods and services do not
inherent the legacy issues around
classification anomalies .
Objectives Of the Study:-
1) To Study the concept of GST.
2) To study the Impact of GST on
Manufacturers.
3) To study the problems of GST On
The Unorganized sector .
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 7
4) To find out the measures on
problems of GST.
Hypothesis:-
There is the negative (H1) hypothesis
developed in the research.
H1- There is no uniformity in the tax
structure of GST
H2- Consumers are not satisfied
with higer rate and middle rate tax
structure for middle class and lower
middle class group
H3- Still GST Bill is not
implemented therefore consumers,
trader have no idea about tax
structure
H4- The Present GST tax structure
will create inflation
Research Methodology:-
1) To know the impact of GST on
different group of consumers , I
applied the survey method and
interview method. To know the
opinion of the consumers on the
present issues.
Collection of Data:-
1)Primary Data has been collected
through the respondent as different
class of consumers . poor, middle
and rich class of the consumers.
2) The secondary data has been
collected from the references and
journals as well as news papers..
3) Samples:-sixty Respondents as
a samples have been selected from
poor class, middle class and rich
class of Navi- Mumbai region to
find out the exact impact of GST
on different groups of consumers
and random sampling method has
been applied To know the effect of
GST on consumers.
Interpretations Of Data:-
S.NO
.
Nature Of
Goods &
Services
Rate
Structur
e
1) Mass
Consumption
s Of
Products.
5%
Lower
Rate
2) Consumption
s By Lower
Middle Class
.
12%
Standar
d Rate 1
3) Consumption
by Middle
class people .
18%
Standar
d Rate2
4) Luxurious
Items&
28%
Higher
Rate
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 8
Demerits
Goods
5) Food grains
Items &
Essential
Commodities
( CPI ) .
0%
Zero
Rate
Class Nature
of goods
Sla
b
Agr
ee
Disag
ree
Overall
Consump
tion
Mass
consumpt
ions
5% 95
%
5%
Middle
class
Moderate
consumpt
ions
12
%
---- 90%
Lower
middle
class
Maximu
m Price
18
%
---- 90%
Rich
class
Luxuriou
s goods
28
%
---- 86%
The above table has given the tax
structure on Various goods we have made
the survey and asked sixty respondent
about their reaction on proposed GST
structure In the mass consumption of
products all groups of the people are
satisfied the tax structure of government
i.e. 5% 95% consumers from all
categories supported , were as the tax
structure on Middleclass and lower middle
class group of consumers are not satisfied
90% consumers have shown their
disagreement on the tax structure of 12%
& 18% tax rate even the rich group of
consumers are not satisfied with the tax
structure of GST. 86% consumers are not
satisfied the tax structure for them because
they will have to pay highest rate of taxes
on their buying products were as 92%
consumers are satisfied with 0% percent
tax of GST on foodgrains and essential
goods.
Here some of the items which are not
covered under GST I.e. Gold and jewellary
as well as petroleum and coal products.
The government also failed to classified
which products are coming in the middle
class and middle lower class category , it is
confusion in the minds of consumers. s .
Government still not fixed the types of
food grains and essential goods , because
50% of Items will be shifted in zero
percent category . The uniformity in the
over all tax process is not seen.
Limitations Of The Study:-
1) To make the research on GST the
period was very short i.e. one
month.
2) The area which is selected for the
above research is onl Navi-
Mumbai there fore the above study
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 9
is not universal to all regions
consumers .
3) The respondent which were
selected for the above research was
not exact , some of
the respondents have been given
the bias information in the
questionnaire
Findings:-
1) Slab system which is applied is not
suitable to different class of
consumers.
2) Paying this tax many consumers
are not able to fulfilled the necessary
documents .
3) The GST tax is to be paid by
Online , this advance technological
system is very difficult for the rural
areas consumers, illiteracy rate still
high in some of the part of north
region, it is very difficult to conversant
with the tax system.
4) The Tax will be shared by central
government as per the government
decision, it is the loss of some
states , that more than sixty percent
tax will be collected by central
government.
5) The GST structure is not uniform ,
the central government has given
the flexibility regarding the states
tax structure, there for every states
is fixing different tax structure on
GST , Kerala states demanding
forty percent tax on demerits and
luxurious goods were as other
states reducing the rate on demerit
of goods.
6) Some of the states have been
excluded by the government from
the GST tax structure Mizoram,
Manipur, Nagaland and Jammu&
Kashmir , it is very difficult for this
states to make development in the
states all the time these state have
been depending on central
government. It is barriers to the
development of the states
7) From the GST system there is a big
concern that the class difference
will grow , which is harmful to
maintain the integrity and equality
in different class of the Society.
8) Through this GST tax structure
there is a chances of Inflation,
ultimately the cost of Goods &
services will be increased again the
tax will be increased, which is also
harmful to the coinsumers.
Suggestions:-
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 10
1) The finance Ministry has to be
taken unanimous decision on
this critical issues , still there
are many meetings have been
taking by the Finance Ministry
though there is no
reconciliation on this issues.
2) The GST tax structure should
not be according to mass
consumption, essential goods
and so on, it has to be
according to the needs of the
society.
3) The GST tax will be paid by
online system, which is very
difficult to the consumers who
are residing in rural area, even
they will have to take the
training regarding that or they
will have to by the computers
and Inter net connection, which
is also difficult for them, there
should be other system would
available for the consumers for
paying the tax.
4) The government must see the
effects of GSTY tax structure,
the burden of tax should not be
gone on poor consumers other
wise this group will face
dangers problem.
5) Many Class of the society can’t
fulfill the documental
procedure for paying the tax
under GST , they have no
Adhar card number, no bank
account, no domicile certificate
and so on. For such consumers
government should make
different provision or they
should be excluded from this
tax structure.
6) The Government should not
allow the tax flexibility to the
states because of this
uniformity in tax structure
would not be remain as same ,
some one will take undue
advantages of it. It is again
create problem.
7) Some of the tax payers are
common to the states and
centre calculating there tax is
one of the challenges for the
finance and income tax
departments , the government
should make necessary
provision for this tax prayers.
Conclusion:-
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 11
From the above study it is cleared that
present GST tax structure is not Uniform,
there have been eight meetings have been
taken to draft the uniform tax structure on
GST , it is the failure of government on
GST.
