CB ANALYSIS

(COST AND BENEFITS)

TITLE OF THE REPORT : COST –BENEFIT ANALYSIS OF GST (Goods & Services
Tax)

NAME OF THE CANDIDATE: PRATHIPATI.NAVYA

ROLL NUMBER : 2017067

YEAR : 1st YEAR (2nd SEMESTER)

COURSE : UNDER GRADUATE (U.G) B.A L.L.B (Hons)

SUBJECT : ECONOMICS

SUBMISSION DATE : 10-04-18

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 TABLE OF CONTENTS

ABSTRACT-----------------------------------------------------------------------------------------------3

INTRODUCTION----------------------------------------------------------------------------------------4

METHODOLOGY----------------------------------------------------------------------------------------5

RESULTS/FINDINGS-----------------------------------------------------------------------------------5

DISCUSSION---------------------------------------------------------------------------------------------6

Costs of the GST Act ---------------------------------------------------------------------------------6

Benefits of the Act ------------------------------------------------------------------------------7

CONCLUSION-----------------------------------------------------------------------------------------9

RECOMMENDATIONS/SUGGESTIONS----------------------------------------------------------9

APPENDIX-----------------------------------------------------------------------------------------------10

REFERENCES-------------------------------------------------------------------------------------------10

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 ABSTRACT

In this report we are reporting the cost and benefits of the Goods & Services Tax Act, 2017
which is called as CB Analysis.

GST (Goods and Services Tax) is a single indirect tax aimed at making the country a unified
common market. It is imposed on the supply of goods and/or services within India. Multiple
indirect taxes that the Central Government or State Governments impose on suppliers and
consumers are subsumed by GST.

The GST Bill has become one of the main points of discussion around the country thanks to
its ability to completely reform the whole taxation system in India. The objective of the bill is
to simplify the system for taxpayers by unifying the taxes applicable to consumers and
suppliers alike. GST was implemented after the approval of four bills passed by the
government, viz., Goods and Services Tax Bill, Integrated GST Bill, Compensation GST Bill,
and Union Territory GST Bill.

The costs involved for the implementation of this act and also the benefits due to this act are
described in this report.

There are different types of costs for analysis; they are principal costs, personnel Costs,
Direct and Indirect costs, Depreciation and Annual Costs. These costs in view of the GST are
explained.

Benefits of the GST Act are it eliminates the cascading effect of tax, higher threshold for
registration, Composition scheme for small businesses, Simple and easy online procedure, the
number of compliances is lesser, Defined treatment for E-commerce operators, improved
efficiency of logistics and unorganized sector is regulated under GST. These are some of the
benefits and all the other benefits are explained in detail. There are several benefits of this act
but it has to make implemented properly and continue the same in future also.

In further report we are going to discuss about the cost and benefits of GST Act in detail.

Exploratory & Explanatory methods of research is used to prepare the report.

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 INTRODUCTION

A cost-benefit analysis is a process by which business decisions are analyzed. The benefits of
a given situation or business-related action are summed, and then the costs associated with
taking that action are subtracted. The CBA is also defined as a systematic process for
calculating and comparing benefits and costs of a decision, policy (with particular regard
to government policy) or (in general) project .

Broadly, CBA has two main purposes:

To determine if an investment/decision is sound (justification/feasibility) – verifying whether

its benefits outweigh the costs, and by how much;

To provide a basis for comparing projects – which involves comparing the total expected cost
of each option against its total expected benefits.

In this report the costs and benefits of a recent government policy regarding tax, Goods and
Services Tax Act is analyzed.

The GST is a Value added Tax (VAT) proposed to be a comprehensive indirect tax levy on
manufacture, sale and consumption of goods as well as services at the national level. It will
replace all indirect taxes levied on goods and services by the Indian Central and state
governments.

There are costs and several benefits of GST Act. In this assignment the reporter is reported
with CB Analysis. It is the costs and benefits of this GST Act. The various types of cost like
principal costs, personnel costs e.t.c are also explained in the view of GST. Exploratory &
Explanatory methods of research is used.

