A STUDY ON IMPLEMENTATION AND

IMPACT OF GST

AMIRTHA.R
INTRODUCTION

Taxation system is a legal system for assessing and collecting taxes. A tax is a mandatory financial
charge or some other type of levy imposed upon a taxpayer by a governmental organization in order
to fund various public expenditures. A failure to pay, or evasion of or resistance to taxation, is
punishable by law.

Taxes consist of direct or indirect taxes. 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 shareholders receiving this payment from the company will also be levied
some tax on that personal income.

TAX SYSTEM AROUND THE WORLD:

Tax laws in most counties are extremely complex and tax burden falls differently on different
groups in each country and sub-national unit. Taxation patterns around the world today reveal large
cross-country differences, especially between developed and developing countries. In particular,
developed countries today collect a much larger share of their national output in taxes than do
Developing countries; and they tend to rely more on income taxation to do so. Developing
countries, in contrast, rely more heavily on trade taxes, as well as taxes on consumption.

There are mainly four types of taxes:

* Corporate tax
* Individual income tax
* Sales tax ( VAT and GST )
* Payroll tax

For example tax rates in Belgium :

* Corporate tax - 33.99%
* Individual tax - 0% to 64%
* Sales tax - 21%, 12%, 6%

TAX STRUCTURE IN INDIA:

HISTORY:
India having a huge population on the eve of independence was in severe grip of poverty. Therefore,
by imposing higher taxes on the people who earn more, government will have more revenue which
will be spent on various sectors such as education, infrastructure, health, etc. Which will provide
services to each and everyone alike?
The basic principle is here -
“No income is taxed twice
No expense is given the benefit twice “

India offers a well-structured tax system for its population. Taxes are the largest source of income
for the government. This money is deployed for the development of the nation. Taxes are
determined by the central and state government along with the local authorities like municipal
corporations. An important restriction on this power in Article 265 of the Constitution which states
that "No tax shall be levied or collected except by the authority of law "

There are two types of taxes;

A) Direct tax

B) Indirect tax

SIGNIFICANCE OF THE STUDY: To elaborately study the implementations, impact created

and current development by GST. To find what benefits society has gained considering the
implementation of GST in India.

OBJECTIVES: 1. To understand the taxation policy in India.

2. To understand GST and to find its merits and demerits.
3. Comparison before GST and after GST.

METHODOLOGY: The information has been collected through Secondary published source
The secondary sources include :
*Internet .
*online databases .
*published online documents .

Chapter 2 :

TAX SYSTEM :

Tax is a ‘financial charge' or deduction for something you get or own. It is not a penalty or fine for
doing something wrong. Normally governments collect taxes so that there is a pot of money to
spend on things that benefit society as a whole.
This might be law enforcement, including the police and courts, infrastructure, like roads and
pathways, and administration.

TAXATION POLICY IN INDIA -

The 19th century saw the establishment of British Rule in India. Following the Mutiny of 1857, the British
Government faced an acute financial crisis. To fill up the treasury, the first Income-tax Act was introduced
in February 1860 by James Wilson, who became British India's first Finance Minister. Thenceforth, there
were many developments in the field of taxation. The tax system was modeled largely on the lines of the
British system prevailing then.

James Wilson, while introducing the I-T Act in 1860, quoted from Manu for levying income-tax in the
country. The Act received the assent of the Governor General on July 24, 1860, and came into effect
immediately. It was divided into 21 parts consisting of no less than 259 sections. The salient features of the
Act were:

Income was classified under four schedules: i) income from landed property; ii) income from professions
and trade; iii) income from securities, annuities and dividends; and iv) income from salaries and pensions.

A tax was imposed on each of these sources. Exemption limit for the general public was fixed at Rs. 200
against the exemption limit of Rs. 4,980 to the military and police and Rs. 2,100 for the naval and marine
officers.

Agricultural income was subject to tax. The rate of tax was 2 percent for incomes ranging from Rs. 200 to
Rs. 499. And for incomes above this, 4 percent. Of the 4 percent charge, 1 percent was to be retained by
provincial governments and 3 percent was to go to the Central Government. Compulsory returns were
required to be submitted by all who were liable to tax. Except in Calcutta, the administration of the tax was
left in the hands of the land-revenue officers. And the financial year commenced on August 1, 1860.