They should find the other solutions where
all stakeholders should agree on the
uniform tax structure, the government
ready to implement the tax structure from
sept. 2016, though the draft has not been
framed properly. There for government
should make the necessary changes in it.
Bibliography:-
1. The Economic Times
(2009) Featured Articles from The
Economic Times.
2. GST India (2015) Economy and
Policy.
3. Mehra P (2015) Modi govt.’s
model for GST may not result in
significant growth push. The
Hindu.
4. Sardana M (2005) Evolution Of
E‐ Commerce In India Part 3.
5. TRAI (2015) Highlights of
Telecom Subscription Data as on
28th February.
6. Patrick M (2015) Goods and
Service Tax: Push for Growth.
Centre for Public Policy Research
(CPPR).
7. SKP (2014) GST: Impact on the
Telecommunications Sector in
India.
8. Reference book T.Manoharan,
Bandgar,Vinod Gupta
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 12
Meaning
According to Article 366 of the 122nd
Constitutional Amendment Bill, 2014
[Constitution (101st Amendment) Act,
2016] “Goods and Services Tax means any
tax on supply of goods, or services or both
except taxes on the supply of the alcoholic
liquor for human consumption”.
In GST there is a single tax and continuous
chain of tax credits from the manufacturer
to the consumer. The supplier at each stage
can avail the credit of GST paid on the
purchase of goods and/or services and can
set off this credit against the GST payable
on the supply of goods and/or services to
be made by him. Thus, only the final
consumers bear the GST charged by the
last supplier in the supply chain, with
setoff benefits at all the previous stages.
Hence, only the value added at each stage
is taxed under GST and here is no tax on
tax under GST system. In GST the goods
and services are not differentiated and
thus, the goods and services are taxed at a
single rate.
Goods and Service tax is a tax levied on
goods and services, imposed at each point
of sale or rendering service. Such GST
could be on entire goods and services or
there could be some excepted class of
goods or services or negative list of goods
and services on which GST is not levied. It
is indirect tax in lieu of tax on goods
(excise) and tax on service (service tax).
It is like state level VAT which is
levied as tax on sale of goods. GST will be
national level value added tax applicable
on goods and services.
GST is one indirect tax for the whole
nation, which will 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.
Credits of input taxes paid at each stage
will be available in the subsequent stage of
value addition, which makes GST
essentially a tax only on value addition at
each stage. The final consumer will thus
bear only the GST charged by the last
dealer in the supply chain, with set-off
benefits at all the previous stages.
Objectives of Study:
1. To understand various aspects of
GST and its benefits, levy of GST
on various types of goods and
services.
2. To understand how the successful
“A Road map to : GST”
Dr. Jayesh K. Rana
Asst. Prof. Dept. of Accountancy,
Smt. M. M. K. College of Commerce and Economics.
Bandra ( W), Mumbai – 400 050.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 13
implementation of GST in India.
Methodology:
Secondary data are collected from
various sources like articles, books and
internet.
Benefits of GST:
Easy compliance: A robust and
comprehensive IT system would be
the foundation of the GST regime
in India. Therefore, all tax
payer services such as
registrations, returns, payments,
etc. would be available to the
taxpayers online, which would
make compliance easy and
transparent.
Uniformity of tax rates and
structures: GST will ensure that
indirect tax rates and structures are
common across the country, thereby
increasing certainty and 2 ease of
doing business. In other words, GST
would make doing business in the
country tax neutral, irrespective of
the choice of place of doing
business.
Improved competitiveness: Reduction
in transaction costs of doing
business would eventually lead to an
improved competitiveness for the
trade and industry.
Better controls on leakage: GST will
result in better tax compliance due to a
robust IT infrastructure. Due to the
seamless transfer of input tax credit
from one stage to another in the chain
of value addition, there is an inbuilt
mechanism in the design of GST that
would incentivize tax compliance by
traders.
Higher revenue efficiency: GST is
expected to decrease the cost of
collection of tax revenues of the
Government, and will therefore, lead
to higher revenue efficiency.
Conclusion:
GST will eliminate multiple levies. It
will also allow deeper
penetration of digital services.
Further companies could
generate substantial savings in
logistics and distribution costs as
the need for multiple sales depots
will be eliminated. GST will help
create a single unified market
across India and allow free
movement and supply of goods in
every part of the country. It will also
eliminate the cascading effect of
taxes on customers which will bring
efficiency in product costs. DTH,
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 14
film producers and multiplex players
are levied service tax as well as
entertainment tax. Due to all this and
more, GST will bring major change
and uniformity in businesses.
References :
1. The Institute of Cost Accountant of
India (2016), ‘An Insight of GST in
India’.
2. V S Datey (2016), ‘ All about
GST- a Complete Guide to Model
GST Law, Taxmann.
3. Atul Kumar Gupta (2016),
GST- Concept & Roadmap,
LexisNexis.
4. www.quora.com/What-is-CVD-
in-excise-dut
5.
www.finmin.nic.in/reports/modelgstla
w_draft.pd
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 15
ABSTRACT: GST expected to be rolled out with
effect from 1st April, 2017 would
subsume various Indirect tax laws
levied presently and enhance the tax
base. On 25th November, 2016 the
revised Model Law has been released
by Central Board of Excise and
Customs. An attempt has been made
in this paper to analyse the impact of
Revised GST Law. We will discuss
various topics like changes in the
revised draft GST Law, Rates of GST
with some new provisions which has
been inserted in CGST Law.
INTRODUCTION:
Revised draft GST Law was put on the
public domain on 25th November 2016
and thereafter, whatever suggestions
have been received by GST Council
were reviewed during GST Council
Meetings held during the Month
December 2016 and finally all the
sections of CGST Law and SGST Law
have been approved. Similarly, all
provisions of IGST Law except for dual
control has been approved by GST
Council. However, issue of control on
the Assessment, Adjudications and
Audits of the Dealers having turnover
less than Rs.1.5 Cr. has not been
finalized since Law Ministry have
opined differently than that of demands
of State Govt. Perhaps this issue will
be settled in the month of January
2017 but winter session of the
Parliament has been washed out
because political differences on
demonetization and therefore GST
Law and IGST Law could not be tabled
in the Parliament. Now, it may be
tabled in the month of Feb. 217 i.e.
Budget Session, but prior to February
2017, issues need to be resolved and
therefore meeting the deadlines of
Rollout of GST from 1st April 2017
seems too ambitious and difficult.
