Economics Research paper BBA LLB (Hons.

Semester I

Project Topic: Analysis of Goods and Service Tax

Submitted to: Prof. Diti Goswami

School of Law, NMIMS

Submitted by: Kartik Goel

Sap ID: 81022200355

TABLE OF CONTENTS
1
ABSTRACT………………………………………………………………………… 03

INTRODUCTION………………………………………………………………….. 04

IMPLEMENTATION of GST IN INDIA………………………………………… 06

RESEARCH METHODOLOGY…………………………………………………..07

RESEARCH QUESTION…………………………………………………………..07

IMPACT OF GST…………………………………………………………………. 06

OBJECTIVES OF RESEARCH ANALYSIS…………………………………….07

STRUCTURAL MODEL OF GST………………………………………………. 09

IMPACT ON THE INDIAN ECONOMY………………………………………...09

DISCUSSION………………………………………………………………………..10

CONCLUSION……………………………………………………………………....13

MY POINT OF VIEW……………………………………………………………….13

REFERENCES………………………………………………………………………..14

Abstract

2
  Purpose of study:

In general, my study on the Goods and Service Tax demonstrates how the introduction
changed the Indian Economic system and helped assisted in the creation of a single
market with a unified taxation system, and helped to reduce tax evasion in the nation. An
introduction, graphs showing how the economy has changed, the answers to some
fundamental issues, and my perspective on the subject will all be included in my study on
the GST.

Indirect taxes were once heavily weighted in India's tax structure. The bulk of tax income
came from indirect taxes until the 1990s tax reforms were put into place. The
fundamental defense of a predominance of taxation was that because the majority of
Indians were poor, extending the direct tax base was constrained in some way. However,
the descending, regressive tax on the production of goods or services that characterizes
the Indian system of indirect taxes, which slows economic development and hinders
productivity, is a feature of this system. The Goods and Services Tax (GST) was
introduced by the Indian government on July 1st, 2017. This is the largest indirect tax
reform in Indian history, and as a result, a number of Central and State taxes, including
the Central Excise Duty, Service Tax, Additional Excise Duty, Surcharges, and others,
are now included in the GST. The structure of GST, its effects on the Indian economy,
and the practical challenges encountered by business and consumers while adopting GST
have all been examined by the researcher in this study. This essay is based on a thorough
examination of the GST Act, several media articles, the impartial judgment of tax
specialists, and the experiences of stakeholders. By investing in different infrastructure
and development projects, the government of India may be able to generate more income
after the implementation of GST, which might help the country's economy flourish. The
four-tiered tax system under GST might cause a significant price increase for luxuries
while also having a favorable effect on the economy. The government has made an
attempt to place necessities in the lowest tax bracket.

In this article, we'll talk about the Goods and Services Tax's idea, model, advantages,
disadvantages, and impact on the Indian economy.

 Brief Data:

3
The Goods and Services Tax (GST) was implemented in India on July 1, 2017, and it
brought about a huge shift. It has changed ever since, with intermittent modifications to
the operating and structural details. This study tries to take stock of the efforts to
implement the tax, as well as its economic and revenue effects, and suggest further
difficulties and reform areas in order to meet the goals of simplification of the tax to
reduce administrative and compliance costs, boosting revenue productivity, and limiting
distortions. But much more work needs to be done to reap the benefits of lowering the
number of tax rates to optimize the system, reviewing the rate structure to reduce
anomalies, reducing the number of exemptions, strengthening the technology foundation,
and expanding the tax base by including previously exempt goods like petroleum fuels,
real estate, and electricity.

1. INTRODUCTION

1. Introduction:
The implementation of Goods
and Services Tax (GST) in
India has been variously
described as “one country-one
tax”, “a game changer” and “a
reform of the century”. The
implementation of a standard
invoice-credit destination-
4
based value-added tax (VAT)
on
goods and services in a large
and diverse federal country at
both national and sub-national
levels ruled by different
political parties is a
remarkable achievement.
Almost all the
countries that have
implemented GST have taken
considerable time to settle
down and even
in Canada, the value-added tax
on goods and services

5
implemented at both the
federal and
provincial levels for almost 30
years is still evolving (Bird,
2012). The challenge of
implementing such reform at
national and subnational levels
in India involving the Union
government, 29 States, and
two Union Territories with
legislatures with different
ruling parties
is formidable. The reform of
this nature is a great
experiment in cooperative
federalism
6
and required a
Statesmanlike stewardship
1. Introduction:
The implementation of Goods
and Services Tax (GST) in
India has been variously
described as “one country-one
tax”, “a game changer” and “a
reform of the century”. The
implementation of a standard
invoice-credit destination-
based value-added tax (VAT)
on
goods and services in a large
and diverse federal country at
both national and sub-national
7
levels ruled by different
political parties is a
remarkable achievement.
Almost all the
countries that have
implemented GST have taken
considerable time to settle
down and even
in Canada, the value-added tax
on goods and services
implemented at both federal
and
provincial levels for almost 30
years is still evolving (Bird,
2012). The challenge of

