Abstract

The main idea behind this complete study is to analyse the structure of GST theoretically and then the on ground impact of GST implementation on the state in which the two major market segments had been undertaken for analyse the problem on different aspects related to the pre GST preparations and familiarity about this new tax regime especially among the marginal segment of the market i.e the marginal sellers and buyer coming from unorganized sector and post GST outcomes from these segments. A critical comparison between the organized and unorganized sector on ground of GST implementation. We also taken under consideration the annual changes occurred in the sales and revenue collection by adding the third sector in the study which is the tax officials of state tax revenue department which also helped to know the governmental practices to cope with the issues of the tax payers. To know the issues of the sellers and consumers we used both structured as well as unstructured interviews and questions. On the other side all those issues were discussed and asked by the tax official in an interview . This is a comprehensive analysis on GST implication in the short run which tried to touch every issue and question regarding the GST and therefore the data collected will be used in many fields as required.

KEYWORDS: Market, Marginal segment, Organized sector, Unorganized sector.

CONTENT

SECTION 1

INTRODUCTION-

Chapter 1 : The tax system

Chapter 2 : The Goods & Service TAX

Chapter 3 : Taxation in INDIA :

-Tax structure till 2017

Chapter 4 : Introduction of GST in INDIA :

-Tax structure in INDIA from 2017

-The design of INDIAN GST

-Constitutional scheme of Indirect taxation before GST

-GST rates

-Need for GST

-Objective of GST

- Impact of GST on Indian Economy

SECTION 2

Chapter 1 : Literature Review

Chapter 2 : Research Methodology

Chapter 3 : Objective of Study

Chapter 4 : Study area

SECTION 3

Chapter 1 : Field of study

- Sample size

- Identification of the respondents

Chapter 2 : Research findings from-

- The seller’s/producer’s sector

- The consumer’s sector

- The GST officials

- Suggestion of respondents

- Short term Impact of GST

SECTION 4

Study outline-

-SWOT (strength,weakness,opportunities & threats) analysis of GST

-Conclusion

-Reference

- Interview of senior tax official of the state

- Questionnaires

“GST after one year, A Short Term Analysis Of The Structure and Impact of GST” 2018

SECTION 1:

Chapter 1-THE TAX SYSTEM

A tax (from the Latin taxo) is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures.A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.

Most countries have a tax system in place to pay for public/common/agreed national needs and government functions: some levy a flat percentage rate of taxation on personal annual income, some on a scale based on annual income amounts, and some countries impose almost no taxation at all, or a very low tax rate for a certain area of taxation. Some countries charge a tax both on corporate income and dividends; this is often referred to as double taxation as the individual shareholder(s) receiving this payment from the company will also be levied some tax on that personal income

An Overview

The legal definition, and the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, and fees for utilities provided by local governments. Governments also obtain resources by "creating" money and coins (for example, by printing bills and by minting coins), through voluntary gifts (for example, contributions to public universities and museums), by imposing penalties (such as traffic fines), by borrowing, and also by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector, levied on a basis of predetermined criteria and without reference to specific benefit received.

In modern taxation systems, governments levy taxes in money; but in-kind and corvée(French: is a form of unpaid, unfree labour, which is intermittent in nature and which lasts limited periods of time: typically only a certain number of days' work each year.) taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government

expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as the Ghana Revenue Authority, Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, Her Majesty's Revenue and Customs (HMRC) in the United Kingdom or Federal Tax Service in Russia. When taxes are not fully paid, the state may impose civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) on the non-paying entity or individual.

A Short History

The first known system of taxation was in Ancient Egypt around 3000–2800 BC in the First Dynasty of Egypt of the Old Kingdom of Egypt.The earliest and most widespread form of taxation was the corvée and tithe. The corvée was forced labour provided to the state by peasants too poor to pay other forms of taxation (labour in ancient Egyptian is a synonym for taxes).Records from the time document that the Pharaoh would conduct a biennial tour of the kingdom, collecting tithes from the people. Other records are granary receipts on limestone flakes and papyrus.Early taxation is also described in the Bible. In Genesis, it states "But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children". Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. A share (20%) of the crop was the tax (in this case, a special rather than an ordinary tax, as it was gathered against an expected famine).

In the Persian Empire, a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC;the Persian system of taxation was tailored to each Satrapy (the area ruled by a Satrap or provincial governor). At differing times, there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. It was the responsibility of the Satrap to collect the due amount and to send it to the treasury, after deducting his expenses (the expenses and the power of deciding precisely how and from whom to raise the money in the province, offer maximum opportunity for rich pickings). The quantities demanded from the various provinces gave a vivid picture of their economic potential. For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities; 1,000 silver talents and four months supply of food for the army. India, a province fabled for its gold, was to supply gold dust equal in value to the very large amount of 4,680 silver talents. Egypt was known for the wealth of its crops; it was to be the granary of the Persian Empire (and, later, of the Roman Empire) and was required to provide 120,000 measures of grain in addition to 700 talents of silver.This tax was exclusively levied on Satrapies based on their lands, productive capacity and tribute levels.

The Rosetta Stone, a tax concession issued by Ptolemy V in 196 BC and written in three languages "led to the most famous decipherment in history—the cracking of hieroglyphics".

Islamic rulers imposed jizya (a poll tax on conquered non-Muslims).

Taxation in simple words can be stated as-

The process whereby charges are imposed on individuals or property by the legislative branch of the federal government and by many state governments to raise funds for public purposes.

The theory that underlies taxation is that charges are imposed to support the government in exchange for the general advantages and protection afforded by the government to the taxpayer and his or her property. The existence of government is a necessity that cannot continue without financial means to pay its expenses; therefore, the government has the right to compel all citizens and property within its limits to share its costs. The state and federal governments both have the power to impose taxes upon their citizens.

The Merriam-Webster dictionary defines the word‘tax’ as—a charge usually of money imposed by authority on persons or property for public purposes

Economic Effects Of Taxation

In economic terms, taxation transfers wealth from households or businesses to the government of a nation. Adam Smith writes in The Wealth of Nations that

"…the economic incomes of private people are of three main types: rent, profit and wages. Ordinary taxpayers will ultimately pay their taxes from at least one of these revenue sources. The government may intend that a particular tax should fall exclusively on rent, profit, or wages – and that another tax should fall on all three private income sources jointly. However, many taxes will inevitably fall on resources and persons very different from those intended … Good taxes meet four major criteria. They are (1) proportionate to incomes or abilities to pay (2) certain rather than arbitrary (3) payable at times and in ways convenient to the taxpayers and (4) cheap to administer and collect."

Smith, Adam (2015). The Wealth of Nations: A Translation into Modern English

In Developing Countries

Following Nicolas Kaldor's research, public finance in developing countries is strongly tied to state capacity and financial development. As state capacity develops, states not only increase the level of taxation but also the pattern of taxation. With the increase of larger tax bases and the diminish of the importance of trading tax, while income tax gains more importance.According to Tilly's argument, state capacity evolves as response to the emergence of war. War is an incentive for states to raise tax and strengthen states capacity. Historically, many taxation breakthroughs took place during the wartime. The introduction of income tax in Britain was due to the Napoleonic War in 1798. US first introduce income tax during Civil War.Taxation is constrained by the fiscal and legal capacities of a country.Fiscal and legal capacities also complement each other. A well-designed tax system can minimize efficiency loss and boost economic growth. With better compliance and better support to financial institutions and individual property, the government will be able to collect more tax. Although wealthier countries have higher tax revenue, economic growth does not always translate to higher tax revenue. For example, in India, increases in exemptions leads to the stagnation of income tax revenue at around 0.5% of GDP since 1986.

Chapter 2 -THE GOODS AND SERVICES TAX

Goods and Services Tax - GST

The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services. In effect, GST provides revenue for the government.

The goods and services tax (GST) is an indirect federal sales tax that is applied to the cost of certain goods and services. The business adds the GST to the price of the product and a customer who buys the product pays the sales price plus GST. The GST portion is collected by the business or seller and forwarded to the government. It is also referred to as Value-Added Tax (VAT) in some countries.