OBJECTIVES OF THE STUDY:
1) To check probable date of GST
implementation
2) To evaluate changes in the
revised draft GST Law.
3) To understand various rates
under GST
4) To examine allowability of input
tax credit in the revise GST
Law.
“ Impact of Revised Draft GST Law ””
CA. SANDEEP SAWANT
Asst. professor in Accountancy
Chetana’s H.S. College of Commerce ad economics
And Kusumtai Choudhari of Arts, Bandra (E), Mumbai-51
Email ID: [email protected].
Contact details: 9930488744
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 16
5) To examine issues relating to
refund and transitional
provisions.
1) Probable date of GST
Implementation:
As stated above, it seems to be
difficult to implement GST w.e.f 1st
April 2017, since Draft Law could not
be converted into the Law and
thereafter Industry needs min. 2-3
months for studying the provisions and
implementing the same. However, in
accordance with Constitution 101st
Amendment Act, 2016, GST will have
to be implemented prior to 16th
September 2017 and therefore GST
will be implemented not later by 1st
Sept. 2017, but it will create more
hardships to trade and industries to
start mid-way and face the issues
arising from transitional provisions and
also prepare the two sets of accounts
prior to 1st Sept. 2017 and thereafter. It
will be better for industry, if GST is
implemented from the start of second
quarter. i.e. 1st July 2017, so that
quarterly accounts are prepared by
most of the industries and there will be
less hurdles, if it is implemented w.e.f.
1st July 2017 rather than 1st Sept.
2017.
2) Evaluation of changes in the
revised draft GST Law.
There are major changes in important
provisions of the Model GST Law,
which has been incorporated in
revised Draft GST Law. Fortunately,
most of them are positive changes.
Those changes are highlighted in the
subsequent paras below. However,
important change is the new provision
which has been inserted in CGST Law.
• Threshold Limit: Due to
change in definition of
aggregate turnover, turnover of
non-taxable goods will not be
considered for calculating the
threshold limit and therefore,
threshold limit of Rs. 20 lacs
will consist of turnover of
taxable goods and exempted
goods (it is 10 lacs for North
State but will not include non-
taxable goods.)
• Interest: Interest also will not
be liable for GST, since,
account has been defined in
IGST law as an account
bearing interest to the
depositor, and includes a non-
resident external account and a
non-resident ordinary account.
Similarly, NBFC has been also
defined and interest is the
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 17
consideration, which is also
received in money and money
is excluded from the scope of
supply of goods and services
and hence interest will not be
charged.
New definition of “Account” has
been inserted which refers to
bank account. It seems that
“Interest” may be exempted
from payment of GST.
• Securities Not Liable to GST:
With no specific exclusion to
“Securities” in the earlier
version, there was a general
apprehension that securities will
be liable to GST. Now, goods
has been defined as under:
“Goods” means every kind of
movable property other than
money and securities but
includes actionable claim,
growing crops, grass and things
attached to or forming part of
the land which are agreed to be
severed before supply or under
a contract of supply.
• Actionable Claim and
Intangible Property will be
considered as goods and not
as service:
Actionable claim shall have the
meaning assigned to it in
section 3 of the Transfer of
Property Act, 1882.
“Actionable Claim” means a
claim to any debt, other than a
debt secured by mortgage of
immovable property or by
hypothecation or pledge of
movable property, or to any
beneficial interest in movable
property not in the possession,
either actual or constructive, of
the claimant, which the civil
courts recognize as affording
grounds for relief, whether such
debt or beneficial interest be
existent, accruing, conditional or
contingent;
Intangible property has been
included in Goods since it has
been specifically excluded from
services.
Earlier, in Model GST Law, it
was included in the definition of
service and now it has been
included in the definition of
goods but there is no HSN
Code available for actionable
claim and intangible property
and therefore it will be
interesting to see that, what
HSN code will be used for the
same.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 18
Registration: Each taxable
person, who is required to take
the registration and crossed the
threshold limit can apply for the
registration. Separate
registration has to be taken for
each state from where supplies
are effected. However, it is the
option of the person to opt for
separate registration, when the
person in engaged in supplies
of different goods and services
which includes:
a. The nature of the products
or services
b. The nature of the production
processes.
c. The type or class of
customers for the products
or services.
d. The methods used to
distribute the products or
provide the services and
e. If applicable, the nature of
the regulatory environment,
for example, banking,
insurance or public utilities.
• Change in definition of
“Capital Goods”:
Definition of capital goods is
given below:
“Capital goods” means goods,
the value of which is capitalized
in the books of accounts of the
person claiming the credit and
which are used or intended to
be used in the course or
furtherance of business.
Earlier definition which was
brought from existing cenvat
credit rules 2004 has been
dispensed with. This will reduce
substantial litigations and
instant ITC credit will be
available on capital goods
except for pipelines and
telecommunication tower fixed
to earth by foundation or
structural support including
foundation and structural
support
• 3) Various rates under GST:
Though rates of the GST are
never the part of provision of
the act but as promised in the
Rajya Sabha by Hon. Finance
Minister Shri. Arun Jaitely that
upper limit of the tax will be part
of the Law and therefore upper
limit of the tax rate of 14% has
been provided in Section 8(1) of
CGST / SGST Law and 28% on
IGST (Section 5(1) of IGST
Law) and therefore, now there
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 19
will be following categories of
the tax rates.
Rate of
Tax
Expected
bifurcation
Remark
Nil
(Exempted
supply)
(0% of
CGST &
0% of
SGST)
Necessary
items may
be
exempted,
which are
presently
exempted
in all the
states for
VAT
Generally,
these will
be in the
range of 80
to 99 items.
5% (2.5% of
CGST &
2.5% of
SGST)
Items which
are
exempted
under
excise and
VAT rate is
in the range
of 4% to 6%
may be
covered
under this
category.
12% (6% of Items on
CGST &
6% of
SGST)
which
excise duty
is 6% and
VAT rate
are in the
range of 4%
- 6% may
be covered
under this
category
18% (9% of
CGST &
9% of
SGST)
Majority of
the Items,
which are
not directly
needed to
the
consumer
and not
covered
above will
cover in this
category.
28% (14% of
CGST &
14%
SGST)
All other
items which
are directly
reaching to
the
consumer
including
luxury
goods. i.e.
white goods
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 20
and
beverages.
