“GOOD AND SERVICES TAX (GST)”
Gujarat Technological University
IN PARTIAL FULFILLMENT OF THE
SUMMER INTERNSHIP PROGRAM (SIP)
UNDER THE GUIDANCE OF
( Prof. Manta Patel)
GROW MORE FACULTY OF MANAGEMENT
(Monik N. Khatri)
Enrollment No.: 167130592022
GROW MORE FACULTY OF MANAGEMENT
Affiliated to Gujarat Technological University
Batch : 2016-18
CERTIFICATE OF THE COMPANY
This Research Report has been prepared in partial fulfillment of the requirement for the subject: the Research Report on the topic ‘Goods And services Tax’ in M. B. A. 2th Sem. in the academic year 2017-2018.
The rationale behind preparing the project report is to study What is G.S.T., Concept of G.S.T., Benefit of G.S.T., Importance of G.S.T. , How it Will be work , Types of G. S.T., Effect of G.S.T. on Trade Sector or Consumer .
I like to express my special thanks to our Head of Department of master of business CHETAN PATEL administration and I are also like to special thank our gratitude to my teacher Prof. MAMTA PATEL Who gave us the me opportunity to do this research paper on the topic Goods and Services Tax, How the GST effect the market price of various goods and services. I came to know many new things and get Practical knowledge of Income tax. I always thankful to them for suppoting. If the theoretical knowledge curves and shapes the career of a person, practical knowledge polishes it and adds luster and brilliant to it.
TABLE OF CONTENT/ INDEX
Chapter Content Page No.
CERTIFICATE OF THE COMPANY 2
TABLE OF CONTENT/ INDEX 5-6
1 INTRODUCTION 7
INTRODUCTION OF GST 8
Meaning and purpose of GST 9
History of GST, Historical Background of GST 10-11
GST COUNCIL 13
COMPENSATION TO STATE 13
Types of categories under GST rate 14
Worldwide GST 15
GST Rates Comparison Chart – Existing Rates Vs New GST Rates 2017 in India 16-22
GST Structure 23
Different Taxes cover Under GST 23
How to differentiate SGST and IGST 24
Difference between IGST&CGST 25
How to differentiate SGST and CGST? 25
The following are the key features of the proposed GST model 26-27
GST Registration 28-29
SWOT ANALYSIS OF GST 30-31
2 LITERATURE REVIEW 32
REVIEWS ABOUT GST 33
CONCLUSION OF LITERATURE 34
3 Research Methodology 35
Problem Statement 36
Benefits of GST 38
4 Data Analysis &Findings 39
Calculation of Tax under GST 40
Example: 1 (Comprehensive Comparison) 41-42
Example –2 (Input Tax Credit For CGST AND SGST) 43-44
Example –3 (Input Tax Credit For IGST) 45-46
Example-4 (Import) 47-48
Example-5 (Export) 49
Other Benefits of GST apart from discussed in first. 50
General points on Various Business Sectors that arise after GST implementation:- 51
5 Suggestions & Conclusion 52
6 Bibliography 56
INTRODUCTION OF GST.
That India’s tax regime relied heavily on indirect taxes. Revenue from indirect taxes was the major source of tax revenue till tax reforms were undertaken during nineties
The reference of GST was first made in the Indian Budget in 2006-07 by the then Finance Minister Mr. P. Chidambaram as a single centralized Indirect tax. The GST Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 was introduced on December 19, 2014 and passed on May 6, 2015 in the Lok Sabha and yet to be passed in the Rajya SabhaThe Bill seeks to amend the Constitution to introduce Goods and Services tax vide proposed new article 246A. This article gives power to legislature of every state and Parliament to make laws with respect to goods and services tax where the supplies of goods or of services take place. Recently, Union Minister Mr. Arun Jaitley said that GST could be implemented as early as 1st July 2017.
In addition, the GST Council on 31st March 2017 approved five amended rules for the Goods and Services Tax regime and gave a “tentative” nod to the remaining four rules. Final discussion on all the 9 rules plus GST Rates would be taken up at the next meeting of GST Council scheduled on 18th-19thMay 2017.
The introduction of such a tax in Indian Economy is a concrete step of Government of India as one of the biggest taxation reforms and is all set to integrate State economies and boost overall growth. It will also help in increasing the GDP of the country by 1-1.5%. Such a tax system has already been implemented worldwide around 150 countries (France being First in 1954) and India is catching up with the global trends.
Meaning and purpose of GST
Clause 366(12A) of the Constitution Bill defines GST as “goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. Further the clause 366(26A) of the Bill defines “Services” means anything other than Goods. Thus it can be said that GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. The proposed tax will be levied on all transactions involving supply of goods and services, except those which are kept out of its purview.
The two important purposes of GST are
Single Umbrella Tax Rate:
GST shall replace a number of indirect taxes being levied by Union and State Governments.
Removing Cascading Effect:
GST is intended to remove “Tax on Tax Effect” and provide for common national market for Goods and Services.
History of GST, Historical Background of GST
Amaresh Baghchi Report, 1994 suggests that the introduction of ” Value Added Tax (VAT) ‘ will act as root for implementation of Goods and Services Tax in India.
Ashim Dasgupta, 2000 empowered committee, which introduces VAT System in 2005, which has replaced old age taxation system in India.