8
implementing such reform at
national and subnational levels
in India involving the Union
government, 29 States, and
two Union Territories with
legislatures with different
ruling parties
is formidable. The reform of
this nature is a great
experiment in cooperative
federalism
and required a
Statesmanlike stewardship1.
Introduction
Due to reduced threshold restrictions for sales turnover, the majority of individuals, small and
medium-sized business owners were still obliged to get registrations under the previous tax
system. A single person or business owner was furthermore needed to register with many
Central and State tax agencies, including Central Excise, Service Tax, Sales Tax, etc. Except
for the Special category States, the Government doubles the GST threshold limit for sales
turnover. Small and medium-sized business owners would benefit from this shift by avoiding

9
tax burden and pointless compliances. Under the GST, there would be no need for several
registrations as there was under the previous tax system. The major accomplishment of the
government of India is the implementation of GST in the State of Jammu and Kashmir, which
will increase government income. GST would eliminate the cascading effects of taxes, assist
business in lowering manufacturing costs, and provide smooth credit throughout the whole
supply chain. A recently announced anti-profiteering policy would guarantee that the benefits
of a lower tax rate or an input tax credit would be passed along to consumers in the form of a
corresponding decrease in price. As a result, the price of authentic items has been markedly
reduced, supporting "Make in India." The main benefits of GST include industries like
FMCG, Pharma, Consumer Durables, Automobiles, and Engineering Goods that have broad
value & supply chains with processes spanning throughout several States. A fair tax system
should take into account concerns of income distribution while also making an attempt to
raise tax revenues to fund government expenditure on infrastructure and public services. The
current tax reform of switching to the Goods and Services Tax would have a tremendously
good effect on the Indian economy, on foreign trade and commerce, on industry, and
ultimately on consumers. Without a question, the GST would assist to streamline the indirect
tax system and remove the problems brought on by the previous taxing structure. We are
equipped to handle the GST as well as the many other changes coming to India. For
numerous commodities, the GST Board has created four primary tax rate slabs: a low rate of
5%, typical rates of 12% and 18%, and a higher rate of 28%. Before the introduction of the
GST, several products had higher real tax rates, but the new tax structure has reduced the tax
burden on consumers. Customers may notice a rise in the price of certain items since they are
now taxed at a higher rate. It should be emphasised, however, that the government has
retained a number of essential commodities for daily usage tax-free, either by charging no tax
at all or fully exempting them from GST. It is difficult to keep track of all of the 1,211 goods
and 600 services that are classified under the various tax slabs. Following the implementation
of GST, 43 percent of goods are subject to an 18 percent tax rate, 19 percent are subject to a
28 percent tax rate, 17 percent are subject to a 12 percent tax rate, 14 percent are subject to a
5 percent tax rate, and 7 percent are subject to an exemption list. Previously, India had a dual
GST system, which is distinct from a dual system of taxing goods and services. The term
"VAT" is used to refer to both central and state-level taxes on commodities. It has agreed to
the value-added tax concept with the restricted cross levy set off and the input tax credit
system for taxing products. With a few limits on cross-levy set-off, the same approach was
applied to the Central Excise and Service Tax. The newly implemented Swachha Bharat Cess
10
and Krishi Kalyan Cess were two of them, and they raised the tax burden on the average
person by 1%. The introduction of the Goods and Services Tax (GST) in India has been
referred to as "one nation, one tax," "a game changer," and "the reform of the century." The
Union government, 29 States, and two Union Territories, whose legislatures are under the
control of different governing parties, complicate the implementation of such a reform in
India on the national and subnational levels.

With assistance from the Center and all of the States, India implemented the GST on July 1st,
2017. The tax on the supply of goods and services took the role of other domestic trade taxes.
It is intended to be a destination-based tax with three different forms of GST: interstate GST
(IGST), state GST (SGST), and national GST (CGST). The interstate GST income is stored
in a separate account, offset by an input tax credit, and then paid depending on ultimate
consumption via a clearing house system. The GST was established as a separate organisation
by amending the Constitution, deciding on the structure of the tax by the GST Council, and
reducing the amount of time that the taxpayer and collector interact by using the IT-enabled
GST Network (GSTN) for registration, payment, and return submission.