It is expected clean cess and Swachh
Bharat cess will also be additionally
imposed on the luxury goods and
beverages. Needless to say, no ITC
credit will be available on such cess.
4) Allowability of input tax
credit in the Revised GST
Law (Section 16):
“Input & input services”
definition has been amended
and therefore input used or
intended to be used in the
course or furtherance of
business will be eligible for
credit even if not used for
outward supply. This will avoid
litigation.
Input service used or intended
to be used in the course or
furtherance of business will be
eligible for credit even if not
used for outward supply. This
will avoid litigation.
Allowability of following input
tax credit in the Revised GST
Law:
• Pipelines and
telecommunication tower fixed
to earth by foundation or
structural support.
• Works contracts services input
credit if it is an input service for
further supply of works
contracts service.
• Food and beverages, outdoors
catering, beauty treatment,
health services, cosmetic and
plastic surgery for making an
outward supply of same
category of goods and services
.
• Rent-a-cab, life insurance,
health insurance where the
same is notified by Government
to be obligatory under any law
for the employer.
Further, Plant and Machinery
has been defined in the
explanation as under:
Plant and Machinery means
apparatus, equipment,
machinery, pipelines,
telecommunication tower fixed
to earth by foundation or
structural support that are used
for making outward supply and
includes such foundation and
structural supports but excludes
land, building or any other civil
structures.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 21
Therefore, Input credit also will
be allowed on foundation and
structural support.
5) Refund and Transitional
provisions:
Refund: Refund will be granted
immediately, when application is
made with all required documents
to the extent of 90% as against
80% and balance 10% will be
given within 60 days as against 90
days. Even the recipient or any
person who has borne the
incidence of tax can apply for the
refund with 6 months from the
issue of order.
Transitional provision: Provisions
relating to Transitions has been
amended so as to avoid double
taxation on the stocks lying with
registered dealers (1st Stage Dealer,
2nd stage Dealers, Import Dealer).
Further, ITC Credit will be allowed on
the following:
a) Credit of Eligible duties and taxes
in respect of input and input services
during transit.
b) Refund claims filed after the
appointed day for goods cleared or
services provided before the appointed
day and exported before or after the
appointed to be disposed of under
earlier law.
c) Transfer of untilised cenvat credit
by taxable person having centralized
registration under earlier law.
d) Cenvat credit reversed under
earlier law due to non-payment of
consideration within a period of three
months, can be reclaimed if payment
is made within three months from the
introduction of GST.
CONCLUSION:
Each taxable person under GST Law
will have to do the “IMPACT
ANALYSIS” on his business to find out
due to change in existing tax regime,
what are the additional benefits he will
be able to get by way of ITC Credit, no
retention and different taxes for which
no set off was allowed. Similarly, what
will be the savings on account of input
tax and output tax? Savings will have
to be worked out considering that there
will be no cascading effect.
Similarly, additional tax burden, if any
also will have to be worked out
considering new provisions of Model
GST Law. If there is a savings then
such savings will have to be passed on
to the customer and that will be the
legal requirement to demonstrate that
savings have been passed on to the
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 22
customers otherwise penal provisions
will attract.
In view of the above, each taxable
person will have to do impact analysis
and keep the same as part of books of
account and use the same towards the
compliances u/s 163 of CGST Law.
Same provisions have been made
applicable to SGST Law and IGST
Law.
Even though, there is uncertainly
whether GST will be made effective
from 1st April 2017, there is a need to
start the GST implementation work
immediately and do the changes in the
Business Strategies and Business
Systems including Supply Chain,
Accounting and IT system.
REFERENCE:
1. ICAI/ICMAI/ICSI Publications
2. Website :
http://www.caclubindia.com
3. Website
:http://www.wikipedia.org
4. Economics Times
5. Business standards
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 23
Introduction
The Indian auto industry is one of the
largest in the world. The industry accounts
for 7.1 per cent of the country's Gross
Domestic Product (GDP). The Two
Wheelers segment with 81 per cent market
share is the leader of the Indian
Automobile market owing to a growing
middle class and a young population.
Moreover, the growing interest of the
companies in exploring the rural markets
further aided the growth of the sector. The
overall Passenger Vehicle (PV) segment
has 13 per cent market share.
India is also a prominent auto exporter and
has strong export growth expectations for
the near future. In April-January 2016,
exports of Commercial Vehicles registered
a growth of 18.36 per cent over April-
January 2015. In addition, several
initiatives by the Government of India and
the major automobile players in the Indian
market are expected to make India a leader
in the Two Wheeler (2W) and Four
Wheeler (4W) market in the world by
2020.
Global Ranking
The world standing for the Indian
automobile sector, as per the
Confederation of the Indian industry is as
follows:
• Largest three-wheeler market
• Second largest two-wheeler market
• Tenth largest passenger car market
• Fourth largest tractor market
• Fifth largest commercial vehicle
market
• Fifth largest bus and truck segment
Performance of Auto Industry during
2015-16
Production
• The industry produced a total
23,960,940 vehicles including
passenger vehicles, commercial
vehicles, three wheelers, two
wheelers and quadricycle in April-
March 2016 as against 23,358,047
in April-March 2015, registering a
marginal growth of 2.58 percent
over the same period last year.
Domestic Sales
• The sales of Passenger Vehicles
grew by 7.24 percent in April-
March 2016 over the same period
last year. Within the Passenger
Vehicles, Passenger Cars, Utility
Vehicles and Vans grew by 7.87
percent, 6.25 percent and 3.58
percent respectively during April-
March 2016 over the same period
last year.
• The overall Commercial Vehicles
segment registered a growth of
11.51 percent in April-March 2016
as compared to the same period last
year. Medium & Heavy
Commercial Vehicles (M&HCVs)
registered a growth at 29.91
percent and Light Commercial
Vehicles grew marginally by 0.30
percent during April-March 2016
over the same period last year.
• Three Wheelers sales grew by 1.03
percent in April-March 2016 over
the same period last year.
Passenger Carrier sales grew by
2.11 per cent & Goods Carrier
sales declined by (-) 3.62 percent
“Impact of GST in Automobile Industry Sector”
Mustafa Sapatwala
SIES College of Arts, Science & Commerce
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 24
respectively in April-March 2016
over April-March 2015.
• Two Wheelers sales registered a
growth at 3.01 percent during
April-March 2016 over April-
March 2015. Within the Two
Wheelers segment, Scooters grew
by 11.79 percent while
Motorcycles and Mopeds dropped
by (-) 0.24 percent and (-) 3.32
percent respectively in April-
March 2016 over April-March
2015.
