GST : A ROAD MAP FOR IMPLEMENTATION

INDEX/CONTEXT
CHAPTER 1:
1.1 Introduction
1.2 Constitutional provision
1.3 Objectives of the study
1.4 Research methodology
1.5 Literature Review
1.6 Research Question
1.7 Scope Of The Study
1.8 Statement Of The Problem

CHAPTER-2
Goods and Service Tax (GST) Implementation In India: A Conceptual
Framework.
2.1 Origin
2.2 GST History
2.3 History of GST in India and its implementation.
2.4 GST Council and Supporting Laws to implement GST
2.5 Principles followed in subsuming the taxes
2.6 Gst Legislation

CHAPTER-3
GOODS AND SERVICE TAX--AN GLOBAL EXPERIENCE
3.2 International scenario.
3.3 An Integrated Regime – Birth Of An Idea
3.4 Significance Of Gst
3.5 Benefits of GST Bill- Business and Industries, Central And State
Government and to the Consumer.

Chapter-4
THE CENTRAL GOODS AND SERVICES TAX BILL ACT, 2017
4.1 Meaning
4.2 Administration-
4.2.1 Officers Under the Act- Appointment of officers and Powers of Officers
4.3 Registration
4.3.1 Persons Eligibility for registration
4.3.2 Persons Non Liable for registration
4.3.3 Procedure for GST registration
4.3.4 Amendment of registration.
4.3.5 Cancellation of registration.
4.3.6 Revocation of cancellation of registration
4.3.7Appeal and review
4.4 Refunds
4.5 Appeal And Review
4.6 Special Provisions Relating To Casual Taxable Person And Non-Resident
Taxable Person

CHAPTER-5
THE UNION TERRITORY GOODS AND SERVICES TAX BILL, 2017
5.1 Meaning
5.2 Administration
5.2.1 Officers under the act
5.2.2 Authorization Of Officers
5.2.3 Powers Of The Officers
5.2.4 Appointment Of Officers Of Central Tax As Proper Officer In Certain
Circumstances
5.3 Inspection, Search, Seizure And Arrest
5.4 Demands And Recovery

CHAPTER 6
Impact of Goods and Service Tax (GST) on Indian Economy
6.1 Impact Of Gst
6.2 Positive Impacts Of Gst
6.3 Negative Impacts Of Gst
..

CHAPTER 7
GST: A Study on the Treatment of Inter- State Transactions in India
7.1 GST Calculator
7.2 GST rates in India
7.3 IGST Model (Inter-State Transactions of Goods & Services) and Input tax
credit (ITC)

CHAPTER 8
Issues for Consideration: The Goods and Services Tax(GST)
8.1 Multiple GST Tax Rate Structure
8.2 Gst Levied On Services Delivered In A State May Be Consumed Across
Multiple States
8.3 Anti-Profiteering Authority
8.4 Rationale behind sharing unutilised money in the GST Compensation Fund
CHAPTER 8: Conclusion.

What is GST bill?

Goods and Services Tax (GST) is defined as the tax levied when a consumer buys a
good or service. It is proposed to be a comprehensive indirect tax levy on
manufacture, sale and consumption of goods as well as services. GST aims to
replace all indirect levied on goods and services by the Indian Central and State
governments. GST would subsume with a single comprehensive tax, bringing it all
under a single umbrella, eliminating the cascading effect of taxes on the production
and distribution prices of goods and services.

Current Scenario: cascading effect of taxation

The current multi-staged tax structure has charges from the State and Union
governments separately, leading to cascading effect of taxes. There are taxes at
different rates and at multiple points. The Centre has taxes like Income tax, service
tax, central sales tax, excise duty and security transaction tax while at the State level
it includes VAT or sales tax, octroi, state excise, property tax, entry tax and
agriculture tax. These taxes lead to increased tax burden on the Indian products
affecting the prices and sales in the domestic as well as international markets.
Wish to know more about GST?

How will GST be a remedy?

Remedy to the above scenario of multiple taxes and its cascading effect which is a
burden on common man is GST. The framework of proposal has dual GST which
means it will have a federal structure. GST will basically have three kinds of taxes
namely Central, State and one called integrated GST that will help to tackle inter-
state transactions. Under the current GST tax reform, all forms of supply of goods
and services like transfer, sale, barter, exchange and rental will have a CGST and
SGST.