I. BACKGROUND

a. IMPLEMENTATION of GST IN INDIA

There is no "one size fits all" or specific GST, as shown by the experience of other nation’s
implementation of the tax in those nations. There are several models with various structures
and execution procedures that are acceptable in various countries, depending on the political
context.

While considering GST as a process innovation inside a macroeconomic framework, the

present research referenced important publications to analyse the situation of GST three years
after it was established. There is just a very little probability that prior research on innovation
implementation may be changed for an economic setting; instead, it has mostly focused on
the organisational contexts. In today's environment, which is defined by the management of
economic operations and constantly changing technology, an economy, like an organisation,
has to continuously update its basic processes in order to survive and stay competitive. India

11
and other emerging economies provide a variety of macro and micro-level innovation
potential. According to earlier research, innovation helps to advance exceptional performance
and keeps the system competitive.

The three types of GST are interstate GST, state GST, and central GST (IGST). The tax is
meant to be destination-based, and interstate transaction income is placed in the IGST
account prior to being distributed by the destination via a clearinghouse procedure. After the
Constitution was changed to make the GST a joint tax of the Center and States, a new
constitutional body called the GST Council was established. It is presided over by the Union
Finance Minister and has as members Finance Ministers or other ministers nominated by
each of the States and Union Territories with legislatures (Article 269 A).

b. RESEARCH QUESTIONS

An application of innovation theory was utilized to address the context and information gaps
around a public policy initiative in a developing economy. Thus, it attempts to address two
distinct research questions (RQs):

RQ1: How has India's overall economic situation been impacted by the introduction of the
GST?

RQ2. How have different parties' perceptions of the new tax system varied?

 DATA AND RESEARCH METHODOLOGY:

The three-year-old GST program that the government has been implementing in India is the
main topic of the research. Based on the SAP-LAP framework, the study's qualitative design
is used. Step-by-step reading of the literature was done in this study to examine how prior
academics had envisioned and thought about a similar phenomenon. To critically evaluate
indirect taxation initiatives, specifically GST, the authors read materials from the GST
Network, Central Board of Indirect Taxes & Customs (CBIC), National Institution for
Transforming India (NITI) Aayog, World Bank, International Monitory Fund (IMF), and
relevant policy documents.

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  Impact of GST: (a) Cost Savings, Productivity Gains, and Impact on
Revenue

Five years are insufficient to examine the consequences of the GST since it constitutes a big
transformation. Additionally, it has undergone reform because of the ongoing changes to both
its structure and its operating details. Furthermore, owing to the diversity of the Indian
politics and the number of States with various economic features, politically acceptable
reform is far from perfect and is constantly being developed.

There are unquestionably substantial gains from the adoption of the GST, even if it is difficult
to quantify them at this time. The first is that it has effectively reduced administrative and
compliance expenses by combining several consumption taxes. The domestic trade taxes that
are assessed both horizontally and vertically between the States and the Centre have also been
successfully harmonized. Although the Union excise taxes and the State sales taxes were
concurrent and overlapped in reality, the Constitution specifically differentiates between the
taxing authorities of the Centre and the States by putting particular taxes under either the
Union or the State list. These bases were consolidated and taxed jointly based on the value
added when the GST was imposed.

(b) Impact on Revenues:

However, it was hoped that improved compliance from the tax's self-policing nature would
ultimately lead to increased revenue productivity. The GST was intended to be revenue-
neutral in the medium run. Two years may be a short period of time to evaluate revenue gains
or losses, particularly in light of the many tax rate changes that have taken place during this
time, but it still helps to identify the short- and medium-term activities necessary to improve
revenue productivity.

It is also evident that, from the standpoint of the Central government, there has been a
significant gap in tax collection. The budget estimate for the federal government's 2018–19
fiscal year was Rs. 7.43 trillion, while the controller general of accounts announced that the
actual collection was Rs. 5.81 trillion, a fall of Rs. 1.62 trillion or 22%. In spite of the
updated projection, the actual collection was 10% lower than anticipated. The size of the loss
is worrisome even if the decreased income was caused by the tax rates on a range of goods
being reduced from 28 percent to 18 percent in November 2018.

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Let us take a quick review with the help of table……........

MONTH FY(2020-21)IN CR. FY(2021-22)IN CR.