Vijay Kelkar Task Force 2004, it strongly recommended that the integration of indirect taxes into the form of GST in India.
Announcement of GST to be implemented by 1st April, 2010 after successfully implementation of VAT system in India and suggestion of various committees and task forces on GST, the Union Government first time in Union Budget 2006-07 announced that the GST would be applicable from 1st April, 2010.
The empowered committees of State Finance Ministers after various meetings reached on amicable formula for implementation of GST in India.
Task force of Finance Ministers has submitted their report in December, 2009 on structure of GST in India.
Government of India has issued first discussion paper in November, 2009.
Constitution (115th Amendment) Bill introduced on 22nd March, 2011 and same was referred to Parliamentary Standing Committee on Finance for discussion.
Finance Minister in his speech announced that the GST will be rolled out by April, 2011.
In August, 2013 Standing Committee on Finance tabled its Report on GST Bill.
In December, 2014 revised Constitution Amendment Bill was tabled in Parliament.
Constitution (122nd Amendment) Bill introduced in the Parliament in December, 2014; since 115th Amendment Bill has been lapsed due completion of parliamentary terms. The Government of India has introduced Constitution (122nd Amendment) Bill on 19th December, 2014 the Lok Sabha has passed the bill on 6th May, 2015 but Bill is pending in Rajya Sabha.
On June 14, 2016, the Ministry of Finance released draft Model law on GST in public domain for views and suggestions.
The changes made by Rajya Sabha were unanimously passed by Lok Sabha.
After the passage of the Amendment Bill in the Rajya Sabha and the changes subsequently ratified and passed by the Lok Sabha unanimously, the Bill was adopted by a majority of State Legislatures wherein approval by at least 50% of the State Assemblies was required.
The final step to the Constitution (122nd) Amendment Bill, 2014 becoming an Act was taken when the Hon’ble President of India gave his final assent on September 8, 2016.
The Constitutional 101st Amendment Act came into force which empowers both the States and Centre to levy this tax.
GST Bill Passed in Rajya Sabha on 3rd August 2016 (03-08-2016) On August 03, 2016, the Constitution (122nd Amendment) Bill, 2014 was passed by Rajya Sabha with certain amendments.
Central GST Bill
Integrated GST Bill
Union Territory GST Bill
GST (Compensation to States) Bill
In 2017 – Four GST related Bills become Act following Presidents assent & passage in Parliament:
In 2017 – GST Council finalizing the GST Rules and GST Rates.
When GST is Applicable – Modi Government Want to applicable GST Bill From 1st July 2017, Due to Some Legal Problems GST Bill is not applicable before 1st July 2017.
The main propose of GST is to replace existing indirect taxes like value-added tax, excise duty, service tax and sales tax. The Good and services tax (GST) is the biggest and substantial indirect tax reform since 1947.
GST as it is known is all set to be a game changer for the Indian economy. India as world’s one of the biggest democratic country follow the federal tax system for levy and collection of various taxes. Different types of indirect taxes are levied and collected at different point in the supply chain. The centre and the states are empowered to levy respective taxes as per the Constitution of India.
The Value Added Tax (VAT) when introduced was considered to be a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level.
Now the Goods and Services Tax (GST) will be a further significant breakthrough – the next logical step – towards a comprehensive indirect tax reform in the country. The Finance Minister in his budget speech of Budget 2015 has announced time and again that the tax will be introduced on 1 April, 2016. (but in CGST Meeting FM Says: GST implement From 1st April or May 2017 ). GST tax system plays a vital role in growth of India.GST cover 12 taxes (Like Vat, Sale tax, CST, KKC etc).
GST is one of the most crucial tax reforms in India which has been long pending. It will be levied on manufacture sale and consumption of goods and services. GST is expected to address the cascading effect of the existing tax structure and result in uniting the country economically.
The paper highlights the effect on various sectors in India. Descriptive statistical tools are used to analyze and interpret the data collected through secondary sources such as official web sites of Government.
It is set up by president under article 279-A. It is chaired by union finance minister.
The quorum of 50% for making decision of council is made by 3/4th majority of the votes cast.
It will make recommendations on
Taxes, surcharge, cess of central and states which will be integrated in GST.
Goods and services which may be exempted from GST
Interstate commerce – IGST- proportion of distribution between state and center
Registration threshold limit for GST
GST floor rates
Special rates during calamities
Provision with respect to special category states specially north east states
Dispute Settlement Authority may also work as for GST.
ADDITIONAL 1% TAX
Additional 1% tax on interstate taxable supply of goods which is levied by centre and directly portioned to the exporter state (origin state).
GST Council has recommended that, this tax will be charged for two years or for longer time period.
COMPENSATION TO STATES
The revenue losses arising out of GST implementation For maximum of 5 years union will compensate states.
This compensation will be made on the recommendation of GST Council.
First three year Centre Government pays 65,000crore to states.
Types of categories under GST rate
The GST tax is levied based on Revenue Neutral Rate (RNR). For the purpose of imposing GST tax in India, the goods and services are categorised in to four.
These 4 categories of goods and services are as follows:
Exempted Categories under GST in India.
The GST and council and other GST authorities notifies list of exempted goods. Such goods are not fallen under payment of GST tax. The authorities may modify or amend the list time to time by adding deleting any item if required by notification to public.