What is the need for GST?

One can explain the impact of cascading taxes with an example. Say A sells goods
to B after charging sales tax, and then B re-sells those goods to C after charging
sales tax. In this case while B was computing its sales tax liability, it also included the
sales tax paid on previous purchase, which is how it becomes a tax on tax. This is
also referred to as taxes on taxes. This is where the need for GST arises to do away
with the phenomenon.

What are the challenges in the implementation?

India is adopting a dual GST, namely the Central GST (CGST) and state GST
(SGST). The main hurdle in the implementation will be the coordination among
different states. The Centre and States will have to come to consensus on the
uniform GST rates, inter-state transaction of goods and services, infrastructural
requirements to implement the new tax reform, all of which needs to be worked upon
for the smooth transition into GST pattern.

Other factors to be considered:

 Since GST is a destination based tax, there should be clarity on where the
goods are going. Proper methodology should be chalked out as it would
require proper management in terms of services provided.
 There has to be uniformity in the implementation of GST in all states at the
same time and the same rates or else it would be difficult to comply with the
law provisions.

Features of GST:
 GST will have two components namely Central GST levied by the Centre
and State GST levied by the states.
 Petroleum products, alcohol for human consumption and tobacco have been
kept out of the purview of the GST.
 The final consumer will have to bear only the GST charged by the last dealer
in the supply chain.
 The tax collected would be divided between the Centre and the States in a
manner that would be defined by the parliament, as per the
recommendations of the GST Council.
 The bill proposes an additional tax not exceeding 1% on inter-state trade in
goods, to be levied and collected by the Centre to compensate the states for
two years, or as recommended by the GST Council, for losses resulting from
implementing the GST.

Advantages of implementing GST:

Introduction of GST is considered to be a significant step in the reform of indirect
taxation in India. Amalgamating several Central and State taxes into a single tax
would help mitigate the double taxation, leading to a common national market. From
the consumers point of view, the advantage would be in terms of a reduction in the
overall tax burden on goods, which is currently estimated at 25%-30%. (Source:
Wikipedia)

The other advantages include:

 Reduction in prices: Manufacturers or traders would not have to include
taxes as a part of their cost of production, which would lead to reduction in
prices.
 Lower compliance and procedural cost: There would be reduction in the load
to maintain compliance. Also keeping record of CGST, SGST and IGST
separately would not be required.
 Move towards a Unified GST: Although India is adopting dual GST, it is still a
good move towards a Unified GST which is regarded as the best method of
Indirect Taxes.
 GST rollout can help boost India’s GDP growth by 100-200 bps or (1 to 2%)
as this will help faster and cheaper movement of goods across the country
with a uniform taxation structure.
 GST’s successful implementation would give a strong signal to the foreign
investors about India’s ability to support business.
 GST will be beneficial with more transparency, efficient compliance, ramp up
in GDP growth to the Centre, states, industrialists, manufacturers, the
common man and the country at large.

What if India launches GST?

The long awaited GST bill if passed by India should have the following benefits, a few
to mention:
 Will help in reducing tax evasion:
All the distributors will prefer purchase with invoices, because that would give them
better profit margins as the distributor will get credit of all the taxes paid at the
previous stage. Currently, it is the distributor who has to bear the burden of the
excise duty. So if the customer insists on taking the bill, we can presume that the tax
evasion should fall. This will indeed be the biggest advantage of GST.
 Removal of location bias approach:
GST would help to even out the tax structures across various states, omitting location
bias. As taxes should not be a hindrance to the investment decision of an individual,
introduction of GST would help an investor to put up business units in any state
without the worry of tax difference. This would boost the business in undeveloped
locations as well.
 Lesser incentive for tax evasion:
Currently, taxes are being paid on the entire underlying value of a product or service,
but with GST, companies will have to pay tax only on the value-addition. This would
lead to reduction in the actual tax paid and also decrease the incentive for evasion.
 Unified market:
With the implementation of GST, there will be cut down of individual taxes imposed
by the central government as well by the states. This would lead to a unified market
and would boost the movement of goods across states with drop in the business
costs.
 Increase in State revenues:
GST will expand the tax base and thereby lead to increase in the revenues available
at the states’ and centre’s disposal. This would thereby help in increasing the
resources of the poorer / consumer states like, Bihar, Uttar Pradesh and Madhya
Pradesh will increase substantially.
 Improvement in tax governance:
GST would improve tax governance in two ways. One it is related to self-policing
incentive inherent to a valued-added tax that can work very powerfully in the GST.
The second relates to the dual monitoring structure of GST, one by the States and
the other by the Centre.