INTERNATIONAL PERSPECTIVES ON GST / VAT:

VAT and GST are used inter-changeably as the latter denotes comprehensiveness of VAT by coverage of goods and services. France was the first country to implement VAT, in 1954. Presently, more than 160 countries have implemented GST / VAT in some form or the other. The most popular form of VAT is where taxes paid on inputs are allowed to be adjusted in the liability at the output. The VAT or GST regime in practice varies from one country to another in terms of its technical aspects like ‘definition of supply’, ‘extent of coverage of goods and services’, ‘treatment of exemptions and zero rating’ etc. However, at a broader level, it has one common principle, it is a destination based consumption tax. From economic point of view, VAT is considered to be a superior system over sales tax of taxing consumption because the former is neutral in allocation of resources as it taxes value addition. Besides, there are certain distinct advantages of VAT. It is less cascading making the taxation system transparent and anti-inflationary. From revenue point of view, VAT leads to greater compliance because of creation of transaction trails.

When compared globally, VAT structures are either overly centralized where tax is levied and administered by the Central government (Germany, Switzerland, Austria), or dual GST structure wherein both Centre and States administer tax independently (Canada) or with some co-ordination between the national and sub-national entities (Brazil, Russia). While a centralized structure reduces fiscal autonomy for the States, a decentralized structure enhances compliance burden for the taxpayers. Canada is a federal country with unique model of taxation in which certain provinces have joined federal GST and others have not. Provinces which administer their taxes separately are called ‘non-participating provinces’, whereas provinces which have teamed up with the Federal Government for tax administration are called ‘participating provinces’.

The rate of GST varies across countries. While Malaysia has a lower rate of 6% (Malaysia though scrapped GST in 2018 due to popular uproar against it), Hungary has one of the highest rate of 27%. Australia levies GST at the rate of 10% whereas Canada has multiple rate slabs. The average rate of VAT across the EU is around 19.5%.

GST TAX COLLECTION STRUCTURE

· SINGLE GST STRUCTURE

Most countries with a GST have a single unified GST system, which means that a single tax rate is applied throughout the country. A country with a unified GST platform merges central taxes (e.g. sales tax, excise duty tax, and service tax) with state-level taxes (e.g. entertainment tax, entry tax, transfer tax, sin tax, and luxury tax) and collects them as one single tax. These countries tax virtually everything at a single rate

· Dual GST Structures: Canada

Only a handful such as Canada has a dual GST structure. Compared to an unified GST economy where tax is collected by the federal or central government and then distributed to the states, in a dual system, the federal GST is applied in addition to the state sales tax. In Canada for example, the federal government levies a 5 percent tax and some provinces/states also levy a provincial state tax (PST), which varies from 7 to 10 percent. In this case, a consumer’s receipt will clearly have the GST and PST rate that was applied to his or purchase value.

More recently, the GST and PST have been combined in some provinces into a single tax known as the Harmonized Sales Tax (HST). Prince Edward Island was the first to adopt the HST in 2013, combining its federal and provincial sales taxes to a single tax at 14 percent. Since then, several other provinces have followed suit including New Brunswick, Newfoundland and Labrador, Nova Scotia and Ontario.  

How many country has GST?

Currently, there are 160 countries in total who have implemented VAT/GST in their country. Let’s have a count of these countries based on region:

Chapter 3 - TAXATION IN INDIA

In India this practice began in the 11th century.

We are now going to divide the tax system of India into two periods - Pre GST period and post GST period. Through which we tried to show the significant changes that occurred in Indian tax system after adding GST in the indirect taxation system in the country.

INTRODUCTION: TAX STRUCTURE IN INDIA( TILL 2017)

It is a three-tier federal structure. The central government, state governments, and local municipal bodies make up this structure. Article 256 of the constitution states that “No tax shall be levied or collected except by the authority of law”. Hence, each and every tax that is collected needs to backed by an accompanying law.

Interestingly, the tax system in India traces its origin to the prehistoric texts such as Arthashastra and Manusmriti. As proposed by these manuscripts, the taxes paid by farmers and artisans in that era would be in the form of agricultural produce, silver or gold. Based on these texts, the foundation of the modern tax system in India was conceptualised by the Sir James Wilson during the British rule in India in the year, 1860. However, post-independence the newly-established Indian Government then soldered the system to propel the economic development of the country. After this period, the Indian tax structure has been subject to a host of changes.

Types Of Taxes in India:

The tax system in India allows for two types of taxes—Direct and Indirect Tax.The tax system in India for long was a complex one considering the length and breadth of India. Post GST implementation, which is one of the biggest tax reforms in India, the process has become smoother. It serves as an all-inclusive indirect tax which has helped in eradicating the cascading effect of tax as a whole. It is simpler in nature and has led to upgraded the productivity of logistics.

Direct Tax:

It is levied directly on individuals and corporate entities. This tax cannot be transferred or borne by anybody else. Examples of direct tax include income tax, wealth tax, gift tax, capital gains tax.

Income tax is the most popular tax within this section. Levied on individuals on the income earned with different tax slabs for income levels. The term ‘individuals’ includes individuals, Hindu Undivided Family (HUF), Company, firm, Co-operative Societies, Trusts.

Indirect Tax:

These are taxes which are indirectly levied on the public through goods and services. The sellers of the goods and services collect the tax which is then collected by the government bodies.

· Value Added Tax (VAT)– A sales tax levied on goods sold in the state. The rate depends on the government.

· Octroi Tax – Levied on goods which move from one state to another. The rates depend on the state governments.

· Service Tax – Government levies the tax on service providers.

· Customs Duty – It is a tax levied on anything which is imported into India from a foreign nation.

Tax Collection Bodies:

The three bodies which collect the taxes in India have clearly defined the rules on what type of taxes they are permitted to collect.

· The Central Government: income tax, custom duties, central excise duty.

· The State Governments: tax on agricultural income, professional tax, value- added tax, state excise duty, stamp duty.

· Local Bodies: property tax, water tax, other taxes on drainage and small services.

HISTORICAL EVOLUTION OF INDIRECT TAXATION IN POST-INDEPENDENCE INDIA TILL GST:

· In post-Independence period, central excise duty was levied on a few commodities which were in the nature of raw materials and intermediate inputs, and consumer goods were outside the net by and large. The first set of reform was suggested by the Taxation Enquiry Commission (1953-54) under the chairmanship of Dr. John Matthai. The Commission recommended that sales tax should be used specifically by the States as a source of revenue with Union governments' intervention allowed generally only in case of inter-State sales. It also recommended levy of a tax on inter-State sales subject to a ceiling of 1%, which the States would administer and also retain the revenue.

· The power to levy tax on sale and purchase of goods in the course of inter-State trade and commerce was assigned to the Union by the Constitution (Sixth Amendment) Act, 1956. By mid-1970s, central excise duty was extended to most manufactured goods. Central excise duty was levied on unit, called specific duty, and on value, called ad valorem duty. The number of rates was too many with no offsetting of taxes paid on inputs leading to significant cascading and classification disputes.

· The Indirect Taxation Enquiry Committee constituted in 1976 under Shri L K Jha recommended, inter alia, converting specific rates into ad valorem rates, rate consolidation and input tax credit mechanism of value added tax at manufacturing level (MANVAT). In 1986, the recommendation of the Jha Committee on moving on to value added tax in manufacturing was partially implemented. This was called modified value added tax (MODVAT). In principle,duty was payable on value addition but in the beginning it was limited to select inputs and manufactured goods only with one-to-one correlation between input and manufactured goods for eligibility to take input tax credit. The comprehensive coverage of MODVAT was achieved by 1996-97.

· The next wave of reform in indirect tax sphere came with the New Economic Policy of 1991. The Tax Reforms Committee under the chairmanship of Prof. Raja J Chelliah was appointed in 1991. This Committee recommended broadening of the tax base by taxing services and pruning exemptions, consolidation and lowering of rates, extension of MODVAT on all inputs including capital goods. It suggested that reform of tax structure must have to be accompanied by a reform of tax administration, if complete benefits were to be derived from the tax reforms. Many of the recommendations of the Chelliah Committee were implemented. In 1999-2000, tax rates were merged in three rates, with additional rates on a few luxury goods. In 2000-01, three rates were merged into one rate called Central Value Added Tax (CENVAT). A few commodities were subjected to special excise duty.