Essential Goods and Services of GST in India
Essential category of goods and services are charged very lower GST rate. Essential goods and services are the goods and services for necessary items and items under basic importance.
Standard Goods and Services for GST in India
A major share of GST tax payers falls under this category of Standard Goods and Services. A standard rate of GST is charged against the goods and services under this category.
Special Goods and Services for GST tax levy
Under special category of goods and services, GST rates would be high. Precious metals including luxury items of goods and services fall under special Goods and Services for GST rate implementation.
GST rates in India at a glance:
Exempted categories – 0
Commonly used Goods and Services – 5%
Standard Goods and Services fall under 1st slab – 12%
Standard Goods and Services fall under 2nd Slab – 18%
Special category of Goods and Services including luxury – 28%
The first country to introduce GST w France in 1954. Worldwide, Almost 150 countries have introduced GST in one or the other form since now. Most of the countries have a unified GST system. Brazil and Canada follow a dual system vis-à-vis India is going to introduce. GST applies only to goods and the provision of repairs, replacement and processing services in china. GST rates of some countries are given below:-
Country Rate of GST
New Zealand 15%
GST Rates Comparison Chart – Existing Rates Vs New GST Rates 2018 in India
GST Rates Comparison Chart – Existing Rates Vs New GST Rates 2017. GST Council issued GST Rates Schedule on 18th May and 19th May 2017.
Here you may find Comparison Chart Between GST Rates & Existing Rates on Various Sectors (Please Note – Existing Rates are based on Gujarat VAT, may vary from state to state). The Council has broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods.
The information is being uploaded. immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes.
The government categorised 1211 items under various tax slabs. Here is a low-down on the tax slab these items would attract: 81% of the items will fall up to 18% rate slabs. Means 19% of the goods to be taxed @28%. The standard slab of 12% & 18% would be applicable to 60% items..Now check more details form below….
GST Rates Comparison Chart on Services
Name of ITEM GST Rate(%) Existing Rate(%)
Telecom 18 15
Works contracts 12 15
Non AC/alcohol-serving restaurants 12 13-14
AC, alcohol-serving restaurants 18 22
Five-star restaurants 28 18
GST Rates Comparison Chart on Constructions.
Name of ITEM GST Rate(%) Existing Rate(%)
Cement 28 30
Wall paper 28 18.5
Paints and varnishes 28 26
Putty, wall fillings 28 26
Plaster 28 26
Ceramic tiles 28 26
Tempered glass 28 26
Sand lime bricks, fly ash bricks 5 6
GST Rates Comparison Chart on Metals & Minerals.
Name of ITEM GST Rate(%) Existing Rate(%)
Peat 5 19.5
All ores and concentrates 5 18.5
Kerosene PDS 5 17
Petroleum coke, petroleum bitumen 18 27.5
Tar 5 12
Coal 5 12
Lignite 5 12
Copper bars, rods, wires 18 18.5
Copper screws, nuts, bolts 18 18.5
Nickel bars, rods, wires 18 18.5
Nickel screw, nuts, bolts 18 18.5
Nickel tubes, pipes, netting 18 18.5
Aluminum ingots, rods, wires 18 18.5
Lead plates, sheets, strips 18 18.5
Zinc goods 18 18.5
Tin bars, rods 18 18.5
GST Rates Comparison Chart on Lifestyle and Home.
Name of ITEM GST Rate(%) Existing Rate(%)
Leather bags 28 6
Cell phones 18 6
Yachts 28 18.5
Air conditioners 28 26
Refrigerators 28 26
Storage water heaters 28 26
Dish washing machines 28 26
Printer, photocopier, fax machines 28 26
Wristwatches 28 26
Furniture 28 26
Video game consoles 28 26
Exercise equipment 28 26
Sports goods 12 18.5
Bicycles 12 18.5
Spectacle lens 12 18.5
Hats and other headgears 18 26
Steel utensils 5 18.5
GST Rates Comparison Chart on Consumer Goods.
