Goods and Services Tax (GST) is an indirect tax imposed in India on the supply of goods and services. It is a comprehensive multistage as it is imposed at every stage in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer. And destination-based tax, as is collected from the point of consumption and not the point of origin like promised taxes. Goods and services are divided into five different tax slabs for collection of tax-0%, 5%, 12%, 18%, however petroleum products alcoholic drinks, and electricity are not taxed under GST.
The reform of India’s indirect tax Regine was started in 1986 by Vishwanath Pratap Singh, finance minister in Rajiv Gandhi’s government, with the introduction of the modified value Added (MODVAT) subsequently, prime minister PV Narasimha Rao and his finance minister Manmohan Singh, initiated early discussions on a value-added tax (VAT) at the state level. A single common “goods and services tax (GST) was proposed and given a go-ahead in 1999 during a meeting between prime minister Atal Bihari Vajpayee and his economic advisory panel which included three farmer RBI governance IG panel Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the finance minister of West Bengal, Asim Das Gupta to design a GST model. The Rani Das Gupta committee was also tasked with putting in place the backend technology and logistics. It later came out for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee Government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend a tax force. In 2005 the Kelkar committee recommended rolling out GST as suggested by the 12th finance commission. After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election into power, the new finance minister p Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1st April 2010. However, in 2011, with the Trinamool congress routing (M) CPI out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done. In the 2014 Lok Sabha election, the Bhartiya Janata Party-led NDA government was elected into power with the consequential dissolution of the 15th Lok Sabha the GST Bill-approved by the standing committee for introduction lapsed seven months after the formation of the then Modi government the new finance minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May 2016 the Lok Sabha passed the constitution amendment bill passing the way for GST.
The GST was launched at midnight on 1 July 2017 by the president of India, and the government of India. The launch was marked by a historic midnight session of both the houses of parliament convened at the central hall of the parliament. Though the session was attended by industry including Ratan Tata, it was boycotted by the opposition due to the predicted problems that it was bound to lead for the middle and lower class Indians. It is one of the few midnight sessions that have been held by the parliament the others being the declaration of India’s independence on 15 August 1947 and the silver and golden jubilees of that occasion. Members of congress boycotted the GST launch altogether. They were joined by the members of the train band.
MORE ABOUT GST
The single GST subsumed several taxes and lorries which included central excise duty sub charges state leaders value-added tax and Octroi other levies which were applicable on interstate transportation of goods have also been done away net the GST regime. GST is levied on all transactions such as sale transfer purchase barter lease or import of goods and services. India adopted a dual GST model meaning that taxation is administered by both the union and state governments.
HSN is an 8 digit code for identifying the applicable rate of GST on different products as per GST rules. IF a company has a turnover of up to 1.5 crores in the proceeding financial year then they need not mention the HSN code while supplying goods on invoices. If a company has a turnover of more than 1.5 Cr. Then they need to mention the first two digits of the HSN code while invoices.
The GST is imposed at a variable rate on variable items. The rate of GST is 18% for soaps and 28% for washing detergents. On GST on movie tickets is based on slabs, with 18% GST for tickets that costs less than Rs 100 and 28% on tickets costing more than Rs 100. Check posts across the country were abolished ensuring free and fash movements of goods. The central government had proposed to insulate the revenues of the states from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and its products. The government has ensured rates of compensation for any revenue loss incurred by them from the date of GST for five years. However, no concrete laves have yet been made to support such action.
An E-way bill is an electronic permit for shipping goods similar to a waybill. It was made mandatory for interstate transport of goods from 1 June 2018. It is required to be generated for every interstate movement of goods beyond 10 kilometres and the limit of 50,000. The pilot started on 1st February 2018 but was withdrawn after glitches in the GST network. The state is divided into four zones.
INTRA-STATE E-WAY BILL
The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, and Telangana which amount to 61.8% of the interstate e-way bill from 15 April 2018 to further reduce tax evasion. It was successfully introduced in Karnataka on 1 April 2018.