The Results of the research are stated in Findings, Interpretation of Analysis is done in the
Discussion and the brief statement of what was found is stated in conclusion.

Recommendations/Suggestions that can be taken to order to implement the benefits of the act
and continue the act for future by increasing its efficiency. Appendix and References are also
given.

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 METHODOLOGY

The type of Research Methodology is Exploratory & Explanatory type of Research.

RESULTS /FINDINGS

The costs and benefits of Goods and Services Tax Act are:

Various types of costs are:

1.Principal Costs – These includes the costs of principal items like machinery it is nothing but
the investment .In this Act ,the establishment of separate office and it’s maintenance amounts
to principal costs.

2. Personnel Costs- These includes hiring new staffs and executives for the company. In this
the appointment of GST Council which contains officers and payment of salaries to them
involves cost.

3. Indirect and direct Costs- These includes logistics, electricity e.t.c. This act also includes
them.

4. Depreciation- It is the future circumstances. Eg: efficiency of machines in case of

company. After the enactment of act the council exists in order to solve the chaos that arises
this future costs are known as depreciation.GST also includes these costs.

5. Annual Costs – It is the total final cost of the policy.

The Benefits includes:

1. Revenue / Production increase

2. Cost control

3. Efficiency of the policy

There are still more benefits of GST Act which will be mentioned under this main headings.

These are the topics that we are going to study in discussion. The various types of costs and
benefits of the act as mentioned, these are further explained in detail in discussion.

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 DISCUSSION

COSTS OF GST ACT:

The costs can be categorized into various kinds. The different kinds of costs and their part in
the goods & Services tax are discussed below.

1. Principal costs- Principal costs are the costs of the principal goods like machinery in the
case of company and also the appointment of agent to the company. Here in this case for the
preparation of this act an office was created and the maintenance of it comes under principal
costs. So there are principal costs by GST act.

2. Personnel costs- These include the hiring of staff and appointment of executives. For the
making of GST Act, a special council was created and the officers were appointed as
members of the council and the council with chair person as head works at the office given to
them. The payment for these officers also adds to the costs of GST.

3. Indirect and direct costs- Direct costs can be defined as costs which can be accurately
traced to a cost object with little effort. Cost object may be a product, a department, a project,
etc. Costs which cannot be accurately attributed to specific cost objects are called indirect
costs. It includes logistics and electricity.GST is a policy which is a direct cost and there were
also indirect costs.

4. Depreciation- It includes future costs .If any problems arises the board will solve them so
these costs also need to be included in costs. There were also committees appointed by GST
Council.

5. Annual costs- It is the sum of the all the costs involved including principal, personal,
direct and indirect and depreciation. It includes every small piece of expenses involved for
the enactment of the act including costs of the notices that need to be issued, committees
involved e.t.c .Finally it is nothing but the costs of the policy.

These are the costs of the Goods and services Tax Act 2017.This policy does not costs much
for its enactment. The expenditure is minimum as what usually requires.

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BENEFITS OF THE GST ACT:

Basically the benefits of any act can be categorized into three .These three topics are
discussed in brief under the all other benefits of GST Act are included.

1.Revenue/ Production increase:

Due to this Act there are benefits for the revenue and huge benefit to the consumers and
corporate people.Because the act provides collection of tax at one point and also reduces
double payment of tax . No illegal actions Can be done. Everyone pays the tax this increases
the Revenue of a country .Production also increases due to this act ,the Make in India
initiative is put forward.

It is good for export oriented businesses. Because it is not applied for goods/services which
are exported out of India.It can bring more transparency and better compliance.Number of
departments (tax departments) will reduce which in turn may lead to less corruption.More
business entities will come under the tax system thus widening the tax base. This may lead to
better and more tax revenue collections.Companies which are under unorganized sector will
come under tax regime.

GST will give a major boost to the ‘Make in India’ initiative of the Government of India by
making goods and services produced in India competitive in the National as well as
International market. Also all imported goods will be charged integrated tax (IGST) which is
equivalent to Central GST + State GST. This will bring equality with taxation on local
products.