This first Act of 1860 yielded about Rs. 1.50 crore of tax revenue. This Act continued for five years before
lapsing in 1865. The income-tax receipts in 1860-61 was 1.1 millions, in 1861-62, 2 millions; in 1862-63,
1.9 millions; in 1863-64, 1.5 millions ; and in 1864-65, 1.3 millions.

India offers a well-structured tax system for its population. Taxes are the largest source of income
for the government. This money is deployed for various purposes and projects for the development
of the nation.
Taxes are determined by the Central and State Governments along with local authorities like
municipal corporations. The government cannot impose any tax unless it is passed as a law.
Here are the salient features of the taxation system in India:
1. Role of the Central and State Government
The entire system is clearly demarcated with specific roles for the central and state government. The
Central Government of India levies taxes such as customs duty, income tax, service tax, and central
excise duty.
The taxation system in India empowers the state governments to levy income tax on agricultural
income, professional tax, value-added tax (VAT), state excise duty, land revenue and stamp duty.
The local bodies are allowed to collect octroi, property tax, and other taxes on various services like
drainage and water supply.

2. Types of taxes
Taxes are classified under two categories namely direct and indirect taxes. The largest difference
between these taxes is their implementation. Direct taxes are paid by the assesses while indirect
taxes are levied on goods and services.

A) Direct taxes

Direct taxes are levied on individuals and corporate entities and cannot be transferred to
others. These include income tax, wealth tax, and gift tax.
■ Income tax
■ Corporate tax
■ As per the Income Tax (IT) Act, 1961 every assesses whose total income
exceeds the maximum exempt limit is liable to pay this tax. The tax structure and rates are annually
prescribed by the Union Budget. This tax is imposed during each assessment year, which
commences on 1st April and ends on 31st March. The total income is calculated from various heads
such as business and profession, house property, salaries, capital gains, and other sources. The
assesses are classified as individuals, Hindu Undivided Family (HUF), association of persons
(AOP), body of individuals (BOI), company, firm, local authority, and artificial judiciary not falling
in any other category.

B) Indirect taxes

Indirect taxes are not directly paid by the assessee to the government authorities.
These are levied on goods and services and collected by intermediaries (those who sell goods or
offer services). Here are the most common indirect taxes in India:
*Value Added Tax (VAT)
This is levied by the state government and was not imposed by all states when
first implemented. Presently, all states levy such tax. It is imposed on goods sold in the state and the
rate is decided by the state governments.
*Customs duty
Imported goods brought into the country are charged with customs duty which
is levied by the Central Government.
*Octroi
Goods that move from one state to another are liable to octroi duty. This tax
is levied by the respective state governments.
 *Excise duty
All goods produced domestically are charged with excise duty. Also known
as Central Value Added Tax (CENVAT), this is paid by the manufacturers.
*Service Tax
All services provided domestically are charged with service tax. The tax is
paid by all service providers unless specifically exempted.

3. Revenue Authorities
*CBDT
The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue
under the Ministry of Finance. This body provides inputs for policy and planning of direct taxes in
India and is also responsible for administration of direct tax laws through the Income Tax
Department.
*CBEC
The Central Board of Excise and Customs (CBEC) is also a part of the Department of
Revenue under the Ministry of Finance. It is the nodal national agency responsible for administering
customs, central excise duty and service tax in India.
*CBIC
Under the GST regime, the CBEC has been renamed as the Central Board of Indirect
Taxes & Customs (CBIC) post-legislative approval. The CBIC would supervise the work of all its
field formations and directorates and assist the government in policy making in relation to GST,
continuing central excise levy and customs functions.

The Indian taxation system in India has witnessed several modifications over the years. There has
been standardization of income tax rates with simpler governing laws enabling common people to
understand the same. This has resulted in ease of paying taxes, improved compliance, and enhanced
enforcement of the laws.

GST :

GST ( goods and service tax ) is an indirect tax which replaces multiple cascading taxes levied by
the government of the country. Almost 160 countries have GST. GST ’ s general rates are 15% to
20 %.