· Taxation of services by the Union was introduced in 1994 bringing in its ambit only three services, namely general insurance, telecommunication and stock broking. Gradually, more and more services were brought into the fold. Over the next decade, more and more services were brought under the tax net. In 1994, tax rate on three services was 5% which gradually increased and in 2017 it was 15% (including cess). Before 2012, services were taxed under a ‘positive list’ approach. This approach was prone to ‘tax avoidance’. In 2012 budget, negative list approach was adopted where 17 services were out of taxation net and all other services were subject to tax. In 2004, the input tax credit scheme for CENVAT and Service Tax was merged to permit cross utilization of credits across these taxes.

· Before state level VAT was introduced by States in the first half of the first decade of this century, sales tax was levied in States since independence. Sales tax was plagued by some serious flaws. It was levied by States in an uncoordinated manner the consequences of which were different rates of sales tax on different commodities in different States. Rates of sales tax were more than ten in some States and these varied for the same commodity in different States. Inter-state sales were subjected to levy of Central Sales Tax. As this tax was appropriated by the exporting State credit was not allowed by the dealer in the importing State. This resulted into exportation of tax from richer to poorer states and also cascading of taxes. Interestingly, States had power of taxation over services from the very beginning. States levied tax on advertisements, luxuries, entertainments, amusements, betting and gambling.

· A report, titled "Reform of Domestic Trade Taxes in India", on reforming indirect taxes, especially State sales tax, by National Institute of Public Finance and Policy under the leadership of Dr. Amaresh Bagchi, was prepared in 1994. This Report prepared the ground for implementation of VAT in States. Some of the key recommendations were; replacing sales tax by VAT by moving over to a multistage system of taxation; allowing input tax credits for all inputs, including on machinery and equipment; harmonization and rationalization of tax rates across States with two or three rates within specified bands; pruning of exemptions and concessions except for a basic threshold limit and items like unprocessed food; zero rating of exports, inter-State sales and consignment transfers to registered dealers; taxing inter-State sales to non-registered persons as local sales; modernization of tax administration, computerization of operations and simplification of forms and procedures.

SECTION 1 : Taxation in India

· The first preliminary discussion on transition from sales tax regime to VAT regime took place in a meeting of Chief Ministers convened by the Union Finance Minister in 1995. A standing Committee of State Finance Ministers was constituted, as a result of meeting of the Union Finance Ministers and Chief Ministers in November, 1999, to deliberate on the design of VAT which was later made the Empowered Committee of State Finance Ministers (EC). Haryana was the first State to implement VAT, in 2003. In 2005, VAT was implemented in most of the states. Uttar Pradesh was the last State to implement VAT, from 1st January, 2008.

“GST after one year, A Short Term Analysis Of The Structure and Impact of GST”

Chapter 4 - INTRODUCTION OF GST IN INDIA

The Kelkar Task Force on Fiscal Responsibility and Budget Management (FRBM) recommended in 2005 introduction of a comprehensive tax on all goods and service replacing Central level VAT and State level VATs. It recommended replacing all indirect taxes except the customs duty with value added tax on all goods and services with complete set off in all stages of making of a product.

An announcement was made by the then Union Finance Minister in Budget (2007-08) to the effect that GST would be introduced with effect from April 1, 2010 and that the EC, on his request, would work with the Central Government to prepare a road map for introduction of GST in India. After this announcement, the EC decided to set up a Joint Working Group in May 10, 2007, with the then Adviser to the Union Finance Minister and Member-Secretary of the Empowered Committee as its Co-conveners and four Joint Secretaries of the Department of Revenue of Union Finance Ministry and all Finance Secretaries of the States as its members. This Joint Working Group got itself divided into three Sub-Groups and had several rounds of internal discussions as well as interaction with experts and representatives of Chambers of Commerce & Industry. On the basis of these discussions and interaction, the Sub-Groups submitted their reports which were then integrated and consolidated into the report of Joint Working Group (November 19, 2007).

This report was discussed in detail in the meeting of the EC on November 28, 2007, and the States were also requested to communicate their observations on the report in writing. On the basis of these discussions in the EC and the written observations, certain modifications were considered necessary and were discussed with the Co-conveners and the representatives of the Department of Revenue of Union Finance Ministry. With the modifications duly made, a final version of the views of EC on the model and road map for the GST was prepared (April 30, 2008). These views of EC were then sent to the Government of India, and the comments of Government of India were received on December 12, 2008. These comments were duly considered by the EC (December 16, 2008), and it was decided that a Committee of Principal Secretaries/Secretaries of Finance/Taxation and Commissioners of Trade Taxes of the States would be set up to consider these comments, and submit their views. These views were submitted and were accepted in principle by the EC (January 21, 2009). Based on discussions within the EC and between the EC and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November, 2009. This spelled out the features of the proposed GST and has formed the basis for discussion between the Centre and the States.

ROLE OF CBIC:

CBIC is playing an active role in the drafting of GST law and procedures, particularly the CGST and IGST law, which will be exclusive domain of the Centre. This apart, the CBIC has prepared itself for meeting the implementation challenges, which are quite formidable. The number of taxpayers has gone up significantly. The existing IT infrastructure of CBIC has been suitably scaled up to handle such large volumes of data. Based on the legal provisions and procedure for GST, the content of work-flow software such as ACES (Automated Central Excise & Service Tax) would require re-engineering. The name of IT project of CBIC under GST is ‘SAKSHAM’ involving a total project value of Rs. 2,256 crores.

Augmentation of human resources would be necessary to handle large taxpayers’ base in GST scattered across the length and breadth of the country. Capacity building, particularly in the field of Accountancy and Information Technology for the departmental officers has to be taken up in a big way. A massive four-tier training programme has been conducted under the leadership of NACIN. This training project is aimed at imparting training on GST law and procedures to more than 60,000 officers of CBIC and Commercial Tax officers of State Governments.

CBIC would be responsible for administration of the CGST and IGST law. In addition, excise duty regime would continue to be administered by the CBIC for levy and collection of central excise duty on five specified petroleum products as well as on tobacco products. CBIC would also continue to handle the work relating to levy and collection of customs duties.

Director General of Anti-profiteering, CBIC has been mandated to conduct detailed enquiry on anti-profiteering cases and should give his recommendation for consideration of the National Anti-profiteering Authority.

CBIC has been instrumental in hand holding the implementation of GST. It had set up the Feedback and Action Room which monitored the GST implementation challenges faced by the taxpayer and act as an active interface between the taxpayer and the Government.

TAX STRUCTURE IN INDIA( FROM 2017)

INTRODUCTION:

Whether it was uniformity of taxation and consequent free interior trade or possession of ‘the jewel in the crown’ at the root of prosperity of Britain is debatable, nonetheless the words of father of modern economics on the benefits of uniformity of system of taxation cannot be taken too lightly. Before implementation of Goods and Service Tax (GST), Indian taxation system was a farrago of central, state and local area levies. By subsuming more than a score of taxes under GST, road to a harmonized system of indirect tax has been paved making India an economic union.

What is a 'Value-Added Tax - VAT'?

A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.

Value-added taxation is based on a taxpayer's consumption rather than his income. In contrast to a progressive income tax, which levies greater taxes on higher-level earners, VAT applies equally to every purchase.

Types of Indirect Taxes in India

The taxes collected by the Indian Govt can broadly be defined into 2 categories – Direct and Indirect. The Direct Taxes are basically the taxes which are directly levied on the Income of an Individual. Some examples of Direct Taxes are Income Tax, Surcharge, Gift Tax etc. The Direct Taxes in India are implemented by Central Board of Direct Taxes (CBDT).

Indirect Taxes are basically the taxes which are not directly levied on the Income of an Individual but is indirectly levied on the Expense incurred by the Individual. This tax is basically levied on the seller of goods or the provider of service but in most cases, he passes it on to the end consumer and therefore, it is the end consumer who bears this in the form of an indirect tax.

In other words, Indirect Tax is levied on the person who is making the sale but he can recover the same from the buyer. In some cases, the Indirect Tax portion is specifically mentioned in the invoice whereas in other cases – the portion of indirect tax is automatically included in the transaction value and not disclosed separately.

An Indirect Tax increases the price of the product or the service and is levied at the same rate to everyone irrespective of the income of the person whereas the rate of income tax varies depending on the income of the Individual.

Some examples of these indirect taxes are Service Tax, Excise Duty, Customs Duty, VAT, Entertainment Tax, Luxury Tax etc.

GST: Merging of various different of Indirect Taxes

In India, there were many different Indirect Taxes which was applicable. For eg: Service Tax is levied on Services, Excise Duty is levied on Manufacturing, Customs Duty is levied on Import of Goods etc.