Exports
• In April-March 2016, overall
automobile exports grew by 1.91
percent. Passenger Vehicles,
Commercial Vehicles, Three
Wheelers and Two Wheelers
registered a growth of 5.24 percent,
16.97 percent (-) 0.78 percent and
0.97 percent respectively in April-
March 2016 over April-March
2015.
Gross Turnover of the Automobile
Manufacturers in India (In USD Million)
Investments
In order to keep up with the growing
demand, several auto makers have started
investing heavily in various segments of
the industry during the last few months.
The industry has attracted Foreign Direct
Investment (FDI) worth US$ 15.06 billion
during the period April 2000 to March
2016, according to data released by
Department of Industrial Policy and
Promotion (DIPP).
Some of the major investments and
developments in the automobile sector in
India are as follows:
Jaguar Land Rover, the UK-based
automotive company, plans to
manufacture Land Rover SUV for
the local market and as well as for
export, most probably at its plant in
Pune.
Italian automobile manufacturer
Fiat has announced its plans to start
local production at Ranjangoan
plant in Pune from the second
quarter of next year at the launch of
its two sports utility vehicles
(SUVs), namely Jeep Wrangler and
Grand Cherokee.
MV Agusta, the Italy-based
premium motorcycle manufacturer,
has entered India through an
exclusive partnership with Pune-
based Kinetic group with the
launch of three luxury bikes, which
will be sold through the
‘Motoroyale’ chain in Pune.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 25
Sweden-based electric vehicle
maker Clean Motion plans to invest
US$ 10 million in India over the
next three years in order to expand
operations including setting up of
an assembly unit for its Zbee three-
wheelers in the country.
Isuzu Motors, the Japan-based
utility vehicle manufacturer, has
inaugurated its greenfield
manufacturing unit in SriCity,
Andhra Pradesh, at a cost of Rs
3,000 crore (US$ 450.94 million).
Japanese two-wheeler
manufacturer Honda Motorcycle
and Scooter India (HMSI) has
opened its fourth and world’s
largest scooter plant in Gujarat, set
up to initially produce 600,000
scooters per annum to be scaled up
to 1.2 million scooters per annum
by mid-2016.
American car maker Ford has
unveiled its iconic Ford Mustang in
India and will make its debut in
second quarter of FY2016 within
the price band of Rs 45 lakh (US$
66,146) and Rs 50 lakh (US$
73,496) in the Indian market.
Nissan Motor Co. Ltd is in
discussion with Government of
India to bring electric and hybrid
technologies to India as the
government plans to reduce air
pollution caused by vehicles.
Global auto major, Ford plans to
manufacture in India two families
of engines by 2017, a 2.2 litre
diesel engine codenamed Panther,
and a 1.2 litre petrol engine
codenamed Dragon, which are
expected to power 270,000 Ford
vehicles globally.
The world’s largest air bag
suppliers Autoliv Inc, Takata Corp,
TRW Automotive Inc and Toyoda
Gosei Co are setting up plants and
increasing capacity in India.
General Motors plans to invest
US$ 1 billion in India by 2020,
mainly to increase the capacity
at the Talegaon plant in
Maharashtra from 130,000 units a
year to 220,000 by 2025.
US-based car maker Chrysler has
planned to invest Rs 3,500 crore
(US$ 513.5 million) in
Maharashtra, to manufacture Jeep
Grand Cherokee model.
Mercedes Benz has decided to
manufacture the GLA entry SUV
in India. The company has doubled
its India assembly capacity to
20,000 units per annum.
Germany-based luxury car maker
Bayerische Motoren Werke AG’s
(BMW) local unit has announced
to procure components from seven
India-based auto parts makers.
Mahindra Two Wheelers Limited
(MTWL) acquired 51 per cent
shares in France-based Peugeot
Motorcycles (PMTC).
Government Initiatives
The Government of India encourages
foreign investment in the automobile
sector and allows 100 per cent FDI under
the automatic route.
Some of the major initiatives taken by the
Government of India are:
Mr Nitin Gadkari, Minister of
Road Transport, Highways &
Shipping has announced plans to
set up a separate independent
Department for Transport,
comprising of experts from the
automobile sector to resolve issues
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 26
such as those related to fuel
technology, motor body
specifications and fuel emissions,
apart from exports.
Government of India aims to make
automobiles manufacturing the
main driver of ‘Make in India’
initiative, as it expects passenger
vehicles market to triple to 9.4
million units by 2026, as
highlighted in the Auto Mission
Plan (AMP) 2016-26.
In the Union budget of 2015-16,
the Government has announced to
provide credit of Rs 850,000 crore
(US$ 124.71 billion) to farmers,
which is expected to boost the
tractors segment sales.
The Government plans to promote
eco-friendly cars in the country i.e.
CNG based vehicle, hybrid vehicle,
and electric vehicle and also made
mandatory of 5 per cent ethanol
blending in petrol.
The government has formulated a
Scheme for Faster Adoption and
Manufacturing of Electric and
Hybrid Vehicles in India, under the
National Electric Mobility Mission
2020 to encourage the progressive
induction of reliable, affordable
and efficient electric and hybrid
vehicles in the country.
The Automobile Mission Plan
(AMP) for the period 2006–2016,
designed by the government is
aimed at accelerating and
sustaining growth in this sector.
Also, the well-established
Regulatory Framework under the
Ministry of Shipping, Road
Transport and Highways, plays a
part in providing a boost to this
sector.
Impact of fiscal and taxation
policies of Budget 2016
1. The budget mainly concentrates on
investment in rural India as well as
infrastructure development. It
has allocated Rs 970 billion over
the next fiscal year on improving
and building new roads and
highways.
The rural development will
generate stability as the market
dynamic evolves and the purchase
capacity of people in those sectors
increase.
2. The government has also
introduced a new tax on cars sales
aimed at fighting high levels of air
pollution and congestion. This
infrastructure cess levies a 1
percent tax on passenger cars – less
than 4 meters long and with
engines smaller than 1,200cc –
which only run on petrol,
compressed natural gas or liquefied
petroleum gas. In addition, small
diesel cars less than 4 meters in
length with engines below 1,500cc
will be taxed at 2.5 percent while
bigger diesel cars will levy an
infrastructure cess of 4 percent.