*As a significant step towards the reform of indirect taxation in India, the Central
The government has introduced the Goods and Service Tax (GST). GST is a comprehensive indirect
tax on manufacture, sale and consumption of goods and services throughout India and will subsume
many indirect taxes levied by the Central and State Governments. GST will be implemented through
Central GST (CGST), Integrated GST (IGST) and State GST (SGST).

*Four laws (IGST, CGST, UTGST & GST (Compensation to the States), Act) have received
President assent. All the States & UT expected to pass State GST Act, by end of May 2017. GST
law is expected to take effect from July 1, 2017.

GST IN OTHER COUNTRIES :

France was first to introduce GST. It was introduced in the year 1954, its introduction was required
because of very high sales taxes and tariffs encourage cheating and smuggling. They followed dual
GST means two-fold system 1)CGST 2)SGST

Canada has dual GST too which was introduced in the year 1991 . Mostly all over the world, the
GST rates vary from 15% to 20% but their exemptions too.Out of 160 countries on having GST
eight countries are not United Nations (UN) member states . Number of UN member states are 193 ,
but 41 member states did not implement GST , example - Bhutan , Oman , etc .

The countries working towards GST are Bhutan , Syria , Gulf cooperation council , etc . In most
countries value added tax (VAT) is taken as a substitute of GST .

Other countries having GST :

*New Zealand (1986)

*Australia (1975)
*Singapore (1994)
*France(1954)

New Zealand:

GST in New Zealand was introduced in 1986 at a rate of 10%. GST is a tax of 15% on all goods, services

and other items sold or consumed in New Zealand.

You become liable to pay GST when your annual turnover exceeds NZ$60,000 in any 12-month period.

Depending on your turnover, you can elect to file returns monthly, two-monthly or six-monthly.
This led to adoption of GST at single rate with food included in the GST base at the full rate. At present, the

country is highest tax productive nations among OECD countries.

Australia:

GST is a broad-based consumption tax. It was introduced on 1 July 2000 and replaced a wholesale sales tax.

The GST rate is set at 10% of the price of the goods being sold or services being supplied, where GST is

applicable.

GST RATES OF DIFFRENT COUNTRIES :

GST IN INDIA :

India implemented GST in the midnight of 30 June 2017. India has got dual GST, subsuming 14
indirect taxes levied by the central and state government. GST (goods and service tax) is an indirect
tax and single taxation policy which is benefit for all stakeholder
*Industry
*Government
*Consumer

It is introduced to boost the economy, which will create National Integrated Economy .
 GST - ONE NATION, ONE MARKET

It helps to make a common market, common tax rates and producer involved in tax. GOI
(Government of India) provided GST council which will govern GST with the chairman of finance
minister of India Arun Jaitley.

The rates are 0% , 5% , 12% and 18% , the special rates are 0.25% - rough precious stones , 3% -
gold , 28% - luxury goods . There are exemptions for products like food grains , curd , baby
products , milk .

This concept was visualized first in 1999, on August 8th, 2016 , the Constitution Amendment Bill
for GST was rolled out and passed to the Parliament of India.On 12th April 2017 the CGI enacted
four bills :

*Central GST (CGST)8

*Integrated GST(IGST)
*Union territory GST(GST)
*Bill to compensate states
The convergence of Central-State Government and ruling -opposition political parties took almost a
decade, missing several deadlines, before implementation from 1 July 2017, appeared to be a
reality.The policy matters were finalized at two levels, Central and States before both stakeholders
merged to form 'GST Council', a body entrusted to make fundamental decisions such as
implementation date, draft law, rules, and rates.

The Council did about a dozen meetings and reached consensus on various issues such as division
of powers for assessment of taxpayers between Central and State Government, formulation of law,
draft rules and finally the rates during the last 8 months.

CHAPTER 3

IMPACT CREATED BY GST :

GST had created a major impact on the Indian economy as well as in the daily life of every
consumer. From the viewpoint of the consumer, they would now have pay more tax for most of the
 goods and services they consume. The majority of everyday consumables now draw the same or a
slightly higher tax. Furthermore, the GST implementation has a cost of compliance attached to it.
It seems that this cost of compliance will be prohibitive and high for the small-scale manufacturers
and traders, who have also protested against the same.