ITEM GST Rate (%) Existing Rate(%)
Aluminium Foil 28 18.5
Preserved Vegetables 18 0
Butter, ghee, cheese 12 6
Dry fruits 12 6
Jams, jellies 18 12
Frozen meal 12 6
Branded paneer5 0
Branded cereals 5 0
Cocoa butter, oils chocolates 28 26
Instant, aroma coffee 28 26
Coffee concentrates, custard powder 28 26
Protein concentrates, sugar syrups 28 26
Razors 28 26
Dental floss 28 26
Toothpaste 28 26
Deodorants 28 26
Aftershave 28 26
Shaving cream 28 26
Cereals 0 0
Puffed, rice, papad, bread Exempt 0
Aquatic/poultry/cattle feed Exempt 0
Salt Exempt 0
Soyabean, groundnut, sunflower, seeds 5 6
Infant use preparations 18 19.5
Pasta, corn flakes, and cakes 18 19.5
Coffee, tea 5 6
Frozen vegetables 5 6
Condensed milk 18 18.5
Toilet paper 18 18.5
Hot water bottles 18 18.5
Petroleum jelly, paraffin wax 18 20
Pencil sharpeners, knives 12 18.5
Meats & fish preparations 12 18.5
Sweetmeats 5 12
Bakery mixes, dough’s, pizza bread 5 12
Vegetable fats & oils 5 12
Tea concentrates, sauces, soups 5 12
Ice cream, instant food mixes, sherbet 18 26
Refined sugar 18 26
Soap 18 26
Dentrifices – toothpaste 18 26
Hair oil 18 26
Handmade safety matches 5 18.5
Broomsticks 5 18
Candles 12 26
Tooth powder 12 26
Led lights 12 26
Milk beverages 12 26
Ready to eat namkeen/bhujiya12 26
Beet sugar, cane sugar 5 26
GST Rates Comparison Chart on Others
Name of ITEM GST Rate (%) Existing Rate (%)
Steam 12 0
Children’s drawing books 12 0
Plastic products 28 18.5
Calcerous stone 28 18.5
Artists’, students’ or signboard colours28 18.5
Nuclear fuel 5 0
Heavy water and other nuclear fuels 5 0
Compressed air 5 0
Solar water heater 5 0
Renewable energy devices 5 0
Braille typewriters 18 13.5
Pianos 28 26
Revolvers 28 26
Artificial Flowers 28 26
Bangles (Non-Precious Metals) EXEMPT 0
Printed books 0 0
Calendars 12 12
Animal or human blood vaccines 5 6
Power driven water pumps 12 12.5
Padlocks, locks 18 18.5
Helmets 18 18.5
Plastic Products 28 18.5
Fertilizers 12 18.5
CGST: GST to be levied by the Centre.
SGST: The GST to be levied by the States is State GST (SGST).
Integrated Goods and Service Tax: Integrated GST (IGST) will be levied by the Centre and the States concurrently
GST cover Different Taxes
State taxes which will be cover in SGST
VAT/Sales Tax on all sales and purchase.
Luxury Tax on gold, luxury goods
Additional Taxes on lottery, betting and gambling.
Central Taxes which will be subsumed in CGST
Central Excise Duty on Manufacturing of goods
Additional Excise Duty
Service Tax is eligible to services provider
The Excise Duty levied under the medical and Toilet Preparation Act,
Additional Customs Duty on import and export of goods
Excise Duty on import and Export is Commonly known as countervailing Duty (CVD) or Special Additional duty of customs (SAD)
A surcharge is based on turnover.
Taxes that will not cover by GST
Other Entry taxes and Octroi Entertainment Tax (levied by local bodies),
Basic customs duty and safeguard duties on import of goods into India
How to differentiate SGST and IGST
SGST and IGST are part of GST, Goods and Service Tax.
SGST expands as State Goods and Service Tax and IGST is the short form of Integrated Goods and Service Tax.
Different indirect taxes like State Sales Tax, VAT, Luxury Tax, Entertainment Tax (unless it is levied by the local bodies), Taxes on lottery, betting and gambling, Entry tax not in lieu of Octroi, State Cesses and Surcharges in so far as they relate to supply of goods and services etc. are subsumed with SGST.
Under IGST, the tax for movement of goods and services from one state to another is collected.
The tax revenue collected under SGST is meant for State Government whereas the tax revenue of IGST is shared between State government and Central government as per the rate fixed by the authorities.
Difference between IGST&CGST
CGST and IGST are part of GST, Goods and Service Tax.
CGST expands as Central Goods and Service Tax and IGST is the short form of Integrated Goods and Service Tax.
Different indirect taxes of Central Excise Duty, Central Sales Tax CST, Service Tax,
Additional excise duties, excise duty levied under the medical and toiletries preparation Act, CVD (Additional Customs duty – Countervailing Duty), SAD (Special Additional Duty of customs) surcharges and cesses are merged with CGST. Under IGST, the taxes for movement of goods and services from one state to another are collected.
Major share of tax revenue under CGST is meant for central government where as IGST tax revenue is shared between State government and Central government as per the rate fixed by the authorities.
How to differentiate SGST and CGST?
CGST & SGST are part of GST, Goods and Service Tax.
CGST expands as Central Goods and Service Tax and SGST is the short form of State Goods and Service Tax.-114935-451485
Different indirect taxes of Central Excise Duty, Central Sales Tax CST, Service Tax, Additional excise duties, excise duty levied under the medical and toiletries preparation Act, CVD (Additional Customs duty – Countervailing Duty), SAD (Special Additional Duty of customs) surcharges and cesses are merged with CGST. Under SGST, the taxes like State Sales Tax, VAT, Luxury Tax, Entertainment tax (unless it is levied by the local bodies), Taxes on lottery, betting and gambling, Entry tax not in lieu of Octroi, State Cesses and Surcharges in so far as they relate to supply of goods and services etc. are subsumed.
The major share of tax revenue under CGST is meant for central government where as SGST tax revenue is for state government.
The special features of the proposed GST model:-
Dual Goods and Service Tax : Center goods or services Tax and State goods or services Tax
Inter-State Transactions the IGST Mechanism: The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.
Destination-Based Consumption Tax: This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides. GST will be a destination-based tax.
Computation of GST on the basis of invoice credit method: The liability under the GST will be invoice credit method i.e. CENVAT credit will be allowed on the basis of invoice issued by the suppliers.
Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states respectively.
Goods and Services Tax Network (GSTN): A not for profit, Non-Government Company called Goods and Services Tax Network (GSTN), jointly set up by the Central and State Governments will provide shared IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders.