As there were many different types of indirect taxes levied on the expense incurred by a buyer, the govt now merge all these forms of indirect taxes and levy a common indirect tax by the name of GST i.e. Goods and Service Tax. Merging of all these taxes will reduce the hassles of compliances associated with all these taxes and improve the tax governance in India.

THE DESIGN OF INDIAN GST:

Concurrent dual model of GST: India has adopted dual GST model because of its unique federal nature. Under this model, tax is levied concurrently by the Centre as well as the States on a common base, i.e. supply of goods or services or both. GST to be levied by the Centre would be called Central GST (Central tax / CGST) and that to be levied by the States would be called State GST (State Tax / SGST). State GST (State Tax / SGST) would be called UTGST (Union territory tax) in Union Territories without legislature. CGST & SGST / UTGST shall be levied on all taxable intra-State supplies.

The IGST Model: Inter-State supply of goods or services shall be subjected to integrated GST (Integrated tax / IGST). The IGST model is a unique contribution of India in the field of VAT. The IGST Model envisages that Centre would levy IGST (Integrated Goods and Service Tax) which would be CGST plus SGST on all inter-State supply of goods or services or both. The inter-State supplier will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The person based in the destination State will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The major advantages of IGST Model are:

(i) Maintenance of uninterrupted ITC chain on inter-State transactions.

(ii) No upfront payment of tax or substantial blockage of funds for the inter-State supplier or recipient.

(iii) No refund claim in exporting State, as ITC is used up while paying the tax.

(iv) Self-monitoring model.

(v) Model takes ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.

Tax Rates: Owing to unique Indian socio-economic milieu, four rates namely 5%, 12%, 18% and 28% have been adopted. Besides, some goods and services are exempt also. Rate for precious metals is an exception to ‘four-tax slab-rule’ and the same has been fixed at 3%. In addition, unworked diamonds, precious stones, etc. attracts a rate of 0.25%. A cess over the peak rate of 28% on certain specified luxury and demerit goods, like tobacco and tobacco products, pan masala, aerated water, motor vehicles is imposed to compensate States for any revenue loss on account of implementation of GST. The list of goods and services in case of which reverse charge would be applicable has also been notified.

Compensation to States: The Goods and Services Tax (Compensation to States) Act, 2017 provides for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax. Compensation will be provided to a State for a period of five years from the date on which the State brings its SGST Act into force. For the purpose of calculating the compensation amount in any financial year, year 2015-16 will be assumed to be the base year, for calculating the revenue to be protected. The growth rate of revenue for a State during the five-year period is assumed be 14% per annum. The base year tax revenue consists of the states’ tax revenues from: (i) state Value Added Tax (VAT), (ii) central sales tax, (iii) entry tax, octroi, local body tax, (iv) taxes on luxuries, (v) taxes on advertisements, etc. However, any revenue among these taxes arising related to supply of alcohol for human consumption, and five specified petroleum products, will not be accounted as part of the base year revenue. A GST Compensation Cess is levied on the supply of certain goods and services, as recommended by the GST Council to finance the compensation cess.

E-Way Bill System: The introduction of e-way (electronic way) bill is a monumental shift from the earlier “Departmental Policing Model” to a “Self-Declaration Model”. It envisages one e-way bill for movement of the goods throughout the country, thereby ensuring a hassle free movement for transporters throughout the country. The e-way bill system has been introduced nation-wide for all inter-State movement of goods with effect from 1st April, 2018. As regards intra-State supplies, option was given to States to choose any date on or before 3rd June, 2018. All States have notified e-way bill rules for intra-State supplies last being NCT of Delhi where it was introduced w.e.f. 16th June, 2018.

Anti-Profiteering Mechanism: Implementation of GST in many countries was coupled with increase in inflation and the prices of the commodities. This happened in spite of the availability of the tax credit. This was happening because the supplier was not passing on the benefit to the consumer and thereby indulging in illegal profiteering. Any reduction in rate of tax or the benefit of increased input tax credit should have been passed on to the recipient by way of commensurate reduction in prices.

National Anti-profiteering Authority (NAPA) has been constituted under GST by the Central Government to examine the complaints of non-passing the benefit of reduced tax incidence. The Authority shall cease to exist after the expiry of two years from the date on which the Chairman enters upon his office unless the Council recommends otherwise.

The Authority may determine whether any reduction in the rate of tax or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices. It can order reduction in prices, imposition of penalty, cancellation of registration and any other decision as may deem fit, after inquiry into the case.

Concept of Supply: GST would be applicable on supply of goods or services as against the present concept of tax on manufacture of goods or on sale of goods or on provision of services. It includes all sorts of activities like manufacture, sale, barter, exchange, transfer etc. It also includes supplies made without consideration when such supplies are made in certain specified situations.

Threshold Exemption: A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States (except J&K) as specified in article 279A of the Constitution) would be exempt from GST. The GST Act has been amended to raise threshold exemption limit in case of six more special category States. The amendment shall be effective from a date to be notified in the future. The benefit of threshold exemption is not available in inter-State supplies of goods.

Composition Scheme: An optional composition scheme (i.e. to pay tax at a flat rate on turnover without credits) is available to small taxpayers (including to manufacturers other than specified category of manufacturers and service providers) having an annual turnover of up to Rs. 1 crore (Rs. 75 lakh for special category States (except J&K and Uttarakhand) enumerated in article 279A of the Constitution). This limit has been raised to Rs. 1.5 crore after necessary amendments in the GST Acts. The amendment shall be effective from a date to be notified in the future.

Zero rated Supplies: Export of goods and services are zero rated. Supplies to SEZs developers and SEZ units are also zero-rated. The benefit of zero rating can be taken either with payment of integrated tax, or without payment of integrated tax under bond or Letter of Undertaking.

Cross-utilization of ITC: IGST credit can be used for payment of all taxes. CGST credit can be used only for paying CGST or IGST. SGST credit can be used only for paying SGST or IGST.

The credit would be permitted to be utilized in the following manner:

(a) ITC of CGST allowed for payment of CGST & IGST in that order;

(b) ITC of SGST allowed for payment of SGST & IGST in that order;

(c) ITC of UTGST allowed for payment of UTGST & IGST in that order;

(d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that order.

ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.

Settlement of Government Accounts: Accounts would be settled periodically between the Centre and the State to ensure that the credit of SGST used for payment of IGST is transferred by the originating State to the Centre. Similarly, the IGST used for payment of SGST would be transferred by Centre to the destination State. Further the SGST portion of IGST collected on B2C supplies would also be transferred by Centre to the destination State. The transfer of funds would be carried out on the basis of information contained in the returns filed by the taxpayers.

Modes of Payment: Various modes of payment of tax available to the taxpayer including internet banking, debit/ credit card and National Electronic Funds Transfer (NEFT) / Real Time Gross Settlement (RTGS).

Tax Deduction at Source: Obligation on certain persons including government departments, local authorities and government agencies, who are recipients of supply, to deduct tax at the rate of 1% from the payment made or credited to the supplier where total value of supply, under a contract, exceeds two lakh and fifty thousand rupees. The provision for TDS has not been operationalized yet.

Refunds: Refund of tax to be sought by taxpayer or by any other person who has borne the incidence of tax within two years from the relevant date. Refund of unutilized ITC also available in zero rated supplies and inverted tax structure.

Tax Collection at Source: Obligation on electronic commerce operators to collect ‘tax at source’, at such rate not exceeding two per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals. The provision for TCS has not been operationalized yet.

Self-assessment: Self-assessment of the taxes payable by the registered person shall be the norm. Audit of registered persons shall be conducted on selective basis. Limitation period for raising demand is three (3) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment of tax or erroneous refund and its adjudication in normal cases. Limitation period for raising demand is five (5) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment of tax or erroneous refund and its adjudication in case of fraud, suppression or willful mis-statement.

Recovery of Arrears: Arrears of tax to be recovered using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person.

Appellate Tribunal: Goods and Services Tax Appellate Tribunal would be constituted by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority. States would adopt the provisions relating to Tribunal in respective SGST Act.

Advance Ruling Authority: Advance Ruling Authority would be constituted by States in order to enable the taxpayer to seek a binding clarity on taxation matters from the department. Centre would adopt such authority under CGST Act.