APRIL 32172 139708
MAY 62151 102709
JUNE 90918 92849
JULY 87422 116393
AUGUST 86449 112020
SEPTEMBER 95480 117010
OCTOBER 105155 130127
NOVEMBER 104963 -
DECEMBER 115174 -
January 119875 -
February 113143 -
March 123902 -
TOTAL 1136085 810816

6. Objectives of the research analysis:

The following primary goals have been taken into account in the research and presentation:

a) To get a thorough understanding of how the GST taxation structure has changed.
b) Thoroughly comprehending the Goods and Services Tax (GST) concept, which is a
new taxation system in India.
c) Recognizing the components of the GST and how it differs from the country's current
tax structure.

14
 d) To assess GST's advantages and disadvantages. To determine how various goods and
services would be taxed in India.
e) To provide details for upcoming studies on the GST-based taxation system.

List of Taxes Abolished After GST implementation:

GOVERNMENT LIST OF TAXES

Central Government taxes  Central excise duty

 Service tax

State Government Taxes  Additional custom duty

 Sales Tax

 Entertainment Tax
Taxes imposed by govt on G/S
 Other taxes and duties

 Stamp Duty

Taxes imposed by  Vehicle Tax

State Stamp Duty
Governments on
Goods Vehicle
15
 Tax
on Services
Taxes imposed by
State Stamp Duty
Governments on
Goods Vehicle
Tax
on Services

Structural Model of GST in INDIA

One Country, One Tax, or GST, is the foundational principle. Almost all indirect taxes
collected by the federal and state governments are replaced by a single tax known as the
goods and services tax or GST. The central goods and services tax (CGST) and the sales tax
(SGST) are combined under the dual-GST concept (state goods and services tax). The SGST
would replace indirect state taxes including state vat, purchase tax, luxury tax, octroi, and tax
on lotteries and gaming, while the CGST will take care of central indirect state taxes like the
central excise tax, central sales tax, service tax, a special extra charge on customs, and
counter veiling duties. A component of the GST is the integrated goods and services tax
(IGST), sometimes referred to as the interstate goods and services tax.

7. Impact on the Indian Economy:

The Indian economy has been more globalised during the last 20 years. State and federal
taxes will be merged into a single tax payment if GST is adopted. It would also raise India's
position in both home and international markets. As a consequence, it's probable that both
inflation and the tax-to-GDP ratio will become better.

16
The GST is predicted to provide a number of benefits since several taxes will be replaced
with a single tax, including a gradual decrease in compliance needs. It is believed that this
would reduce prices and subsequently inflation since it will remove the impact of tax on tax
and permit seamless credit. The government may anticipate financial gains since the tax base
would expand and because the predicted 27 percent GST would apply to both goods and
services. GST is a tax that is known around the globe, thus it is also predicted that it would
increase the competitiveness of Indian exports and make India a desirable place for
international investment.

 DISCUSSION:

8. Problems with GST:

a) Amendment in the constitution…

The adoption of GST is required by the Constitutional Amendments that permit States to levy
Service Tax and that provide the Central Government the power to generate revenue from
dealer and retailer transactions. Federal and state administrations both concur that
replacement is desirable. The process of revising the law will take some time, even if it is not
a big problem. Following the constitutional change, the Union List received a new item 92C
that gave it the power to levy the services tax. Before passing the GST, both administrations
adopted a number of adjusted measures, and they should be implemented as soon as possible.

b) Administration issue…

The GST is a collection of many indirect tax types that bring in money for the federal
government as well as state governments. But there might be other problems, including the
issue of electricity and who would run the system. How is the administration going to
operate? The person who decides the tax rate. We may infer from the first paper's explanation
that there will be distinct tax management on both the federal and state levels. While the state
will be in control of the state GST, the federal government will administer the GST.

c) Tax awareness amongst stakeholders…

To inform the public about the new tax and how it would function, the Canadian
government's "Department of Finance" spent $11.6 million on print, radio, and television

17
advertising during the introduction of the GST in 1990. A video that was aired through
satellite was shown on the nation's cable television networks. Nearly $5 million was spent on
GST running costs by the department's communication groups. With 6,000 calls handled
daily, they provided a toll-free hotline service. Additionally, the Excise and Customs
Department spent an extra $10.6 million on the GST in 1990–1991 and an additional $9.2
million on the production and distribution of documents describing the new Tax's
administration. GST cost a total of $ 85 million. Proctor & Gamble, which spent $56.7
million on the GST campaign, had the biggest advertising budget in the private sector in
1989. India, a developing country, with a rural population of more than 60%. The cost of
spreading awareness of the GST is a considerable burden for the (Central and State
governments).

d) Political Issue…

VAT is now imposed by 29 Indian States and 7 Union Territories. Each State is free to set its
own tax rate and control the tax system as it deems proper. The central government would be
in control of both the tax structure and the tax rate if it were given that authority. It is not
evident why all the States give up their rights to the Union Government, despite the fact that
it is a severe matter.