INPUT TAX CREDIT SET OFF: ITC for CGST & SGST will be taken for taxes allowed against central and state respectively.
GST on Imports: Import of goods will be subject to basic customs duty and IGST.Centre will levy IGST on inter-State supply of goods and services.
Maintenance of Records: A taxpayer or exporter would have to maintain separate details in books of account for availment, utilization or refund of Input Tax Credit of CGST, SGST and IGST.
Administration of GST : Administration of GST will be the responsibility of the GST Council ,
which will be the apex policy making body of the GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio.
Goods and Service Tax Council: The GST Council will be a joint forum of the Centre and the States. The Council will make recommendations to the Union and the States on important issues
Any supplier of goods and service Provider of services who makes a taxable supply with an aggregate threshold limit turnover of over Rs.20 lakhs in a financial year is required to obtain GST registration.
In special category states, the limit for aggregate turnover criteria is set at Rs.10 lakhs. Every business whose taxable supply of goods or services under GST (Goods and Service Tax) and whose turnover exceeds the threshold limit of Rs. 20 lakh / 10 Lakh as eligible will be required to register as a normal taxable person.
GST Registration Number
GSTIN or GST Registration Number is 15 Digit identification number which is given to each applicant who Appling for GST Registration.
GST Number is based on the State code and Pan Number. First two digit represent the state code and another 10 digit represent the Pan number of the client , one digit represent the entity code.
GST Registration Procedure
GST Registration last date
GST Registration last date, Revised GST Enrolment schedule for your State 2017. GST Registration reopen on 25th June 2017 and continue for 3 months as per Rules.
GST Registration Schedule 2017 at new GST Portal for Your State. GST Registration Last Date is Extended till 30th September 2017.
GST Migration for Excise and Service Tax assesses to start from 25th June 2017. In this article we provide we provide GST Enrolment Dates for all States of India.
“As part of its efforts to ensure implementation of GST by 1st July, 2017, CBEC has taken steps to ensure that its existing taxpayers are migrated to GST in a simple, user-friendly and smooth manner” an official statement said.
All existing central excise/ service tax assessees are requested to migrate as early as possible, latest by 30th September 2017
SWOT ANALYSIS OF GST
Strength of GST
Collection it will reduce cascading effect of taxes;
Compliance cost will reduce;
Few numbers of rates;
Time saving due to call of Entry, Octroi taxes;
Reduction of corruption;
Simplification of tax collection and administration;
Lower burden of taxes on end consumers;
Give edge to the industry on their foreign competitors;
Easy flow of resources across the country;
Reduction in inflation;
Widening tax base and tax of Central as well as State.
Weaknesses of GST
Change in Business software
Increase in operating cost of business
Policy change during the middle of the year
Disruption to business
Lack of skilled resources and need for re-skilling
This system is very fond of technology, but India is a developing country where people are not habitual of technology.
Opportunities of GST
Simpler tax system
Reduction in prices of goods and services due to elimination of cascading
Uniform prices throughout the country
Transparency in taxation system
Increase in employment opportunities
Reduction in multiplicity of taxes
Mitigation of cascading/double taxation
More efficient neutralization of taxes especially for export
Development of common national market
Simpler tax regime-fewer rates and exemptions
A unified common national market to boost Foreign Investment and “Make in India” campaign
Boost to export/manufacturing activity, generation of more employment, leading to reduced poverty and increased GDP growth
Improving the overall investment climate in the country which will benefit the development of states
Uniform SGST and IGST rates to reduce the incentive for tax evasion
Reduction in compliance costs as no requirement of multiple record keeping.
Threats of GST
1. Inter-States supply of goods and services are considered as import and IGST will be applied (1%) in addition to custom duties.
2. The Central government promised for compensation to loss making States for a period of 5 years. The compensation will be as: 100% for first 3 years, 75 % for 4th year and 50% for 5th year. So, it is possible that all States does not implement it in effective manner to get compensation .3. GST is not friendly with banking sector. Because the cost of goods become cheaper after GST and it will promote export. Presently, 14% service tax is being levied on baking transactions. GST will make these transactions more costly. Over and above, in most of countries banking sector is excluded from GST.
4. GSTC (Goods and Service Tax Council) will set the benchmark for resolving the dispute on recommendations of GSTC. It means GSTC will lay down the criteria for GSTC itself. It is against the principle of natural justice.
5. GST is not a guarantee in itself that it would not be influenced by political parties and politicians will not use it as a win-loss.
CHAPTER:-2 LITERATURE REVIEW
REVIEWS ABOUT GST
Pinki, Supriya Kamma and Richa Verma (July 2014) studied, “Goods
and Service Tax- Panacea For Indirect Tax System in India” and concluded that the new NDA government in India is of GST and it is beneficial for central government , state government and as well as for consumers in long run if its implementation is backed by strong IT infrastructure.
Agogo Mawuli (May 2014) studied, “Goods and Service Tax-An Appraisal” and found that GST is not good for low-income countries If still these countries want to implement GST then the rate of GST should be less than 10% for growth.
Nitin Kumar (2014) studied, “Goods and Service Tax- A Way Forward” and concluded that implementation of GST in India help in removing economic distortion by current indirect tax system and expected to encourage unbiased tax structure which is indifferent to geographical locations.