Transitional Provisions: Elaborate transitional provisions have been provided for smooth transition of existing taxpayers to GST regime.

Subsuming of taxes, duties etc.: Among the taxes and duties levied and collected by the Union, Central Excise duty, Duties of Excise (Medicinal and Toilet Preparations), Additional Duties of Excise (Goods of Special Importance), Additional Duties of Excise (Textiles and Textile Products), Additional Duties of Customs (commonly known as CVD), Special Additional Duty of Customs (SAD), Service Tax and cesses and surcharges insofar as they related to supply of goods or services were subsumed. As far as taxes levied and collected by States are concerned, State VAT, Central Sales Tax, Purchase Tax, Luxury Tax, Entry Tax, Entertainment Tax (except those levied by the local bodies), Taxes on advertisements, Taxes on lotteries, betting and gambling, cesses and surcharges insofar as they related to supply of goods or services were subsumed.

CONSTITUTIONAL SCHEME OF INDIRECT TAXATION IN INDIA BEFORE GST :

· Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. As per Article 246 of the Constitution, Parliament has exclusive powers to make laws in respect of matters given in Union List (List I of the Seventh Schedule) and State Government has the exclusive jurisdiction to legislate on the matters containing in State List (List II of the Seventh Schedule). In respect of the matters contained in Concurrent List (List BI of the Seventh Schedule), both the Central Government and State Governments have concurrent powers to legislate.

· Before advent of GST, the most important sources of indirect tax revenue for the Union were customs duty (entry 83 of Union List), central excise duty (entry 84 of Union List), and service tax (entry 97 of Union List). Although entry 92C was inserted in the Union List of the Seventh Schedule of the Constitution by the Constitution (Eighty-eighth Amendment) Act, 2003 for levy of taxes on services, it was not notified. So tax on services were continued to be levied under the residual entry, i.e. entry 97, of the Union List till GST came into force. The Union also levied tax called Central Sales Tax (CST) on inter-State sale and purchase of goods and on inter-State consignments of goods by virtue of entry 92A and 92B respectively. CST however is assigned to the State of origin, as per Central Sales Tax Act, 1956 made under Article 269 of the Constitution.

· On the State side, the most important sources of tax revenue were tax on sale and purchase (entry 54 of the State List), excise duty on alcoholic liquors, opium and narcotics (entry 51 of the State List), Taxes on luxuries, entertainments, amusements, betting and gambling (entry 62 of the State List), octroi or entry tax (entry 52 of the State List) and electricity tax (entry 53 of the State List). CST was also an important source of revenue though the same was levied by the Union.

GST RATES

Tax Rates

Products

5%

Household necessities such as edible oil, sugar, spices, tea, and coffee (except instant) are included. Coal , Mishti/Mithai (Indian Sweets) and Life-saving drugs are also covered under this GST slab

12%

This includes computers and processed food

18%

Hair oil, toothpaste and soaps, capital goods and industrialintermediaries are covered in this slab

28%

Luxury items such as small cars , consumer durables like AC and Refrigerators, premium cars, cigarettes and aerated drinks , High-end motorcycles  are included here.

GST Tax Rates on some common items:

Though edible items like sugar, tea and coffee are included in the 5% slab, milk does not attract any tax under the new GST regime. The idea behind this is to ensure that basic food items are available for everyone but instant food is kept out of this category.

· Basic household items like toothpaste and hair oil, which currently attract 28% tax, will be taxed at 18% only.

· Sweets will also be taxable at 5%.

· Tax rates on coal has also been reduced from 11.69% to just 5% in order to relieve the pressure on power industries.

· GST also gives a major push to domestic industries as they will be able to procure seamless input credit for capital goods. Make in India campaign is set to flourish after this reform.

A) GST Rates on Goods

The government has proposed a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18% and 28%. After the recent revision of GST rates, these are the commodities that fall under the four tax slabs along with those that do not attract any tax. Please note that only those commodities are included in this list whose rates have been revised in various council meetings.

Let us have a look at various products and the tax slab in which they fall into :

No Tax

Apart from other items that enjoy zero GST tax rate, these are the commodities added to the list after 11th June rate revision –

· Hulled cereal grains like barley, wheat, oat, rye, etc.

· Bones and horn-cores unworked and waste of these products.

· Palmyra jaggery

· All types of salt

· Dicalcium Phosphate (DCP) of animal feed grade conforming to IS specification No. 5470 :2002

· Kajal [other than kajal pencil sticks]

· Picture books, colouring books or drawing books for children

· Human hair – dressed, thinned, bleached or otherwise worked

· Sanitary Napkins

·  Unit container-packed frozen branded vegetables (uncooked/steamed)

· Vegetables preserved using various techniques including brine and other preservatives that are unsuitable for immediate human consumption.

·   Music Books/manuscripts

5% Tax Slab

Given below are the items that have been added to the 5% GST tax rate slab along with the other existing items-

· Cashew nuts/cashew nuts in shell

· Ice and snow

· Bio gas

· Insulin

· Aggarbatti

· Kites

· Coir mats, matting and floor covering

· Pawan Chakki that is Wind-based Atta Chakki

· Postage or revenue stamps, stamp-postmarks, first-day covers, etc.

· Numismatic coins

· Braille paper, braille typewriters, braille watches, hearing aids and other appliances to compensate for a defect or disability

· Fly-ash blocks

· Walking sticks

· Natural cork

· Marble rubble

· Accessories/parts for carriages designed for differently-abled individuals

12% Tax Slab

After the GST council meeting on 11th June, the following items were added to the 12% GST rates category-

· Preparations of vegetables, fruits, nuts or other parts of plants, including pickle, murabba, chutney, jam, jelly

· Ketchups, sauces and mustard sauce but excluding curry paste, mayonnaise and salad dressings, mixed condiments and mixed dressings

· Bari made of pulses including mungodi

· Menthol and menthol crystals, peppermint, fractionated/de-terpenated mentha oil, dementholised oil, Mentha piperita oil and spearmint oil

· All diagnostic kits and reagents

· Plastic beads

· Exercise books and note books

· Glasses for corrective spectacles and flint buttons

· Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs

· Fixed Speed Diesel Engines

· Two-way radio (Walkie talkie) used by defence, police and paramilitary forces etc.

· Intraocular lens

· Corrective spectacles

· Playing cards, chess board, carom board and other board games, like ludo, etc.

· Debagged/roughly squared cork

· Items manufactured from natural cork

· Agglomerated cork

18% Tax Slab

The items mentioned below have been added to the 18% GST tax rate slab among the other existing items-

· Kajal pencil sticks

· Dental wax

· Plastic Tarpaulin

· School satchels and bags other than of leather or composition leather; toilet cases, Hand bags and shopping bags of artificial plastic material, cotton or jute; Handbags of other materials excluding wicker work or basket work

· Headgear and parts thereof

· Precast Concrete Pipes

· Salt Glazed Stone Ware Pipes

· Aluminium foil

· All goods, including hooks and eyes

· Rear Tractor tyres and rear tractor tyre tubes

· Rear Tractor wheel rim, tractor centre housing, tractor housing transmission, tractor support front axle

· Weighing Machinery other than electric or electronic weighing machinery

· Printers other than multifunction printers

· Ball bearing, Roller Bearings, Parts & related accessories

· Transformers Industrial Electronics

· Electrical Transformer

· Static Converters (UPS)

· Recorders/Video recorders/digital cameras

· CCTV

· Set top Box for TV

· Computer monitors not exceeding 17 inches

· Electrical Filaments or discharge lamps

· Winding Wires, Coaxial cables and Optical Fiber

· Perforating or stapling machines (staplers), pencil sharpening machines

· Baby carriages

· Instruments for measuring length, for use in the hand (for example, measuring rods and tapes, micrometers, callipers)

· Bamboo furniture

· Swimming pools and paddling pools

· Televisions/Monitors (upto 32 inches)

·  Power banks powered by Lithium-ion batteries

· Sports goods, games consoles and related items with HS code 9504

·  All items with HS code 8483 including gear boxes, transmission cranks and pulleys

· Used or retreaded pneumatic rubber tires

28% Tax Slab

The council meeting was held to ‘reduce’ the tax rates on certain items based on customer preferences. Hence, no additional items were added to the highest GST rates slab of 28%.

*The GST rates for various products are subject to change from time to time without prior information.