Surprisingly, the government did
not impose any taxes on two- and
three-wheelers, which may bring a
rise in demand for these types of
vehicles.
Electric, hybrid, and hydrogen
fuel-celled vehicles were not
further taxed. The govt. should
think of measures to promote
alternate fuel technologies which
would help the environment. The
government should not think based
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 27
on size of the vehicle which has no
relation to the technology.”
3. The finance minister has also
introduced a ‘luxury tax to collect
tax at source at the rate of 1% on
purchase of luxury cars exceeding
value of Rs 10 lakh.” Moreover,
the customs duty on commercial
vehicles will increase from 10 to
40 percent.
Goods and Service tax (GST)
The current Indirect tax regime in India
provides for a complex tax environment
due to multiplicity of taxes, elaborate
compliance obligations and tax cascading.
The Industry also has witnessed several
types of cesses such as automobile cess,
NCCD, infrastructure cess etc.
The automobile industry has its own
complexity such as longer investment
cycle, development of vendors/ part
makers, substantial outsourced processes,
unique market approach, etc.
Under the proposed GST regime, all the
key Indirect tax legislations would be
subsumed (except for few taxes such as
Stamp Duty), and hence it is expected that
it would result in a simpler tax regime.
GST - Goods and Service Tax to replace
and merge Excise Duty, Infrastructure
Cess, VAT Duty as One Entity called
GST. While - Octroi would likely be
abolished as GST is a destination based
Tax. So GST will cover all tax
components till the time the Passenger Car
would arrive in state dealer. Road Tax
though would continue to be additional
component on buying Cars and would not
be covered under GST
Passenger Car Buying is one sector where
there is regime of high taxes.
1. Excise Duty (ranging from 12% to
27%)
2. Infrastructure Tax (1% to 4%)
3. VAT Duty (12.5% to 14.5%)
4. Octroi / Entry Tax (4% to 6%)
5. Road Tax
Existing Scenario (Pre GST) Vs Post
GST Scenario
GST Rates (Update as on 3rd November
2016)
GST Rates are fixed at 5%, 12%, 18% and
28%. Passenger Car Sector will attract the
highest Slab of 28%.
The Taxes applicable post GST would be
as below on Cars would be as below from
April 2017. There would be additional cess
on Luxury Cars to make up for loss of
Excise and VAT Ex-chequer amount to
Government and overall cess on luxury
cars would be 40%
Final Impact of GST on Car Prices in India
(2017 Onwards)
Below would be the likely Impact
of GST on Car Prices in India:-
• Small Cars (Sub 4 Meter Segment)
- No Positive Impact on Car Prices
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 28
with 28% GST Cess. In fact, Small
Cars would likely be expensive by
1% to 2%
• Mid Sedan, Mid SUV Range (> 4
Meter, But Engine < 1.5 Litre) -
Prices would likely Increase by 2%
to 3% as is expected that GST +
Additional Luxury Cess will make
up for 40% Tax
• Luxury High End Cars (Engine >
1.5 Litre) - Prices would almost be
same or may come marginally by
1% or so and thus would be the
only Beneficiary in GST. May See
- Benz, Audi, BMW Range prices
coming down from Rs. 30000 to 1
Lakh
In all - There would not be any
benefit post GST - to the passenger
car Sector. It was earlier
anticipated for 20% Cess - but with
28% GST on Cars - it will likely be
detrimental for Automobile sector -
which was eagerly waiting for GST
and buyers who deferred purchase
call for 2017
In the light of the above developments,
industry would now need to analyse the
provisions of the draft law in detail, and
assess its impact on their business. This is
essential to ensure that timely
representations are made to the
Government, as well as to identify key
implementation requirements as part of the
preparations for transition from the
existing indirect tax regime to GST
regime.
While there are issues of concern common
across sectors, in the ensuing paragraphs,
we have sought to identify the key aspects
of the Model GST Law as may be relevant
for the automobile sector.
1. Valuation
The Automobile industry has seen
significant disputes under central excise
valuation like:
• Sale below the cost for market
penetration treated as ‘additional
consideration’
• Inclusion of State Industrial
Promotion Subsidies retained by
the manufacturer
• Deductibility of post-sale discounts
from value under excise
• Valuation of demo cars
• Treatment of PDI charges and
other dealer reimbursements,
advertisement charges recovered
from dealers etc
• Sales through marketing companies
and mutuality of interest
The Model GST law continues with the
concept of ‘transaction value’ which is a
welcome measure. The transaction value
shall be adopted where the supplier and
buyer are not related, and price is the sole
consideration for sale. However, the
definition of the term, ‘related’ and the
methods for determination of value are
similar to the present customs valuation
rules.
The powers for rejection of the transaction
value are very wide, and could lead to
significant valuation disputes.
Some of the significant valuation points
arising out of the draft law are as follows:
• Likely re-birth of ‘FIAT’
principles: Under the Model GST
law, the transaction value can be
rejected when ‘price is not sole
consideration’ for sale. The Supreme
Court has held in the case of FIAT
India that sale below manufacturing
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 29
cost for market penetration would be
treated as if ‘price is not the sole
consideration’. The excise law was
amended with a view to remedy the
implications arising out of this ruling.
The principles laid out in the FIAT
ruling may apply in respect of
valuation under GST, unless proper
safeguard rules are included.
• Inclusion of subsidy: Under the
Model GST law, any subsidy linked to
supply of goods is to be included in
the valuation for payment of GST.
Majority of the automobile
manufacturers enjoy special benefits
from the State Government in the
form of State Investment Promotion
Subsidies (‘IPS’). This is given in the
form of refund of VAT/ CST paid, or
as a loan. While the IPS scheme has to
be appropriately modified under the
GST regime, the question arises as to
whether these subsidies have to be
included in the taxable value for GST
purposes.
• Discounts in invoice and normal
trade practice: The deduction for
discounts is provided subject to the
condition that the same is shown in
the invoice and is in the course of
normal trade practice. The term
‘normal trade practice’ is very
subjective and especially in the
automobile industry, the discounts
vary depending upon the variants, new
product launch, etc., and this may lead
to potential disputes.
• Post-supply discounts: The post-
supply discounts are allowed as a
deduction only when they are pre-
determined and linked to the supply
invoices. There would be practical
challenges in claiming such discounts,
especially in the context of practices
followed by the automobile industry,
as these discounts or incentives are
not applied to specific invoices.