REVERSE CHARGE MECHANISM
The reverse charge mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of unregistered, smaller the tax on behalf of suppliers. The receiver of the goods is eligible for the Input tax credit, while the registered dealer is not. In the notification noted on 29th January 2019, the Indian government has finally implemented the RCM (reverse charge mechanism) which started on 1st February 2019 as per the GST acts and amendments. Also to note that the up to INR 5000 exceptions will be removed effectively.
GOODS KEPT OUTSIDE THE GST
- Alcohol for human consumption
- Petrol and petroleum products (GST will apply at a later date ) viz.
Petroleum crude, high-speed diesel, motor spirit ( petrol) natural gas aviation turbine fuel.
GST council is the governing body of GST having 33 members. It is chaired by the Union Finance Minister. GST council is an apex member committee to modify, council, or produce any law or regulation based on the content of goods and services tax in India. The council is headed by the union finance minister Nirmala Sitharaman assisted the finance minister of all the states of India. The GST council is responsible for any revision or enactment of rules or any rate changes of the goods and services in India.
GOODS AND SERVICE TAX NETWORK
The GST N software is developed by Infosys Technologies and the information Technology network that provides the computing resources is maintained by the NIC “Goods and Services Tax “ Network (GSTN) is a non-profit organization formed for creating a sophisticated network accessible to stakeholders, government and taxpayers to access information from a single source (petrol). The portal is accessible to the tax authorities from tracking down every transaction, while taxpayers can connect for their tax returns. The GSTNS authorized capital is 10 crores (US$1.4 million) which initially the central government held 24.5 per cent were held by non-government financial institutions, HDFC hold 20%, ICICI holds 10% NSE Strategic Investment holds 10% and LIC housing finance holds 11%
NEED FOR GST IN INDIA
THE TAX STRUCTURE WILL BE SIMPLE
At present there is a huge member of taxes that has to pay by consumers with GST it will single tax to pay which is must easier for businesses according to complexities will reduce and results in less paperwork which will save both time and money GST will increase economic GDP by 2% -2.5%.
INCREASE IN TAX REVENUE
A simple tax structure will bring more taxpayers and in return, it will be the revenue for the government.
GST will eliminate all other taxes of indirect taxes and this will effectively mean that the tax amount paid by end-users will reduce. As in economics, the lower will the prices more will be demand for that product.
Around 38 lakhs new taxpayers have registered under the GST regime and the total count has crossed one crore if we include the 64 lakh earlier novels. The total number of taxpayers was above 1.14 crore in October 2018
|Month||No. of returns||Change||No.||Change|
|January||73 30 lakh|
|December||72 44 lakh||67 lakh|
|November||69 60 lakh||64 lakh|
|October||67 45 lakh||65 lakh|
IMPACT OF GST
- TRANSPARENT TAX MANAGEMENT
The introduction of technology into the taxation system can be a blessing in disguise, an opportunity to bring about transparency in tax management. Rather than relying on cash transactions, the wholesalers will now get an opportunity to go digital.
- FINANCIAL STREAMING
Because the entire supply value chain including tax forms will be on GST records wholesalers will be better connected to retailers and suppliers this will make it easier to process payments and get tax returns promptly thereby improving the cash flows.
- RE-ORGANISATION OF SUPPLY CHAIN
GST will enable high visibility and streamlining of the supply chain providing wholesalers with a transparent view of supply movements. However, in the initial transition phase, many wholesalers may undergo de-stocking since they would have already paid VAT on their current stocks.
- EASE OF BORROWING THROUGH DIGITAL LENDING
Because financial and tax transactions will now be recorded in the GST system even small traders will have digital records that will act as a ready reckoner of information when a trader opts for a loan. Financial institutions and online lenders like capital float can now easily access the loan eligibility of small traders such as Kirana owners by accessing this data and providing them with quick and easy loans.
- IMPORT TAX CREDIT FACILITY
Retailers would be able to claim taxes paid for input products and services availed. This will present a cost advantage to retailers. Under GST they will be able to claim the tax paid on the most refrigerator when they file their taxes.
- EASE OF ENTRY INTO THE MARKET
The market is expected to become more business-friendly due to the clarity of processes related to the procurement of raw materials and better supply logistics.