B) GST Rates on Services

Government has also impose GST on Services with the same 4-tier tax structure as of goods. GST rates on services comprising of 5%,  12%, 18% and 28% comes with various pros and cons for the consumers. However, government has exempted healthcare and educational services from the purview of the GST.

The Goods and Services Tax council has passed the rate slabs at NIL, 5%, 12%, 18%, 28%. Some of the services categorized under different slabs are mentioned below :

Nil GST

· Chargeable services offered on Basic Savings Bank Deposit (BSBD) account opened under the PMJDY (Pradhan Mantri Jan Dhan Yojana)

5% Tax Slab

· Railways-Transportation of goods, passengers

· Goods transported in a vessel from outside India

· Renting a motor cab without fuel cost

· Transport services in AC contract/stage or radio taxi

· Transport by air (scheduled)/air travel for purpose of pilgrimage via chartered/non-scheduled flights

· Tour operator services

· Leasing of aircrafts

· Print media ad space

· Working for printing of newspapers

12% Tax Slab

· Rail transportation of goods in containers from a third party other than Indian Railways

· Air travel excluding economy

· Food /drinks at restaurants without AC/heating or liquor license

· Renting of accommodation for more than Rs.1000 and less than Rs.2500 per day

· Chit fund services by foremen

· Construction of building for the purpose of sale

· IP rights on a temporary basis

· Movie Tickets less than or equal to Rs. 100

18% Tax Slab

· Food/drinks at restaurants with liquor license

· Food /drinks at restaurants with AC/heating

· Outdoor catering

· Renting for accommodation for more than Rs.2500 but less than Rs.5000 per day

· Supply of food, shamiyana, and party arrangement

· Circus, Indian classical, folk, theatre, drama

· Supply of works contract

· Movie Tickets over Rs. 100

28% Tax Slab

· Entertainment events-amusement facility, water parks, theme parks, joy rides, merry-go-round, race course, go-carting, casinos, ballet, sporting events like IPL

· Race club services

· Gambling

· Food/drinks at AC 5-star hotels

· Accommodation in 5-star hotels or above

GST on Loans and Advances

Earlier Service Tax was levied on Loans which has now been replaced by GST which would now be levied on loans. The rate of Service Tax was 15% whereas the rate of GST is 18%. A lot of people are of the opinion that the effective cost of having a loan would increase as the rate of GST is 3% higher than the rate of Service Tax. Several people are of the opinion that their EMI’s would increase as the rate has been increased by 3%. However, this is not the case as GST is not levied on repayment of loan or on payment of Interest on Loan.

GST is only levied on the processing charges and any other charges paid to the bank excluding the principal repayment and interest payment. These other charges include the Loan Processing Fees, Loan Prepayment Charges and other charges, if any. As a major chunk of the loan repayment comprises of principal repayment and interest payment, the impact of GST on Loans would be very negligible. The impact of GST on Home Loans and Personal Loans has been explained below for a much better understanding of the impact.

Mentioned below are the important loans and their GST rates:

(a) Personal Loan- 18%

(b) Home Loans- 18%

(c) Car Loan– 18%

Upcoming products in GST Rates SlabThe Government is going on with some new tactics to bring in some of the products under GST system. As hinted by Finance Minister, Arun Jaitley, there could be an inclusion of products under GST with the reduction of GST rates on some products.  Major products which can come under GST rates slab includes :Petroleum products- Petrol and Diesel; Land; Electricity & Others.

“GST after one year, A Short Term Analysis Of The Structure and Impact of GST”

NEED FOR GST IN INDIA:

The introduction of CENVAT removed to a great extent cascading burden by expanding the coverage of credit for all inputs, including capital goods. CENVAT scheme later also allowed credit of services and the basket of inputs, capital goods and input services could be used for payment of both central excise duty and service tax. Similarly, the introduction of VAT in the States has removed the cascading effect by giving set-off for tax paid on inputs as well as tax paid on previous purchases and has again been an improvement over the previous sales tax regime.

But both the CENVAT and the State VAT have certain incompleteness. The incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. Similarly, in the State-level VAT, CENVAT load on the goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved. Moreover, there are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which have still not been subsumed in the VAT. Further, there has also not been any integration of VAT on goods with tax on services at the State level with removal of cascading effect of service tax.

CST was another source of distortion in terms of its cascading nature. It was also against one of the basic principles of consumption taxes that tax should accrue to the jurisdiction where consumption takes place. Despite remarkable harmonization in VAT regimes under the auspices of the EC, the national market was fragmented with too many obstacles in free movement of goods necessitated by procedural requirement under VAT and CST.

In the constitutional scheme, taxation powers on goods was with Central Government but it was limited upto the stage of manufacture and production while States have powers to tax sale and purchase of goods. Centre had powers to tax services and States also had powers to tax certain services specified in clause (29A) of Article 366 of the Constitution. This sort of division of taxing powers created a grey zone which led to legal disputes. Determination of what constitutes a goods or service is difficult because in modern complex system of production, a product is normally a mixture of goods and services.

As can be seen from the previous paragraphs, India moved towards value added taxation both at Central and State level, and this process was complete by 2005. Integration of Central VAT and State VAT therefore is nothing but an inevitable consequence of the reform process. The Constitution of India envisages a federal nature of power bestowed upon both Union and States in the Constitution itself. As a natural corollary of this, any unification of the taxation system required a dual GST, levied and collected both by the Union and the States.

Objectives of GST 2017

Introduction of an unified Goods and Services Tax (GST) to replace the existing multiple tax structures of Central and State Taxes is not only desirable but imperative in the emerging economic environment. Increasingly, services are used or consumed in production and distribution of goods and vice-versa. Separate taxation of goods and services often requires splitting of transactions into value of goods and services for taxation, which leads to greater complexities, administration and compliances costs. 

Integration of various central and state taxes into a GST system would make it possible to give full credit for inputs tax collected. GST being a destination – based consumption tax based on VAT principle, would also greatly help in removing economic distortions caused by present complex tax structure and will help in development of common national market. This is the essence of GST, and hence GST is not only simply VAT plus Service Tax but an improvement over the previous system of VAT and disjointed service tax. The introduction of GST along with prudent accounting policies, transparency and supported by a robust electronic controls will bring down the peak rates of taxation and enhance revenue growth. In simple words, introduction of Value Added Tax [VAT] at the Central and the State level has been considered to be a major step – an important breakthrough – in the sphere of indirect tax reforms in India. If the VAT is a major improvement over the sales tax system, then the Goods and Services Tax [GST] will indeed be further significant improvement – the next logical step – towards a comprehensive indirect tax reforms in the country. 

It can be said that the various issues may it be contemporary or emerging with time, which present system of Indirect Taxes in India suffering with. To overcome those issues and making Indian economy more vibrant and competitive, we need a change through new GST regime. 

The objective of the new taxation regime in short as under:

a. No cascading of taxes b. Reduced compliance costc. Seamless flow of creditd. Less wastage of time and effort to complye. Few number of taxesf. Transparent and corruption freeg. Supportive to compete at Domestic and International Marketh. Buoyancy in tax collection both for Central and State/UTi. Tax impact on inflation should be minimal.

Advantages of GST

i. Elimination of multiple taxes

ii. Elimination of cascading effect

iii. It will re-distribute the burden of taxation equitably between manufacturing and services.

iv. Speeds up economic union of India.

v. Better compliance and revenue buoyancy.

vi. Tax incidence for consumers may fall.

vii. Lower transaction cost for final consumers.

viii. It acquires a very simple and transparent character.

ix. Uniformity in tax regime.

x. Efficiency in tax administration.

xi. Increased tax collections due to wide coverage of goods and services.

xii. The increasing proximity of our tax system to the global tax system.

xiii. It may boost our economy and enable us to compete at the global front.

xiv. It will certainly reduce the tax burden for consumers.

xv. It will reduce prices of manufacturing goods, attract higher investment.

xvi. Creates employment due to its rationalization and simplification of taxes.

xvii. It will lower the tax rate by broadening the tax base.

xviii. It will foster a common market across the country.

xix. It will promote exports.

xx. It will spur growth.

Benefits of GST

1. The tax structure will be made lean and simple.

2. The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across States and reduce the transaction costs of businesses.

3. It is good for export-oriented businesses because it is not applied for goods/service which are exported out of India.