Whether provisional assessment is
required in such cases, and the
procedures therefore, need clarity.
Further, in case such discounts are not
claimed as deduction, whether the
same would be again subjected to
GST in the hands of the dealers is also
not clear.
• Sale through marketing companies:
The trigger for related party valuation
mechanism is similar to customs. The
term, ‘related’ is different from the
present concepts in excise valuation
like ‘interconnected undertaking’,
‘holding/ subsidiary relationship’ and
‘mutuality of interest’. The GST
valuation rules also provide for
determination of value by comparison
with goods of like kind and quality (as
the first method in the list of
sequential methods). This is very
subjective, and is likely to result in
controversies and challenges in
substantiating the valuation.
Key Action points
• Evaluate the impact of the valuation
rules and resultant GST impact on
transactions between related persons
and with dealers.
• Represent to Government:
▪ Appropriate amendments in the
Model GST law
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 30
▪ Specific automobile sector
guideline on the principles of
valuation.
2. Job work and GST
The job work process is the backbone for
automobile industry operations. The
Model GST law treats ‘job work’ as a
service and seeks to maintain the existing
excise procedures for job work
transactions, i.e. non-taxability of job work
transaction and providing credits to the
principal for supplies to job worker, 180
days condition for bringing back goods
after job work, etc.
However, there is lack of clarity in the
conceptual framework for job work. To
illustrate a few:
• Does ‘job work’ include situations
where the job worker adds his own
materials, or should all the
materials belong to the principal?
• Is job worker engaged in exempted
or non-taxable supply?
• Whether the input tax credit in
respect of inputs, capital goods and
input services received by job
worker is eligible in the hands of
the job worker or the principal?
• Intra-State vs. Inter-State job work
– Whether provisions relating to
supply and procedure for job work
apply to both, intra-State and inter-
State job work activities?
• In case of inter-State job work
transactions and supply directly
from the job worker’s premises,
there could be accumulation of
credits in the principal’s State –
possibility of utilisation or transfer
of such credits to be examined
(including whether removal for job
work can be treated as a supply by
the principal)
Key Action points
• Evaluate if there are any potential
credit leakages on the job work
transactions and the related cost
impact, if any
• Evaluate whether job worker
exemption is optional or mandatory
– its related tax impact
• Represent for further clarity on ‘job
work’ transactions and also
possible special provisions for job
work for automobile industry
3. Credits on vendor tooling
It is a common practice in the automobile
industry for vendors to develop tools/
moulds for manufacture of parts of
automobiles. Typically, the ownership of
such tools is transferred to the OEMs, and
the cost is also recovered from the OEM’s.
However, the tools are physically located
in the vendors’ factory for manufacture of
parts.
Under the Model GST law, the definition
of ‘capital goods’ covers only those goods
which are used at the place of business of
supply of goods. Thus, only goods which
are used in the place of business of OEM
seem to be eligible for GST credit in the
OEM’s hands.
This definition would pose a challenge to
the OEMs in availing credits relating to
tools located in the vendor’s premises, on
which cost is recovered by the vendors.
This could possibly result in increase in
the cost of tooling and the cost for
manufacture.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 31
Key Action points
• Evaluate the GST impact on
tooling arrangements
• Evaluate the need for alternative
business arrangement of movement
of tools from vendor to OEM and
back to vendor location (this may
not be practically feasible in many
situations)
• Represent to liberalise definition of
‘capital goods’ to include all assets
used for business, including assets
located at vendor premises
4. Time of supply for payment of GST
Currently, under the excise law, duty is
paid at the time of removal of the vehicles
manufactured. VAT is paid at the time of
sale of vehicles. The Model GST law
specifies that the time of supply of goods
shall be at the earliest of:
• Date of removal of goods
• Date of which goods are made
available to recipient
• Date of invoice
• Date of receipt of payment with
respect to the supply
• Date of receipt of goods as shown
in the books of accounts by
recipient.
Under the existing law, receipt of advance
towards supply of goods is not a taxable
event, both under Central Excise and VAT
law. However, under the Model GST Law,
receipt of advance is sought to be treated
as a taxable event.
Considering the practice of ‘cash and
carry’ followed by vehicle manufacturers
and also the dealer network following
advance for supply with its customers, the
change in the timing of supply would
result in significant changes in the cash
flow, and also procedural changes for
manufacturers and dealers.
In this context, it is also relevant to note
the definition of the term ‘consideration’,
which states that any deposit shall not be
treated as payment made for the supply,
unless the same is applied as consideration
for the supply. Thus, there is an alternative
view that the advances for supply can also
be treated as a ‘deposit’. If this view is
taken, the date of appropriation of the
deposit towards a supply may be treated as
the date of payment. This would also lead
to interpretation as to what is the date of
such appropriation (like date of Vehicle
Identification Number (VIN), date of
registration of vehicle with the regional
transport office etc.). This needs to be
clarified.
The industry would also need to consider
that there could be more than one GST
invoice for the supply of vehicles. This has
to be factored along with the procedure
followed by various State Regional
Transport Office (RTO), to avoid any
hassles in relation to registration of
vehicles.
Key Action points
• Evaluate the cash flow impact for
OEM’s and also for Dealer
Networks on requirement for
payment of GST on advances
• Industry to represent before the
Government to clarify the timing of
supply. This clarity would be
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 32
fundamental for the industry to
begin its implementation process
• Industry to also work with the
States in relation to procedure for
registration on account of GST
5. Dealer Incentive Schemes and GST
impact
At present, dealer incentive schemes are
not subject to VAT, but there are issues on
applicability of service tax on dealers,
depending on the terms of each scheme.
The industry is of the view that these
schemes are not an independent service by
dealers to the manufacturers, but are in the
nature of post-sale discounts.
The Model GST law does not provide as to
whether these incentives or discounts are
subject to GST. Further, since the original
supply would have already suffered GST
and the buyer would have taken the input
tax credit, the issue of whether these
incentives/ discounts would impact the
price and credits, or will these be kept out
of GST (in the VAT chain), needs to be
addressed. This requires a deeper analysis.
Further, in case such schemes are subject
to GST, whether the same would be
treated as a service or goods is also
another aspect that needs to be clarified.