Impact of GST on the ‘Make in India’ initiative

The current indirect tax regime is a hindrance in the growth of the domestic
manufacturing sector as well as flow of foreign investment to the sector. Introduction
of GST is important as it would help alleviate the situation. There would be reduction
in cost of manufacturing both from a tax view as well as compliance front. Inspite of
being one country, India has more than 30 markets which would be transformed into
a single market with GST. Since it will also be applicable on imports, the tax factor
working against ‘making in India’ will disappear, further boosting the production and
in turn the exports as well.

RECENT POSITIONING:
The Monsoon session of the Parliament that has begun recently will go on till August
12. The bill has already been cleared in the Lok Sabha. Once again, hopes are high
that the Goods and Services Tax Bill will get passed in the Rajya Sabha, making way
for this reform to become legislation and eventually get implemented next year.

Roadblock to the introduction of GST

GST still has a long way to go before it is finally implemented. After the Bill is passed
in both the Houses of Parliament by two thirds majority, it will be sent to the State
Legislatures for ratification. At least 50% of the State Legislature approval will be
required before the proposed Constitution amendments are brought into effect. After
this, the Parliament would be required to legislate laws pertaining to CGST and
IGST.
Conclusion:
GST will bring in transparent and corruption-free tax administration, removing the
current shortcomings of the supply chain owing to the multi-layered policies. GST is
not only investor or business friendly but also consumer friendly. GST is the need of
the hour and any hindrance to its enactment is clearly unjustified and not in national
interest. Critics argue about the feasibility of implementing GST. But one should
always remember that there is no reform that is perfect. It is important that we start
with the current bill and gradually improvise the same in due course.

TIMELINE OF GST

 1986: Vishwanath Pratap Singh, Finance Minister in Rajiv Gandhi’s

government, proposed in the Budget a major overhaul of the excise taxation
structure. This was similar to GST in a theoretical sense.

 2000: Initiating discussions on GST, Vajpayee government appoints an

Empowered Committee headed by the then finance minister of West
Bengal Asim Gupta.

 2004: Vijay Kelkar, then advisor to the Finance Ministry, recommends

GST to replace the existing tax regime.
 Feb 28, 2006: GST appears in the Budget speech for the first time.
Finance Minister Chidambaram sets an ambitious task of implementing
GST by April 1, 2010.
 Feb 28, 2007: Chidambaram said in his Budget speech that the Empowered
Committee of finance ministers will prepare a road map for GST.
 April 30, 2008: The Empowered Committee submits a report titled ‘A
Model and Roadmap Goods and Services Tax (GST) in India’ to the
government.
 Nov 10, 2009: Empowered Committee submits a discussion paper in the
public domain on GST welcoming debate.
 Feb 2010: Government launches project for computerisation of commercial
taxes. Finance Minister Pranab Mukherjee defers GST to April 1, 2011.
 March 22, 2011: Constitution Amendment Bill (115th) to GST introduced
in the LokSabha
 March 29, 2011: Bill referred to Standing Committee on Finance.
 Nov 2012: Finance minister and state ministers decide to resolve all issues
by Dec 31, 2012.
 Feb 2013: Declaring government’s resolve to introduce GST, the finance
minister makes provisions for compensation to states in the Budget.
 Aug 2013: The standing committee submits a report to
Parliament suggesting improvements. But the bill lapsed as the 15th
LokSabha was dissolved.
 Dec 18, 2014: Cabinet approval for the Constitution Amendment Bill
(122nd) to GST.
 Dec 19, 2014: The Amendment Bill (122nd) in the LokSabha
 May 6, 2015: The Amendment Bill (122nd) passed by the LokSabha.
 May 12, 2015: The Amendment Bill presented in the RajyaSabha
 May 14, 2015: The Bill forwarded to joint committee of RajyaSabha and
LokSabha
 Aug 2015: Government fails to win the support of Opposition to pass the
bill in the RajyaSabha where it lacks sufficient number.
 Aug 3, 2016: RajyaSabha passes the Constitution Amendment Bill by a
two-thirds majority. Note: GST constitutional amendment bill needs
to passed by at least 50% of state legislatures to be implemented. Assam is
1st State to pass GST bill.
 1 July 2017: GST to be applicable across India.
  WILL HELP IN REDUCING TAX EVASION:
All the distributors will prefer purchase with invoices, because that would give
them better profit margins as the distributor will get credit of all the taxes paid
at the previous stage. Currently, it is the distributor who has to bear the burden
of the excise duty. So if the customer insists on taking the bill, we can presume
that the tax evasion should fall. This will indeed be the biggest advantage of
GST.