4. In the long run the lower tax burden could translate into lower prices on goods for consumers.

5. The suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers.

6. It can bring more transparency and better compliance.

7. Number of departments [tax departments] will reduce which in turn may lead to less corruption.

8. More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.

9. Companies which are under unorganized sector will come under tax regime.

Impact of GST on Indian Economy

GST is a game-changing reform for the Indian Economy, as it will bring the net appropriate price of the goods and services. The various factors that have impacted Indian economy are:

1) Increases competitivenessThe retail price of the manufactured goods and services in India reveals that the total tax component is around 25-30% of the cost of the product. After implementation of GST, the prices have gone down, as the burden of paying taxes has been reduced to the final consumer of such goods and services. There is a scope to increase production, hence, competition increases.

2) Simple Tax StructureCalculation of taxes under GST is simpler. Instead of multiple taxation under different stages of supply chain, GST is a one single tax. This saves money and time.

3) Economic Union of IndiaThere is freedom of transportation of goods and services from one state to another after GST. Goods can be easily transported all over the country, which is a benefit to all businesses. This encourages increase in production and for businesses to focus on PAN-India operations.

4) Uniform Tax RegimeGST being a single tax, it has made it easier for the taxpayer to pay taxes uniformly. Previously, there used to be multiple taxes at every stage of supply chain, where the taxpayer would get confused, which a disadvantage.

5) Single nation market

Long queues of trucks at state borders disappeared as check posts were dismantled, creating a seamless national market. These barriers had restricted movement of goods across the country, leading to huge delays and increasing transaction costs for the logistics sector, eventually translating into higher costs for consumers. 

6) Greater Tax RevenuesA simpler tax structure can bring about greater compliance, this increases the number of tax payers and in turn the tax revenues collected for the government. By simplifying structures, GST would encourage compliance, which is also expected to widen the tax base.

7) Increase in ExportsThere has been a fall in the cost of production in the domestic market after the introduction of GST, which is a positive influence to increase the competitiveness towards the international market.

SECTION 2:

CHAPTER-1 LITERATURE REVIEW

MEANINIG:

A Literature Review is "a systematic, explicit, and reproducible method for identifying, evaluating, and synthesizing the existing body of completed and recorded work produced by researchers, scholars, and practitioners."

A literature review has four main objectives

1) It surveys the literature in your chosen area of study.

2) It synthesises the information in that literature into a summary.

3) It critically analyses the information gathered by identifying gaps in current knowledge;by showing limitations of theories and points of view;formulating areas for further research and reviewing areas of controversy.

4) It presents the literature in an organized way.

IMPORTANCE:

Doing a careful and thorough literature review is essential when you write about research at any level. It is basic homework that is assumed to have been done vigilantly, and a given fact in all research papers. By providing one, usually offered in our introduction before we reach to our study statement,we are telling our readers that we have not neglected the basics of research.

It not only surveys what research has been done in the past on our topic, but it also appraises, encapsulates, compares and contrasts, and correlates various scholarly books, research articles, and other relevant sources that are directly related to our current research. Given the fundamental nature of providing one, our research study will be not considered seriously if it is lacking one at the beginning of our paper.

The literature which we reviewed for our dissertation study on GST are as follow:

1. Dr. G. Sunitha and P. Satischandra broadly discussed about GST in their research paper titled “Goods and Service Tax (GST): As a new path in Tax Reforms in Indian Economy”. The authors have tried to explain the concept of GST and different models of GST. They also focussed on the impact of GST on Indian markets. According to them the current tax structure is the main hurdle for growth of Indian economy. New tax structure of GST will remove this hurdles and boosts Indian economy.

2. Nitin Kumar write a research paper named “Goods and Service Tax in India-A Way Forward” in “Global Journal of Multidisciplinary Studies”, Vol. 3, Issue6, May 2014 and he noted that implementation of GST in India will be a great move and it will be remove all the problems of current tax structure in India.

3. Jaiprakash (2014) mentioned that it is tax reforms travel from CST through VAT to GST which ensure the greater uniformity in the tax system and it will reduce the application of multiple taxes on good and services. GST broaden its scope on international business which leads to the growth of the GDP of our nation.

4. Shakir Shaik et.al (2015) in their study he mentioned that the implementation of Good and Services Tax in India. According to him “GST will reduce litigation on classification issues. And also discussed that implementation of GST in the framework of India will lead to commercial benefits which were untouched by the Value Added Tax system and would essentially require to economic development. GST may usher in the possibility of a collective gain for industry, agriculture, trade and common consumers as well as for the central and state government”

5. Monika Sherawat and Upasana Dhanda (2015) explained that implementation of GST taxation policy it would be allotted equally among production and services with minimum tax rate which result in increased the tax base and minimized the exemptions. It is forecasted to help in establishing an effective and flexible tax administration.

6. Srinivas K. R (2016) in his article “Issues and Challenges of GST in India” he has mentioned that central and state governments are empowered to levy respective taxes as per the Indian constitution which is likely to change the complete scenario of present indirect taxation system.GST will be a compressive indirect tax structure on manufacture, sales and consumption of goods and services throughout India, to replace the various indirect taxes levied by the both the governments.

7. Ekta Narula and Priyanshi Rastogi (2016) have explained that the main aim of GST is to streamline the existing indirect tax system with a single tax on consumption of goods and services manufacture and sales. It is accepted worldwide and around 140 countries of the world are following the GST law. It will be applied on goods and services at every stage of worth to be added to the goods which includes all indirect taxes of central and state government. Application of GST in India will result in the growth of economy and boost the overall GDP of the country.

Chapter 2 - Research METHODOLOGY

Meaning of research methodology -

Research is common parlance refers to a research for knowledge. Once can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The advanced Learner’s Dictionary of current English lays down the meaning of research as a “careful investigation or inquiry specially through search for new facts in any branch of knowledge”. Redman and Mory define research as a “Systematized efforts to gain new knowledge” some people considered research as a movement, a movement from the known to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for when the unknown conforms us we wonder and our inquisitiveness make us probe and attain full and fuller understanding of the unknown. This inquisitiveness is the mother of all knowledge and the mother which man employs for obtaining the knowledge of whatever the unknown, can be termed as research.

Research is an academic activity and as such the term should be used in a technical sense. According to Clifford Woody research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.

Objectives of Research:

The purpose of research is to discover answers to questions through the application of scientific procedures. The main aim of research is to find out the truth which is hidden and which has not been discovered as yet. Though each research study has its own specific purpose, we may think of research objectives as falling into a number of following broad groupings:

1. To gain familiarity with a phenomenon or to achieve new insights into it

2. To portray accurately the characteristics of a particular individual, situation or a group

3. To determine the frequency with which something occurs or with which it is associated with something else

4. To test a hypothesis of a causal relationship between variables.

This study intensively has been done by using both Primary as well as Secondary data about the implementation of GST and its outcomes after one year. To know the concept of GST and the entire tax system of India and major reforms made in this field we extensively used the secondary information given in various books,media,internet and other sources of secondary data.

On the other side the major portion of this dissertation work is covered by primary study of the sectors selected for the study in which we mainly relied on the written questionnaire forms and oral interpersonal interviews taken by the respondents. For our study we selected Dehradun which is both a capital of the state and also we are quite familiar with this district.

The secondary information taken about GST is about the structure of Goods & Services tax of India which includes the historical background of GST in India, the types of indirect taxes which have been now merged under GST, its constitutional background, analyses of the major needs and objectives of GST for the country, how it was implemented on each and every good and service, GST rate slabs, the pattern of GST adopted in India and the other points which clearly unable us to understand the concept of this new taxation regime undertaken by the country.

On the other side, after analyzing the structure of GST we moved for our primary research analyses which undertakes extensively the two major sectors of the market which got influenced after the implementation of this tax on the market commodities and services i.e, The Sellers and The Consumer sectors of the market economy. We selected these two sectors for our study because these two sectors commands on the supply of and demand for goods and services in the market and after the implementation of the GST how the buying and selling pattern of the consumers and sellers got influenced with regards to the changes in prices of the commodities, what are the difficulties occurred in the total tax payment structure for the sellers after GST and how their business got affected, how they deal with this new tax, how much they are aware and know about this tax etc..are the main points which we covered through preparing separate questionnaire for both the consumers and sellers.