Key Action points
• Review of the existing dealer
schemes for GST compatibility
• Assess the incremental cost in case
GST would be applicable, the place
of supply and availability of credit
on the same
• Represent to Government for
clarity on incentive schemes
6. Lack of clarity on subsuming of cess
The automotive industry has witnessed
several cesses, including automobile cess,
NCCD, tractor cess and infrastructure cess.
In the discussions on GST, the
Government has indicated its intention to
subsume all Central and State cesses into
GST. However, on a reading of the Model
GST law and the constitutional
amendment bill, it is not clear as to
whether the cesses levied under different
legislations (for specified purposes) will be
subsumed into GST or would continue
under the GST scenario.
7. Input Tax Credit
The definition of ‘capital goods’ has been
drafted on the same lines as the existing
CENVAT Credit Rules. Accordingly,
input tax credit will be allowed only of
those goods falling within specified
Chapters to the Model GST Law. Further,
the definition of ‘inputs’ and ‘input
services’ also provides for exclusions.
Therefore, it appears that even under GST,
restrictions on input tax credit will
continue. Further, a nexus of goods and
services received is also required to be
established with outward supplies.
Accordingly, nexus-related litigation could
continue under GST.
Reconciliation of inward and outward
supplies
If there is a mismatch between the details
of outward supplies uploaded on the GST
Network by the vendors and the inward
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 33
supplies uploaded by the recipient, such
mismatch will be communicated to the
recipient.
If the mismatch is not rectified by the
vendor in the month of communication,
the recipient will be liable to pay the
differential GST along with interest in the
subsequent month. This provision places
the liability for noncompliance on the
recipients, i.e. the OEMs or the automobile
companies, as against their vendors.
Similar provisions have been prescribed
wherein details of credit notes issued by a
supplier have to match with the
corresponding reduction of input tax credit
claimed by the recipient.
Key Action points
Represent on the premise that placing the
responsibility on the automobile
manufacturers for noncompliance by
vendors will cause unnecessary hardship to
the companies. Therefore, a representation
should be made to the effect that interest
should not be recovered from automobile
manufacturers.
8. Stock in the hands of dealer on the
transition date – possible double taxation
The transition provisions provide that
credit balances admissible under the
present regime can be carried forward
under GST.
In case of stocks lying with dealer which
are procured on payment of excise duty
and CST, such excise duty and CST is not
admissible as credit under the present
regime. Accordingly, the transition of such
taxes/ duties included in the stocks lying
with the dealer has to be allowed.
Otherwise, under the GST regime, such
stocks would suffer tax again, i.e. excise
duty and CST paid, and CGST and SGST
on supply after the appointed date.
Key Action points
• Industry to evaluate the impact of
stock in the hands of dealers and
plan for the same
• Automobile industry should make
a representation to allow credit of
excise duty and CST in respect of
such stocks of dealers
9. Lack of clarity on MOU incentives
The investments by automobile companies
are significant, and have a multiplier effect
on the State’s economy. Generally, States
provide for various incentives including
Investment Promotion Subsidies (IPS). A
majority of the automobile manufacturers
enjoy special benefits from the State
Government in the form of State
Investment Promotion Subsidies (IPS).
This is given in the form of refund of
VAT/ CST paid, or as a loan.
With the introduction of GST, taxes move
from the Origin State to the Consumption
State. This would result in significant
reduction of flow-back of IPS, since GST
on inter-state sales is not credited to the
Origin State.
While this issue does not strictly arise
under the GST law, the shift in the place of
supply significantly impacts the IPS.
Unless there is a compensation mechanism
to the States or to the OEMs with regard to
the impact on the IPS due to GST, the
effect on project viability for some of the
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 34
mega automobile projects would be
severe.
Key Action points
• Evaluate the impact on account of
non-availability of IPS
• Represent to the Government for
appropriate compensation for the
unutilized portion of the incentive
Demonetization (Withdrawal of
currency notes of 500 and 1000
rupee):
Government’s move of stripping legal
tender status of 500 and 1000 rupee
currency notes has lead to decline in sales
of automobile companies as the decision
has adversely affected buyer sentiment and
hit footfalls at showrooms.
Fact-findings:
Mr. Jnaneshwar Sen, Senior VP for
Sales and Marketing, said bookings
have come down by 40% as the
currency crunch is prompting
people to withhold new purchases.
Retailers for Hyundai and Maruti
Suzuki have spoken about massive
squeeze in demand.
Rakesh Srivastava, Senior VP
(Sales and Marketing) at Hyundai,
India has, however, said that there
are serious short-term challenges
due to lower footfalls and
conversions at showrooms.
Pawan Munjal, Chairman of Hero
MotoCorp, had also complained of
a steer drop in footfalls in the first
two days of demonetization
The supply crunch is severe for
components and at least this
quarter will be hit badly. The after
sales market for components is
down by 60-70% in Northern
India.
Some of the auto retailers and the
allied industry are also facing
problems in meeting working
capital requirements.
Key Action Points:
• Companies are paying heed to their
demand and adjusting output and
stock levels.
• Honda Motorcycle and Scooter
India will have ‘No-production
days to strike a balance between
with the market slowdown.
• Component suppliers have already
been briefed about the situation and
many of them have started
adjusting their production
schedules.
• With the New Year set to begin
about a month, dealers are not
willing to be saddled with
inventory of 2016.
• Companies have planned to
increase its production in the new
year as the cash flow gets normal
and interest rates slashed due to
increased supply of money due to
demonetization.
Conclusion
The automobile industry is looking
forward to introduction of GST. However,
there are quite a few concerns in the draft
Model GST law, including some of the
key aspects highlighted above, which need
to be addressed.
The road tax and registration tax needs to
be subsumed in GST.
Shodh-Chetana ISSN : 2454 – 1877 JAN-MAR , 2017 Page 35
The govt. should strike a balance between
environmental safety and economic
growth by-
1. Formulating fiscal and legal framework
-
- to discourage/prohibit the use of
technologies creating a havoc on
environment
- to encourage the development and
use of alternate fuel technologies
- To make manufacturing in the
country competitive
2. Developing infrastructure to accelerate
the growth rate of automobile sector and
other sectors
Bibliography
▪ Media Reports, Press Releases,
▪ Department of Industrial Policy
and Promotion (DIPP),
▪ Automotive Component
Manufacturers Association of India
(ACMA),
▪ Society of Indian Automobile
Manufacturers (SIAM), ion Budget
2015-16, Union Budget 2016-17
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