e) Inflation…

Inflation is a risk for the services industry. In addition, the services sector contributes 50% of
India's GDP. Currently, the bulk of services is subject to a GST rate of 18%, which is higher
than the former tax system's 15% tax rate. As a consequence, there will be pressure for price
increases in the services sector. To some degree, it will assist in bringing down service prices
so that service providers may earn input tax credits for the goods and services they purchase.
Another aspect that must be taken into account is the fact that the GST would increase
compliance expenses for many service companies. Banks, insurers, and telecommunications
are a few examples. Prior to GST, registration was only essential at the federal level; now,
registration at the state level is mandatory. The advantages of the input tax credit would be
diminished as a consequence, and the cost of delivering services would rise (ITC).

9. Prospects of GST:

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 A) India And GST…

India's government is a federal one. The Central Products and Services Tax (CGST) and the
State Goods and Services Tax (SGST) would both be levied on the Taxable Value of goods
plus services under the dual GST model that the Union Government has envisaged.

B) Benefit to Industry...

The GST is projected to benefit the user of the full supply chain of goods and services, which
encompasses commerce and agriculture from beginning to end, via a comprehensive tax
system. It is predicted that the lower tax burden would boost industry income and provide
new commercial possibilities.

C) Benefit to Exports…

The price of products and services produced will fall as a result of the GST's significant
reduction in the input costs of the Central and State Taxes. This will increase competition for
Indian products and services in the global market.

D) Reduction In Cost…

The implementation of the GST will result in a significant decrease in the costs of cotton
textiles (by 6.44 percent), wool, silk, and synthetic fiber textiles (by 11.4 percent), as well as
textile products such as clothing. This is according to the Government of India's 2009 "Task
Force on Goods and Services Tax: Thirteenth Finance Commission" report (by 17.45
percent). Because their proportionately bigger share of total consumption costs than the rich
is what would benefit most from price decreases, it will be the poor. Part of the urgent
problem of poverty will be addressed by it. Implementing GST will result in higher real
returns on labor, investment, and land.

8. Conclusion And Policy Implications:

Implementing the Goods and Services Tax will be an important step toward reorganizing
India's indirect tax system (GST). A single national market would be made possible by
reducing cascading or double taxing by combining many Central and State taxes into one tax.
The ease of administration and enforcement should result from the tax's simplicity. GST is
expected to enhance e-commerce and boost industry competitiveness. The GST would

19
drastically alter the Indian economy by unifying the market and reducing the effect of taxes
on the price of goods and services. The present system will undergo a complete redesign as a
consequence, which will have an impact on the tax structure, tax incidence, tax calculation,
tax payment, compliance, credit use, and reporting. The expansion of the Indian economy
benefits from the Goods and Service Tax. Due to a rise in taxes on services, which make up
60% of India's GDP, the GST initially harmed growth. The GST may enhance government
income, and this extra money may help fund the nation's many infrastructure initiatives.
Small and medium-sized firms in particular may have difficulties at first as a result of the
GST's tighter restrictions on accounting procedures in a company. The dual GST that India is
considering would provide the Center and the States equal authority to charge GST. This will
guarantee that the States' financial independence and the cooperative federalism ideology as a
whole be maintained. Due to its complexity & lack of information, the impact of GST on
consumers is yet unclear. Consumers are not knowledgeable of the accounting procedures
and financial practises used by small firms as well as those in the retail, restaurant, and
lodging industries. As opposed to the previous years' 7.6% and 8.0 percent growth rates, the
GDP growth of India is predicted to be 6.4% and 7.4% in 2017 and 2018, respectively. The
updated fiscal growth projections for 2018 and 2019 are 6.7% and 7.5%, respectively. Let's
hope that the GST will have a favourable effect on the Indian economy and on consumers in
the near future. The government has to allow business and consumers ample time to embrace
this major tax adjustment.

9. My point of view:

It is also evident from the description above that the GST will help both producers and
consumers since it will cover a variety of input tax credit set-offs, and service tax set-offs,
and include a number of taxes. Further conclusions on the beneficial impacts of GST on
various businesses and sectors are possible.

REFERENCES:

 Articles from www.arjonline.org on the Impact of GST on India.

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 www.ijirt.org Publication Volume & Issue: Volume 6, Issue 12

 www.ijcrt.org

 Central Board of Excise & Customs. (n.d.). Retrieved 10 12, 2017,

from www.cbec.gov.in: http://www.cbec.gov.in/htdocscbec/gst

 www.financialexpress.com Articles on the effect of GST.

21