They may end up pricing their goods at higher rates. It is expected in future that GST would not just
mean a lower rate of taxes, but also minimum tax slabs. Countries where the Goods and Service Tax
has helped in reforming the economy, apply only 2 or 3 rates – one being the mean rate, a lower rate
for essential commodities, and a higher tax rate for the luxurious commodities. Currently, in India,
we have 5 slabs, with as many as 3 rates – an integrated rate, a central rate, and a state rate. In
addition to these, cess is also levied.

The fear of losing out on revenue has kept the government from gambling on fewer or lower rates.
This is very unlikely to see a shift anytime soon; though the government has said that rates may be
revisited once the RNR (Revenue neutral rate ) is reached.

Impact of GST on macroeconomic indicators is likely to be very positive in the medium-term. Inflation would be

reduced as the cascading (tax on tax) effect of taxes would be eliminated. The revenue from the taxes for the
government is very likely to increase with an extended tax net, and the fiscal deficit is expected to remain under the
checks. Moreover, exports would grow, while FDI (Foreign Direct Investment) would also increase. The industry leaders

believe that the country would climb several ladders in the ease of doing business with the implementation of the

most important tax reform ever in the history of the country.

BEFORE AND AFTER GST –

GST IMPACT
WHAT GETS CHEAPER? WHAT GETS COSTLIER?

C CHEAPER COSTLIER

FOOD - FOOD-
MAIDA,BESAN,SALT,CUTLER, TEA AND COFFEE, FOOD AT DINING
KETCHUP,PICKLE. RESTAURANTS

PERSONAL CARE - PERSONAL CARE -

SOAPS, HAIR OIL AND TOOTHPASTE SHAMPOOS, DEODORANTS

OTHERS - OTHERS-
FOOTWEAR AND APPARELS TUITION FEES, BUYING A FLAT / SHOP
REVENUE STAMPS
 PRODUCTS AFTER GST BEFORE GST

SOFT DRINKS 28% 23-24%

HAIR OIL 18% 26%

SOAP 18% 26%

SUGAR 5% 5%

BUTTER/GHEE/CHEESE 12% 6%

COOKING OIL 5% 5-6%

CELL PHONES 28% 6%

LUXURY HOTELS 28% 28-30%

LIFE-SAVING API 5% 5-8%

EFFECTS OF GST :

Amidst economic crisis across the globe, India has posed a beacon of hope with ambitious growth targets,
supported by a bunch of strategic undertakings such as the Make in India and Digital India campaigns. The
Goods and Services Tax (GST) is another such undertaking that is expected to provide the much-needed
stimulant for economic growth in India by transforming the existing base of indirect taxation towards the
free flow of goods and services. GST is also expected to eliminate the cascading effect of taxes. India is
projected to play an important role in the world economy in the years to come. The expectation of GST
being introduced is high not only within the country, but also within neighboring countries and developed
economies of the world.

Short-term effects:

1. Inflation: Naturally when a new taxation system is introduced, due to fear and lack of clarity among
businessmen prices tend to increase.
2. Confusion: Since there are actually 6 slab rates(0,5,12,18,28,28+cess) there will be a confusion
initially. This appears only among the businessmen and end consumer .
 3. Lobbying: Industries that aren't satisfied with the tax rate will continue to demand for lowering their
tax rate.
4. Losses for States: As many state taxes under VAT are subsumed in GST and also states get only a
share of revenue from GST in the form of SGST and GST being a destination based tax, the states
are likely to incur losses especially manufacturing states like Maharashtra, Tamil Nadu, Gujarat,
Karnataka,Haryana,etc. For this, the center has promised to compensate for 5 years.

These short-term effects should be eliminated within 4–5 months so that to inculcate confidence among
people and they can experience the benefits.