 REMOVAL OF LOCATION BIAS APPROACH:

GST would help to even out the tax structures across various states, omitting
location bias. As taxes should not be a hindrance to the investment decision of
an individual, introduction of GST would help an investor to put up business
units in any state without the worry of tax difference. This would boost the
business in undeveloped locations as well.

 LESSER INCENTIVE FOR TAX EVASION:

Currently, taxes are being paid on the entire underlying value of a product or
service, but with GST, companies will have to pay tax only on the value-
addition. This would lead to reduction in the actual tax paid and also decrease
the incentive for evasion.

 UNIFIED MARKET:
With the implementation of GST, there will be cut down of individual taxes
imposed by the central government as well by the states. This would lead to a
unified market and would boost the movement of goods across states with drop
in the business costs.

 INCREASE IN STATE REVENUES:

GST will expand the tax base and thereby lead to increase in the revenues
available at the states’ and centre’s disposal. This would thereby help in
increasing the resources of the poorer / consumer states like, Bihar, Uttar
Pradesh and Madhya Pradesh will increase substantially.
  IMPROVEMENT IN TAX GOVERNANCE:
GST would improve tax governance in two ways. One it is related to self-
policing incentive inherent to a valued-added tax that can work very
powerfully in the GST. The second relates to the dual monitoring structure of
GST, one by the States and the other by the Centre.

• NETURALITY IN BUSINESS
As it is neutral to business processes, business models, organization
structure, geographic location and product substitutes, it will promote
economic efficiency and sustainable long-term economic growth.

STATEMENT OF OBJECTS AND REASONS

Presently, the Central Government levies tax on, manufacture of certain

goods in the form of Central Excise duty, provision of certain services in the
form of service tax, inter-State sale of goods in the form of Central Sales tax.
Similarly, the State Governments levy tax on and on retail sales in the form of
value added tax, entry of goods in the State in the form of entry tax, luxury tax
and purchase tax, etc. Accordingly, there is multiplicity of taxes which are
being levied on the same supply chain.

2. The present tax system on goods and services is facing certain

difficulties as under—

(i) there is cascading of taxes as taxes levied by the

Central Government are not available as set off against the taxes
being levied by the State Governments;

(ii) certain taxes levied by State Governments are not

allowed as set off for payment of other taxes being levied by
them;
 (iii) the variety of Value Added Tax Laws in the country
with disparate tax rates and dissimilar tax practices divides the
country into separate economic spheres; and

(iv) the creation of tariff and non-tariff barriers such as

octroi, entry tax, check posts, etc., hinder the free flow of trade
throughout the country. Besides that, the large number of taxes
create high compliance cost for the taxpayers in the form of
number of returns, payments, etc.

3. In view of the aforesaid difficulties, all the above mentioned

taxes are proposed to be subsumed in a single tax called the goods and
services tax which will be levied on supply of goods or services or both
at each stage of supply chain starting from manufacture or import and
till the last retail level. So, any tax that is presently being levied by the
Central Government or the State Governments on the supply of goods
or services is going to be converged in goods and services tax which is
proposed to be a dual levy where the Central Government will levy and
collect tax in the form of central goods and services tax and the State
Government will levy and collect tax in the form of state goods and
services tax on intra-State supply of goods or services or both.

4. In view of the above, it has become necessary to have a Central

legislation, namely the Central Goods and Services Tax Bill, 2017. The
proposed legislation will confer power upon the Central Government
for levying goods and services tax on the supply of goods or services or
both which takes place within a State. The proposed legislation will
simplify and harmonise the indirect tax regime in the country. It is
expected to reduce cost of production and inflation in the economy,
thereby making the Indian trade and industry more competitive,
domestically as well as internationally. Due to the seamless transfer of
input tax credit from one stage to another in the chain of value addition,
there is an in-built mechanism in the design of goods and services tax
that would incentivise tax compliance by taxpayers. The proposed
goods and services tax will broaden the tax base, and result in better tax
compliance due to a robust information technology infrastructure.