Nishitha Guptha (2014) in her study stated that implementation of GST in the Indian framework will lead to commercial benefits which were untouched by the VAT system and would essentially lead to economic development. Hence GST may usher in the possibility of a collective gain for industry, trade, agriculture and common consumers as well as for the Central Government and the State Government.
Dr. R. Vasanthagopal (2011)studied,”GST in India: A Big Leap in the Indirect Taxation System” and concluded that switching to seamless GST from current complicated indirect tax system in India will be a positive step in booming Indian economy. Success of GST will lead to its acceptance by more than 130 countries in world and a new preferred form of indirect tax system in Asia also.
Fabian Christandl, Detlef Fetchenhauer and Erik Hoelzl (2011)
conducted a study 2 months before and after a raise in value-added tax (VAT), 303 participants had to estimate the current prices for four products affected and four products not affected by this raise in VAT and the anticipated or recalled prices of these products. Before the VAT increase, an undifferentiated belief in strong future price increases was prevalent. After the VAT increase, a confirmation bias was found: in retrospect, participants reported price increases that were significantly higher than the official price development and in line with an undifferentiated belief in marked price increases.
CONCLUSION OF LITERATURE
Tax reforms have drawn the attention of researchers both in India and abroad. The implementation of VAT of comprehensive nature, or at central and state levels both, may also involve some elements of tax design. Most of the countries have introduced VAT in the last about 25 years. In India also indirect tax reforms have drawn attention only after introduction of economic reforms in the country. Therefore, the literature on VAT is of recent origin. The Value Added Tax does not have a long history admittedly; there is not as much literature available on this topic as other forms of tax system. So, in other words, only a limited number of studies have been undertaken on VAT and those too with different perspectives. An attempt thereby, has been made to review the literature on VAT. GST help to reduce the unnecessary taxes. GST play very wide role in every economic.
CHAPTER :- 3
Indirect tax system is very lengthy process in taxation system. GST help to reduce the indirect taxes. In public no one aware about GST and How GST will affect the life of a common person. After GST, What is Benefits to various sectors and change in various prices.Objective of Research
To study GST affects the indirect taxation systems.
To study, how much effect on price of different goods.
To Compare GST with other taxes.
Challenges of Research
GST Slabs rate official declare by GST councils.
To study the elimination of multiplicity of taxation.
To study the benefits after the implementation of GST.
The research is an exploratory research and the data collection is done mainly from the secondary data sources such as statistical data available on the official web site, the books published on GST and various contemporary news articles, journals and papers.
The data so collected is used for understanding the present tax structure and for calculating the tax structure in the GST regime along with credit provisions. The basic statistical concept such as forecasting etc is used for determining the tax liability in of GST at different proposed rates of tax.
Benefits of GST
GST provide comprehensive and wider coverage of input credit setoff, you can use service tax credit for the payment of tax on sale of goods etc.
CST will be removed and need not pay. At present there is no input tax credit available for CST.
Many indirect taxes in state and central level included by GST, You need to pay a single GST instead of all.
Uniformity of tax rates across the states
Ensure better compliance due to aggregate tax rate reduces.
By reducing the tax burden the competitiveness of Indian products in international market is expected to increase and there by development of the nation.
Prices of goods are expected to reduce in the long run as the benefits of less tax burden would be passed on to the consumer.
CHAPTER :- 4
Calculation of Tax under GST
Rate of GST:
There would be two-rate structure lower rate for necessary items and items of basic importance and a standard rate for goods in general items. There will also be a special rate for precious metals and a list of exempted items
Model of GST with example:
The GST shall have 2 components: 1 levied by the Centre referred to as Central GST or CGST, and another levied by the States referred to as State GST or SGST.
Rates for CGST and SGST would be approved appropriately.
The CGST and the SGST would be applicable to all goods and services made for a consideration except the exempted goods and services.
Cross utilization of ITC both in case of Inputs and capital goods between the CGST and the SGST would not be permitted except in the case of inter-State supply of goods and services (i.e. IGST).
The Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis for goods and services for the States and the Centre.
Example: 1 (Comparison )
Comparison between Indirect tax laws and GST one law
Particulars Indirect Tax GST
Manufacture to Wholesaler Cost of Product 5,000.00 5,000.00
Add: Profit 2,000.00 2,000.00
Manufacturer Price 7,000.00 7,000.00
Add: Excise Duty @ 10% 700.00 –
Total (a) 7,700.00 7,000.00
Add: VAT @ 12.5% 924.00 –
Add: CGST @ 9% – 630.00
Add: SGST @ 9% – 630.00
Invoice Value 8624.00 8260.00
Wholesaler to Retailer COGS to Wholesaler(a) 7700.00 7,000.00
Add: Profit @10% 770.00 700.00
Total (b) 8470.00 7,700.00
Add: VAT @ 12.5% 1,078.00 –
Add: CGST @ 9% – 693.00
Add: SGST @ 9% – 693.00
Invoice Value 9,548.00 9086.00
Retailer to Consumer: COGS to Retailer (b) 8470.00 7,700.00
Add: Profit 847.00 770.00
Total (c) 9317.00 8,470.00
Add: VAT @ 12.5% 1,164.62 –
Add: CGST @ 9% – 762.3
Add: SGST @ 9% – 762.3
Total Price to the Final consumer 10,481.62 9994.6
Cost saving to consumer – 486.4
% Cost Saving – 4.86
Input tax credit to wholesaler is Rs.924 and Rs.1,260 in case of Indirect Tax and with GST respectively.