- BETTER BORROWING OPPORTUNITY
The retailer’s scope for business growth can be increased by increasing the retailer’s access to finances. This is where fintech conders like capital float slip in they can ease their passage to the new regime. Capital float recognizes the financial challenges.
FOR IMPORTERS AND EXPORTERS
- IMPORTS TAXATION
Every import will be treated as an interstate supply and will be subject to integrated goods and services tax along with basic customs Duty.
|1 duties+taxes payable||Basic customs Duty||GST (18%)||GST cess (if applicable)|
- EXPORTS TAXATION
Exports will be treated as zero-rated supply i.e. no GST will be charged on exports. This is in line with the “make in India” campaign that aims to make India a global manufacturing hub.
- IMPORT OF SERVICES
The new clause of import of services is one of the tax payments on the service receiver when the services are provided by a person riding outside India.
IMPACT ON GROSS DOMESTIC PRODUCT
The biggest tax reform i.e. goods and services tax is now a part of the Indian economy. A new and unified tax structure is followed for indirect taxation in the place of various tax laws like excise duty service tax, VAT, CST, etc.
- LATEST GDP DATA FOR JAN-MARCH QUARTER
India’s GDP has been recorded at 7.7 per cent in the quarter of January-March, with a fast approach towards better than 7.0 in the previous quarter with some expectations for 7.6 per cent in the financial year 2018, to the 7.3 per cent and 7.5 per cent in the FY19 and FY 20 respectively. There is some hindrance to the GDP number due to GST as speculated by the experts but still, many economists are likely to maintain around 6.5 per cent.
- GST’S POSITIVE IMPACT ON GDP
Now there is only one tax rate for all which will create a unified market in terms of tax implementation and the transaction of goods and services will be seamless across the states. The same will reduce the cost of the transaction. In a survey, it was found that 10-11 types of taxes were levied on the road transport business. So the GST will be helpful to reduce transportation costs by eliminating other taxes. After GST implementation the export of goods and services will become competitive because of the effect of cascading effect of taxes on goods and services. GST is more transparent and in comparison to the previous law provision so it will generate more revenue for the government and will be more effective in reducing corruption at the same time. Overall GST will improve the tax compliances. The GST regime has a very powerful impact on many things including GDP.
- GST’S NEGATIVE IMPACT ON GDP
In a report, DBS bank noted that initially, GST will lead to a rise in inflammation rate which will remain for a year but after that GST will affect positively on the economy. As we know Real Estate also plays an important role in the Indian economy but some experts think that GST will impact the Real Estate business negatively as it will add up an additional 8 to 10 per cent to the cost and reduce the demand by about 12 per cent.GST is applied in the form of IGST, CGST, and SGST by the centre and state governments but some economists say that there is nothing new in the form of GST although these are the new names of central excise, VAT, CST, and service tax, etc. Despite having some factors which are being expected to affect the economy adversely there are expected with a positive impact.
WHAT THE FUTURE LOOKS LIKE
Talking about the long-term benefits it is expected that GST would not mean a lower rate of taxes, but also minimum tax slabs. Countries where the goods and services 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 an integrated rate a central rate, and a state rate. In addition to these cess is all levied. The fear of losing out on revenue has kept the government from gambling on fever or toner 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.
Technicalities of GST implementation in India have been criticized by global financial institutions sections of Indian media and opposition political parties in India. World banks 2018 version of India development update described India’s version of GST as too complex, noticing various flaws compared to the GST system prevalent in other countries most significantly the second-highest tax rate among a sample of 115 countries at 28%The opposition congress parties has consistently been among the most vocal opponents of GST implementation in India with party president and leader of the opposition, Rahul Gandhi slams BJP for allegedly destroying small businessmen and industrial in the country.
On priority, it is up to the government to address the capacity building amongst the lesser endowed participants such as the small-scale manufacturers and traders. Ways have to be found for lowering the overall compliance cost and necessary changes may have to be made for the good of the masses. GST will become good and simple only when the entire country works as a whole towards making it successful.
I would like to express my special thanks of gratitude to my teacher well as our principal who gave me the golden opportunity to do this wonderful project on the topic of Goods and service tax, which also helped me in doing a lot of research and I came to know about so many new things. Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing this project within a limited time.
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