Our study mainly focusing on the lower segment of the markets which implies that we made our maximum surveys in the open unregulated markets of Dehradun where we interacted with the small and marginal sellers who does not posses systematic knowledge to fill GST returns and those who are earlier were not paying tax or were unregistered.

Also to analyse the consumer study we interacted to random consumers in the markets from both regulated and unregulated markets of Dehradun.

We also extended our study to the third sector which is The GST Officials of the state to know their experiences in one year with this new tax system and also to know about the impact of GST on the revenue collection of the state after one year and for this we interacted with the senior tax officers of the tax departments and prepared questionnaire possessing all the question which we want to point in our study.

SECTORS

SAMPLE SIZE

About the respondents

CONSUMERS

34

The consumers of small and big malls of the city are taken into consideration.

SELLERS

36

About 65% of the sellers respondents taken from the open markets of Dehradun like Paltan Market and rest of 35% responds taken from the small and big malls and showrooms of the city like Pecific mall and the like.

OFFICIALS

15

we interacted with the state tax headquarter of Dehradun and the Commercial tax departments of Dehradun and Rishikesh and take responds from the senior tax officials of the state.

Chapter 3 - OBJECTIVES OF THE STUDY

This study has been structured to fulfill the following objectives-

1) To analyse the theoretical structure of the GOODS & SERVICES TAX in India.

2) To find the people’s view on the implementation of GST after one year.

3) To analyse the results of various businesses after implementing GST in one year.

4) To analyse the overall impact of GST mainly on the lower segment of the market( both sellers & consumers).

5) To check the change in total revenue collection by the state after GST.

CHAPTER 4- STUDY AREA

This dissertation project is focusing on the outcomes of GST after one year of the implementation of this new tax system in the country in state UTTARAKHAND district DEHRADUN.

About the state - UTTARAKHAND

Uttarakhand officially the State of Uttarakhand, formerly known as Uttaranchal,is a state in the northernpart of India.

It is often referred to as the Devabhumi (literally "Land of the Gods")due to a large number of Hindu temples and pilgrimage centres found throughout the state. Uttarakhand is known for the natural environment of the Himalayas, the Bhabhar and the Terai. On 9 November 2000, Uttarakhand became the 27th state of the Republic of India, being created from the Himalayan districts of UttarPradesh.

It borders Tibet to the north; the Sudurpashchim Pradesh of Nepal to the east; the Indian states of Uttar Pradesh to the south and Himachal Pradesh to the west and north-west as well as Haryana on its south-western corner. The state is divided into two divisions, Garhwal and Kumaon, with a total of 13 districts. The interim capital of Uttarakhand is Dehradun, the largest city of the state, which is a railhead. 

Economy of Uttarakhand-

Economy of Uttarakhand

Currency

INR

Fiscal year

2018-19

Statistics

GDP

₹2.586 lakh crore (US$36 billion)(2018-19)153,076

GDP rank

20th

GDP growth

6.77% (2017-18)

GDP per capita

₹1.73 lakh (US$2,400) (2017-18)

Public finances

Public debt

30.30 percent of the GSDP. (2016-17)

Revenues

₹39,912.00 crore (US$5.6 billion)(2016-17)

Expenses

₹40,422.20 crore (US$5.6 billion)(2016-17)

Uttarakhand is one of the fastest growing states in India, thanks to the massive growth in capital investments arising from conducive industrial policy and generous tax benefits. The state is situated in the foothills of Himalayas. The presence of several hill stations, wildlife parks, pilgrimage places and trekking routes make Uttarakhand an attractive tourist destination.

Uttarakhand is a well-renowned religious and wildlife tourism destination. About 21 new places in Uttarakhand that have the potential to become major tourist destinations. These places include Jageshwar, Baijnath, Saat Taal, Bhimtal, Patal Bhuvaneshwar, Chakori, Someshwar, Pithoragarh, Chakrata, Roopkund, Hanaul, Anson Barrage, Harshil, Dhanaulti and Dayara meadow. Jauljiwi in Kumaon and Tons in Garhwal division are planned to be developed as adventure tourism destinations.

In 2017, domestic tourist inflow in the state were 34.36 million and foreign tourist visits had crossed over 0.13 million.

Between 2011-12 and 2017-18, Gross State Domestic Product (GSDP) expanded at a Compound Annual Growth Rate (CAGR) of 10.86 per cent to Rs 2.14 trillion (US$ 33.21 billion) whereas the Net State Domestic Product (NSDP) expanded at a CAGR of 11.07 per cent to Rs 1.91 trillion (US$ 29.71 billion).

The state has close proximity to the national capital Delhi, a leading market of the country and excellent connectivity with neighbouring states. Uttarakhand has abundant natural resources due to hills and forests. Its agro-climatic conditions support horticulture-based industries. The vast water resources available in the state are also favourable for hydropower.

Uttarakhand is being developed as an ‘energy state’ to tap the hydropower electric potential of over 25,000 MW. As of November 2018, hydropower generation installed capacity in the state was recorded to be 1,815.69 MW. Power generation in the state for 2018-19 (from April to November) reached 11,468.32 GWH. Energy requirement in the state reached 9,390 million units (from April to November 2018).

According to the Department of Industrial Policy & Promotion (DIPP), the cumulative FDI inflows, during April 2000 to June 2018, stood at around US$ 680 million.

The capital of Uttarakhand : Dehradun

Dehradun also spelled Dehra Dun is the interim capital of Uttarakhand, a state in the northern part of India. Located in the Garhwal region, it lies 236 kilometres (147 mi) north of India's capital New Delhi and 168 kilometres (104 mi) from Chandigarh. It is one of the "Counter Magnets" of the National Capital Region (NCR) being developed as an alternative centre of growth to help ease the migration and population explosion in the Delhi metropolitan area and to establish a smart city at Dehradun.During the days of British Raj, the official name of the town was Dehra.At present, Gairsain, a hill-town between Garhwal and Kumaon regions and centrally located in Uttarakhand, is being developed as permanent capital of the state.

Dehradun is located in the Doon Valley on the foothills of the Himalayas nestled between the river Ganges on the east and the river Yamuna on the west. The city is famous for its picturesque landscape and slightly milder climate and provides a gateway to the surrounding region. It is well connected and in proximity to Himalayan tourist destinations such as Mussoorie, and Auli and the Hindu holy cities of Haridwar and Rishikesh along with the Himalayan pilgrimage circuit of Chota Char Dham.

Dehradun Municipal Corporation is locally known as Nagar Nigam Dehradun. Other urban entities involved in civic services and city governance and management include Mussoorie Dehradun Development Authority (MDDA), Special Area Development Authority (SADA), Jal Sansthan, and Jal Nigam among others. Dehradun is also known for its Basmati rice and bakery products.

Demographics-

As per provisional reports of Census India, population of Dehradun in 2011 was 578,420;male and female are 303,411 and 275,009 respectively. The sex ratio of the city is 906 per 1000 males.The number of literates in Dehradun city is 463,791, of which 251,832 are males and 211,959 are females.Average literacy rate of Dehradun city is 89.32 percent, whereas male literacy and female literacy rates are 92.65 and 85.66 percent, respectively.The number of children of age under six in Dehradun city is 59,180 as per figure from Census India report on 2011. There are 31,600 boys and 27,580 are girls.Child sex ratio of girls is 873 per 1000 boys.

SECTION 3

Chapter 1 -FIELDS OF STUDY

We selected three major sectors which are mainly influenced by the introduction of GST. These sectors are :

1. The consumers-

The consumers are considered as an important part in the market as it has its influence on the demand side of the market and after the implementation of GST rates on goods and services the prices of various commodities somehow changed which affects the purchasing power of the consumers in the market in both negative and positive manner. To know the changes occurred in their overall shopping pattern in the market we formed questionnaire which consists all those basic and common question related to the problems and benefits of GST that a consumer faced in one year of this tax reform.

2. The sellers-

Secondly we surveyed the second major part of the market i,e. the sellers of the market which has the influence on the overall supply side of the market. GST affects mainly the sellers of the market as this is completely a new tax form in the country and it is very difficult for the small and marginal sellers to adopt this new tax payment system on their own to understand and also the different tax slabs on different commodities cause creation of complexity for the sellers. To know the views of sellers about this tax, difficulties they faced and loop holes in the implementation and results of their annual turnover after GST we prepared questionnaire asking these factors by