5. The Central Goods and Services Tax Bill, 2017, inter alia,
provides for the following, namely:—

(a) to levy tax on all intra-State supplies of goods or

services or both except supply of alcoholic liquor for human
consumption at a rate to be notified, not exceeding twenty per
cent. as recommended by the Goods and Services Tax Council
(the Council);

(b) to broad base the input tax credit by making it

available in respect of taxes paid on any supply of goods or
services or both used or intended to be used in the course or
furtherance of business; (c) to impose obligation on electronic
commerce operators to collect tax at source, at such rate not
exceeding one per cent. of net value of taxable supplies, out of
payments to suppliers supplying goods or services through their
portals;

(d) to provide for self-assessment of the taxes payable by

the registered person;

(e) to provide for conduct of audit of registered persons in

order to verify compliance with the provisions of the Act;

(f) to provide for recovery of arrears of tax using various

modes including detaining and sale of goods, movable and
immovable property of defaulting taxable person;

(g) to provide for powers of inspection, search, seizure and

arrest to the officers;
 (h) to establish the Goods and Services Tax Appellate
Tribunal by the Central Government for hearing appeals against
the orders passed by the Appellate Authority or the Revisional
Authority;

(i) to make provision for penalties for contravention of the

provisions of the proposed Legislation;

(j) to provide for an anti-profiteering clause in order to

ensure that business passes on the benefit of reduced tax
incidence on goods or services or both to the consumers; and

(k) to provide for elaborate transitional provisions for

smooth transition of existing taxpayers to goods and services tax
regime.

6. The Notes on clauses explain in detail the various provisions

contained in the Central Goods and Services Tax Bill, 2017.

7. The Bill seeks to achieve the above objectives

5. SIGNIFICANT FEATURES OF “DUAL
GST” MODEL RECOMMENDED IN INDIA:
India intends to adopt a dual GST which will be imposed concurrently
by the Center and States. The dual model was propounded in the First
Discussion Paper released by the “Empowered Committee” with objective to
do away with the problem of tax cascading and move to a common tax base.

The significant features of Dual GST recommended in India, in

conjunction with the recommendations by the JWG (Joint Working Group),
are as under:

1. There will be Central GST to be administered by the Central

Government and State GST to be administered by State Governments.

2. Central GST will replace existing CENVAT and Service tax while
State GST will replace State VAT.

3. Central GST may subsume following indirect taxes on supplies of

goods and services:

 Central Excise Duties (CENVAT)

 Additional excise duties including those levied under Additional Duties
of Excise (Goods of Special Importance) Act, 1957.
 Additional customs duties in the nature of countervailing duties,
i.e.,CVD, SAD and other domestic taxes imposed on imports .
 Cess levied by the Union eg., cess on rubber, tea, coffee etc.
 Service Tax
 Central Sales Tax – To be completely phased out
 Surcharges levied by the Union like National Calamity Contingent
Duty, Education Cess.
4. State GST may subsume following State taxes:
 Value Added Tax
 Purchase Tax State Excise Duty (except on liquor)
 Entertainment Tax (unless it is levied by the local bodies)
 Luxury Tax; Octroi Entry Tax in lieu of Octroi
 Taxes on Lottery, Betting and Gambling

5. The proposed GST will have two components – Central GST and
State GST –the rates of which will be prescribed separately keeping in
view the revenue considerations, total tax burden and the acceptability
of the tax.

6. Taxable event in case of goods would be ‘sale’ instead of

‘manufacture’.

7. Exports will be zero rated and will be relieved of all embedded taxes
and levies at both Central and State level.

8. The JWG has also proposed a list of exempted goods, which includes
items such as, life saving drugs, fertilizers, agricultural implements,
books and several food items.

9. Certain components of petroleum, liquor and tobacco are likely to be

outside the GST structure. Further, State Excise on liquor may also be
kept outside the GST.

10. Taxes collected by Local Bodies would not get subsumed in the
proposed GST system.