Input tax credit to Retailer is Rs.1,078 and Rs.1,386 in case of Indirect Tax and with GST respectively.
IGT -GS Model (Inter-State Transactions of Goods & Services) and Input tax credit (ITC) with example:
Existing CST (Central state tax), tax on interstate sell of goods shall be discontinued.
The ITC of SGST, CGST shall be applicable.
Since ITC of SGST shall be allowed, the Exporting State will transfer to the Centre the credit of SGST used in payment of IGST.
The Importing dealer will claim credit of IGST while discharging his SGST liability (while selling the goods in state itself). Thereafter, the Centre will transfer to the importing State the credit of IGST used in payment of SGST.
Advantage of IGST in India:
As ITC is used up while paying the tax, No refund claim in exporting State,.Maintenance of uninterrupted ITC chain on inter-State transactions.
Substantial blockage of funds for the inter-State seller or buyer or No upfront payment of tax .
Example 2 (ITC For CGST AND SGST)
Monik, a registered dealer had ITC for CGST Rs.375/- and SGST Rs.525/- respectively in respect of purchase of inputs and capital goods.
He manufactured 900 liters of finished products. 100 liters was normal loss in the WIP. The final product was sold at price of Rs.10 per liter as follows:-
Goods sold within State – 400 liter.
Finished product sold in inter-State sale – 325 liter.
Goods sent on stock transfer to consignment agents outside the State – 175 liter.
Further, CGST and SGST rate on the finished product of dealer is 6% and 6% respectively. IGST rate is 12%.Calculate tax liability of SGST and CGST to be paid after tax credit.
Solution: Output Tax Calculation
Particulars Sales Within State Stock Transfer Outside State Inter State Sales Total
Qty. Sold 400 175 325 Price per unit 10 10 10 Value of Goods Sold 4000 1750 3250 9000
Tax Amount: Tax – CGST(6%) 240 – – 240
Tax – SGST(6%) 240 – – 240
Tax– IGST(12%) – 210 390 600
Calculation of Tax Payable
Particulars CGST SGST IGST Total
Tax Payable Amount 240 240 600
Less: Input Tax Credit
CGST 240 – 135 375
SGST – 240 285 525
Balance Payable – – 180 180
There would be no effect for normal loss.
ITC of CGST and SGST of Rs. 325 and Rs. 525 are paid on inputs. This input tax credit should first be CREDIT for payment of CGST and SGST respectively, and balance is to be used for payment of IGST. Thus, balance available for payment of IGST is Rs. 135 of CGST and Rs. 285 of SGST and he is liable to pay balance amount of IGST of Rs. 180 by cash (600-135-285=180). Since credit of SGST of Rs.135 has been utilized for payment of IGST.
Example 3 ( ITC For IGST)
Continuing with the above example 2, Aussme the dealer purchases goods interstate and have input tax credit of IGST available is Rs.1,000/-. Computed the tax payable.Solution: Calculation of Tax Payable
Particulars CGST SGST IGST Tax Payable Amount 210 390 600 Less: Input Tax Credit CGST – – – SGST – – – IGST 210 190 600 2000
Balance Payable – 200.00 – 200
Note: Input tax credit of Rs.1000, IGST is available. This ITC should first be utilized for payment of IGST and balance is to be used first for payment of CGST and Balance for SGST. Likewise in this case Rs.210 and balance Rs.190 are utilized for CGST and SGST respectively. He is liable to pay balance amount of SGST of Rs.200 by cash.(1000-600-210-190 = 200).
Some Specific points of taxation for specific
This tax does not apply to alcohol and petroleum products. They will be continued to be taxed as per the existing under State law practices.
Tax on Tobacco products will be subject to GST. But government can levy the extra tax percent over and above GST rate.
Exemption/Composition Scheme under GST:
Treatment for goods exempt under one state and taxable under the other to be provided.
List of exempt items which shall be outside the of GST shall be provided.
The Small Taxpayer: The small taxpayers whose gross annual turnover is less than 1.5 Crore will not be covered by GST law and no need to pay tax.
Export & Import in GST with example:
GST on export would be 0% rated
Both CGST and SGST will be levied on import of goods and services into India. i.e. SGST goes to the state where it is consumed. Complete set-off will be available on the GST paid on import on goods and services.
Shir Gayatri imported goods for Rs. 20,000/- and incurred expenses to produce final saleable goods. BCD @ 10 % was chargeable on imported goods.
These manufactured goods were sold within the state at Rs. 90,000 plus applicable GST. Rate of CGST and SGST is 6% and 6% respectively.
Compute Cost, Sale value and tax payable for the transaction.