Long-term effects:

1. Transparency: All these years we had had many hidden taxes under each and every product. But
now under GST, all these are made into one.
2. Ease of doing business: Now being the taxation being transparent, we can expect a boost in private
investment and FDI which will boost our employment and growth.
3. No cascading of taxes: Since now businessmen can take input credit of the taxes they paid, their
profit would increase.
4. Reduction in evasion: Since the tax returns will increase through GSTN, evasion would decrease
automatically.
5. Reduction in prices of products: Businessmen would realize the benefits of GST and profit they
get would increase. They are expected to pass on the benefits to the consumers. Anti-profiteering
clause in GST would likely to ensure this.
6. Elimination of check posts: When goods are transported from one state to another, now they need
not pay taxes to each and every state they cross through. For example, if you need to transport wheat
from Punjab to Tamil Nadu, the cost of wheat is two or three fold of the original price. Even the
wheat imported from Australia is cheaper than the wheat from Punjab.
7. Clean governance: Since everything is now through technology, people need not go for various
officials to file returns and is expected to eliminate corruption.

MERITS :

*A simple tax structure can bring greater compliance, thus increasing number of taxpayers
and in turn tax revenues of Government.

*GST will be levied only at the final destination of consumption based on VAT principle
and not on various points. This will help in removing economic distortions and bring about the
nation of common market.

* GST will also help to build a transparent and corruption-free tax Administration.
 *As the GST tax will mark the end of 17 other indirect laws, there won’t be much of logistics
and inventory costs as of now. Also, the slow movement across the state levels of goods carrier
will be stopped with the transit speed increasing tenfold.

DEMERITS :

*According to the proposal of the GST Tax, the control on business will be rendered to
Central and State Governments with businessmen binding by-laws. As such complexity may arise
for many businessmen across the nation.

*The aviation industry would be affected. Services taxes on airfares currently range from six
to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.

* GST Tax would swell negative remarks on the real-estate As perceived, GST will increase
the cost of the new homes by 8% which in turn will cease the demand by 12 %.

*On one end, government is trying to give a push to banking services and insurance in India
and on another side of the picture, the government has decided to tax banking and insurance service
at higher rates when compared to the previous rates.

CHAPTER 4 :

Suggestions and Conclusions

Changes have been a natural element in the lives of human beings who have always tried to
create something new. When we think of this era tremendous changes cross our minds..for
me the newest being referred to as the emerald stone in the history of Indian taxation- the tax
for all taxes - GST.
The process of tax reforms initiated in India since 1991 is aimed at implementing a uniform
tax system on goods and services across the country, thereby reducing the complexity of the
tax system by simplifying the process of taxation and simplifying it. Could go.Apart from
this, there will be an opportunity to create a better competitive business environment in India,
while there is also a possibility of a sharp increase in the revenue of the other, and in this
context, towards the improvement of indirect taxes, in the context of VAT (Value Added Tax)
sequel. There is a unified indirect tax imposed on the goods and services tax and goods,
which include central excise duty, state-level VAT, taxation, purchasing tax, luxury tax,
entertainment duty, service tax etc.

Conclusion of GST :

Implementation of GST is one of the best decisions taken by the India government. For the
same reason, July 1 was celebrated as Financial Independence day in India when all the
Members of Parliament attended the function in Parliament House. The transition to the GST
regime which is accepted by 159 countries would not be easy . confusions and complexities
were expected and will happen. India, at some point in time, had to comply with such
regime. Though the structure might not be a perfect one but once in place, such a tax
structure will make India a better economy favorable for foreign investments. Until now
India was a union of 29 small tax economies and 7 union territories with different levies
unique to each state. It is a much accepted and appreciated regime because it does away with
multiple tax rates by central and state. And if you are doing any kind of business then you
should register for GST as it is not going to help Indian government but will help you also to
track your business weekly as in GST you have to make your business activity statement
each week.

BIBLIOGRAPHY :
https://www.quora.com/Which-was-the-first-country-to-implement-GST-and-why

https://www.google.co.in/amp/s/timetrimebooksoftwaresolutionslawcrux.wordpress.com/2012/10/29/goods-and-

service-tax-gst-in-france/amp/

http://www.ey.com/in/en/services/ey-goods-and-services-tax-gst
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https://www.jaagore.com/simplify/the-impact-of-GST-goods-and-services-tax-in-india

https://www.quora.com/What-is-GST-And-what-are-the-advantages-and-disadvantages-of-GST