2.Cost control:

This act also helps in cost control.Changes that took place due to GST that reduces the costs
are explained below.

Goods and Services Tax was a single Taxation System.Due to this 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. .In the long run, the lower tax burden could translate into lower prices on goods
for consumers.The Suppliers, manufacturers, wholesalers and retailers are able to recover

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GST incurred on input costs as tax credits. This reduces the cost of doing business, thus
enabling fairer prices for consumers.In this way it helps in cost control.

3.Efficiency of the Act:

Efficiency of the act means the uses of the act.The uses or other benefits of this act are as
follows:

GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of
industry, government and the consumer. It will lower the cost of goods and services, give a
boost to the economy and make the products and services globally competitive. GST aims to
make India a common market with common tax rates and procedures and remove the
economic barriers, thus paving the way for an integrated economy at the national level.

GST is largely technology driven. It will reduce the human interface to a great extent and this
would lead to speedy decisions.

Under the GST regime, exports will be zero-rated in entirety unlike the present system where
refund of some taxes may not take place due to fragmented nature of indirect taxes between
the Centre and the States. This will boost Indian exports in the international market thus
improving the balance of payments position. Exporters with clean track record will be
rewarded by getting immediate refund of 90% of their claims arising on account of exports,
within seven days.

GST is expected to bring buoyancy to the Government Revenue by widening the tax base
and improving the taxpayer compliance. GST is likely improve India’s ranking in the Ease of
Doing Business Index and is estimated to increase the GDP growth by 1.5 to 2%.

GST will bring more transparency to indirect tax laws. Since the whole supply chain will be
taxed at every stage with credit of taxes paid at the previous stage being available for set off
at the next stage of supply, the economics and tax value of supplies will be easily
distinguishable.

The taxpayers would not be required to maintain records and show compliance with a myriad
of indirect tax laws of the Central Government and the State Governments like Central
Excise, Service Tax, VAT, Central Sales Tax, Octroi, Entry Tax, Luxury Tax, Entertainment
Tax, etc.These are the benefits of the Goods and Services Act.

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 CONCLUSION

Goods and Services Tax (GST) aims to make India a common market with common tax rates
and procedures and remove the economic barriers, thus paving the way for an integrated
economy at the national level. By subsuming most of the Central and State taxes into a single
tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value
chain, it would mitigate the ill effects of cascading, improve competitiveness and improve
liquidity of the businesses.

Though the GST Act was recently enforced the aims & objectives of the act with which it
came are very useful.At first it caused so much chaos and disturbances due to the change of
the entire system and the people also are irritated by the act because it increased the tax
burden on them.But the good effects of this act are reflected in future.It reduces illegal
exports and imports and also non payment of taxes by the people.It also reduces the prices of
the goods.So the law is very efficient and should be continued.

Cost –Benefit analysis of this Act supports the enforcement of this law.Because the costs that
are charged for this Act are less than Benefits and benefits are more than the costs.Recent
2018 Budget also said that due to the GST the revenue of the country is also increased.As the
act was efficient with more benefits and less costs,it can be enforced.

RECOMMENDATIONS/SUGGESTIONS

The Recommendations /Suggestions that can be given are:

1. Relief must be given to small scale operators and particularly reduced processes should be
applicable to them.

2. Rates should be rationalized and reduced to make India competitive and in interest of
compliance and economic growth. Daily use items such as soaps, crèmes, movie tickets,
electrical goods shouldn't be taxed at 28 %.

3. Composition scheme should also be provided to small scale service providers.

The above issues need to be addressed and to bring in more clarity in the implementation of
this biggest tax reform.

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So by making necessary corrections to the act it has to be implemented efficiently till it
achieved its objectives.

APPENDIX

1. https://economictimes.indiatimes.com last visited on 10th April, 2018

2. Goods and Services Tax by CA Atul Kumar Gupta, 3rd edition

REFERENCES

1. https://cleartax.in/s last visited on 9th April, 2018

2. http://www.financialexpress.com/ last visited on 9th April, 2018

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