Solution: Calculation of cost of imported goods
Cost of Goods imported 20,000
Add: (BCD) Basic Customs Duty @ 10% 2,000
Cost of imported goods (including BCD) 22,000
Add: CGST on Import @ 6% 1320
Add: SGST on Import @ 6% 1320
Cost of imported goods (including BCD & GST) (Note below) 24,240
Calculation of Sale value after import
Sale Value Before Tax 90,000
Add: CGST on Import @ 6% 5,400
Add: SGST on Import @ 6% 5,400
Sales Value 1,10,800
Tax Payable Calculation
Particulars CGST SGST
Output tax 5,400 5,400
Less: Input tax credit – –
CGST 1,320 –
SGST – 1,320
Net tax payable 4,080 4,080
Now continuing with the above example 4, suppose the same good is exported after 10 months of use after adding margin amounting Rs.20,000/- and use factor of 10 months for refund calculation is 0.20. Therefore the refund will be 0.80 of Duty amount.
Compute Export Value and Refund Value.
Solution: Export Value calculation
Cost of Imported Goods(from above example) 1,10,800
Add: Margin and Modification Amt. 20,000
Sale Value 1,30,800
Add: CGST on Export @ 5% –
Add: SGST on Export @ 7% –
Export Value 1,30,800
Basic Customs Duty from above example) 2,000.00
Refund Factor 0.80
Refund amount of BDC 1600.00
Add: CGST(from above example) 1320.00
Add: SGST(from above example) 1320.00
Total Refund amount 4,240.00
The above example withstand two basic principles of Taxation Laws i.e. Exports are zero rated and the incidence of tax will follow the destination principle.
Other Benefits of GST.
Reduces transaction costs and wastages: A single registration and a single compliance will suffice for both SGST and CGST provided government.
The multiplicity of taxation: The reduction in the multiplicity of taxation applicable in a chain of transaction will help to reduce the paper work by existing indirect taxation laws.
Reduces tax burdens:- The cost of tax that consumers have to bear will be certain and it is expected that GST would reduce the tax burdens on the consumers.
Reduces the corruption:-As the multiplicity of taxes reduces so does the multiplicity of visits to multiple departments reduces and hence the reduction in corruption.
There would be uniformity of tax rates across, the states In all cases except a few products and states,.
Various Business Sectors that arise after GST implementation:-
Real Estate Industry: Construction and Housing sector need to be included in the GST tax base being high tax revenue generating sector and for reduction in no. of tax legislations involved.
FMCG Sector:. Implementation of proposed GST and opening of Foreign Direct Investment (F.D.I.) are expected to fuel the growth and raise industry’s size.
Transport Sector: Truck drivers spend more than half of their time while check post and tolls. At present there are more than 600 check points After the introduction of GST, the time spend by the road transport industry in complaining with laws will reduce
Impact on Small Enterprises:There will be three categories of Small Enterprises in the GST regime.
Those below threshold limit of Rs.1.5 Crores would not be covered.
Those between the threshold and composition turnovers will have the option to pay a turnover based tax i.e. composite tax or opt to join the GST regime.
Those above threshold limit will need to be within framework of GST. Possible downward changes in the threshold in some States consequent to the introduction of GST may result in obligation being created for some dealers.
CHAPTER :- 5
As GST is implemented, I would like to give suggestions to my fellow practitioners, so that we can serve our clients in efficient and effective manner:
Those practitioners who got large number of small and mid-size clients who generally don’t have a robust system of accounting must develop a Standard format for capturing data from clients in order to save their precious time and energy.
Study the accounting systems & procedures of medium and Big sized clients thoroughly so that you can act as their GST implementation guide.
Use of industry-wide accepted GST software should be adopted instead of filing returns manually every month.
A proper fees chart should be developed based on turnover and volume of transactions undertaken by clients and Institute should urge all practitioners to follow it.
Regular update should be made available to clients on GST related matters on websites of practitioners. A new tab on website named GST should be inserted on home page of their respective websites.
Pool of professional resources should be developed at every branch of ICAI for continuous guidance.
Regular industry wide guidance campaign should be organised so that the transition from current indirect tax regime to GST should be smooth.
A standard compliance checklist should be developed on the basis of client’s business which should contain information about procedures to be performed right from the registration to assessment, it will help you in providing better consultancy services to clients belonging to specific industries.
As problems faced by most clients are of similar nature, FAQs should be developed at office level keeping in mind the clientele.
Regular in-house training programmes should be conducted for Articles and other permanent staff of the office.
Implementation of GST is one of the best decision taken by the Indian 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, 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 Centre and States.
If you are doing any kind of business then you should register for GST as it is not only 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.
It can be concluded from the above discussion that GST will provide relief to producers and consumers by providing wide and comprehensive coverage of input tax credit set-off, service tax set off and subsuming the several taxes. Efficient formulation of GST will lead to resource and revenue gain for both Centre and States majorly through widening of tax base and improvement in tax compliance.
It can be further concluded that GST have a positive impact on various sectors and industry. Centre has decided to review the existing exemptions from Central Excise Duty so that list of goods exempt from CGST and SGST list and 99 items exempted from VAT are taken off from both the components of GST.
VAT has to some extent reduced tax-evasion and frauds. It is encouraging to note that most of the traders and general public are aware of VAT. GST, the major reforms on indirect taxes, will reduce tax burden due to cascading effect.
After the implementation of GST indirect taxation systems will remove and it easy to all tax payer to pay the tax to government. Efficient formulation of GST will lead to resource and revenue gain for both Centre and States majorly through widening of tax base and improvement in tax compliance.
It can be further concluded that GST have a positive impact on various sectors and industry. GST requires concentrated efforts of all stake holders namely, Central and State Government, trade and industry.
CHAPTER :- 5