INTRODUCTION The word “tax” is derived from Latin word “taxare” meaning to estimate. A tax is not a voluntary payment or donation, but enforced contribution, exacted pursuant to legislative authority and is contribution imposed by the government, whether under the name of toll, tribute, impost, duty, custom, excise, subsidy, aid, supply, or any other name (Chakraborty & Rao, 2010 ; Garg, 2014).! Taxation was first imposed in Ancient Egypt around 3000 B.C.- 2800 B.C. during the first dynasty of the old kingdom. Records indicate from that period that the Pharaoh would conduct a biennial tour of the kingdom, collecting tax revenues from the people. Other data indications are granary recOeipts on limestone flakes and papyrus. Taxes are the only way for financing the public goods because of their inappropriate pricing in the market, It can only be levied by the government, via funds collected from taxes. It is highly important that the taxation system is designed in such an appropriate manner that it doesn't lead to any sort of market distortions and failures in the economy. The taxation laws should be highly competitive so that revenue can be raised in a highly efficient and effective manner. In India, the taxation system was started in ancient times. The early taxation system’s existence can be seen in many ancient books like Manu - Smrti and Arthasastra. During the British Empire, the entire taxation system of India was transformed, It was entirely in favour of the British Empire, but it also incorporated moclern and scientific techniques of taxation systems. Another remarkable transformation came in the year 1922 in the taxation system when Britishers established an entirely new administrative and taxation system in India. In this system, the taxation system was categorized in two main categories; Direct Taxes and Indirect Taxes. In India, the taxation system is entirely controlled, imposed, and updated by Central and State governments. The authority to levy tax is derived from the Indian Demeritstitution, which allocates the power to levy taxes between Central Government System and State Government system? “hups://www.collinsdictionary.comv’dicticnary/english/tax Ahups://www ey.convin/en’services'ey-goods-and.services-tax.pst Page| 5 & scanned with OKEN ScannerIn early 1950s, the Central Government’s total tax revenue approximately amounted to®401 crores. During the 1990s, the tax revenue was around X68,500 crores, in 2014-15 it was €13.64 lakh crores and recently the figures rocketed up to more than 14.6 lakh crores. In these recent figures, €2.8 lakh crores and 22.1 lakh crores was generated from excise duty and service tax, respectively, by the Central Government. In total revenue, the proportion of indirect taxes was 57% in the carly 1950s, 84% in 1991, and 46% in 2014-15 and recently it was 34%. There is no doubt that after new economic reforms the proportion of indirect taxes in total tax revenue is decreasing. It implies that tax system is moving towards a progressive taxation from regressive taxation, which is expected in developing countries? Therefore, this reform will help in avoiding multiple layers of taxation that currently exist in India, GST is a comprehensive tax levy on manufacture, sale and Demeritsumption of goods and services at a national level. Through a tax credit mechanism, this tax is collected on value-addition on goods and services at each stage of sale or purchase in the supply chain. The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end Demeritsumer bears this tax as he/she is the last person in the supply chain, Experts say that GST is likely to improve tax collections and boost India's economic development by breaking tax barriers between States and integrating India through a uniform tax rate, Under GST, the burden of tax collection will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. It is expected to help build a transparent and corruptionfree tax administration. Final impact of total GST will be only at the destination ps t, presently it is at various points (from manufacturing to retail outlets) i.c, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold. At present excise duty paid on the raw material Demeritsumed is being allowed as input credit only on manufactured goods. For other taxes and duties paid for post-manufacturing expenses, there is no mechanism for ide the tax nput credit under the Central Excise Duty Act GST will di burden equitably between manufacturing and services. It will be replacement of Excise Duty and other taxes.’ > Pannu SPS (2015). ‘The Biggest Tax Reforms in India: New Delh ‘Anushuya Pal, NarwalKaram (2014). “Indian Indivet Tax Systems: Reforms and Goods and Services Tax" Advances in Management 7.7 (Jul 2014): 9-14. ince from Independence’ Business Today, Nov, 28, 2015, Page | 6 & scanned with OKEN Scanner‘The Indian Taxation System - Scenario before GST Tax policies play a vital role in any country's progress and have a direct impact on any country's economy in terms of efficiency and equity. A good taxation policy is that which takes care of the entire income di ribution and also generates tax revenues in such a manner for Central and State Governments, which can lead to overall benefit in the nation’ frastructure, defense, public amenities, people's security, and a country's exports.° The entire framework to impose indirect taxes comes under Demeritstitutional provisions of India, Article 246, Seventh Schedule gives the right to Central and State Governments to levy taxes and collect indirect taxes on the basis of goods and services transactions. The taxation system varies from manufacturer to manufacturer on point of sale or level of imports or exports. Indirect taxation based collection systems are based on origin, and are designed to impose tax and collect the same at the event of happening of any taxable activity. Journey of Indirect Taxation Tax & Important Turning Points in India : 1974: Report of LK Jha Committee suggested introduction of VAT system. 1986: Introduction of restricted VAT called “MODVAT”. 1991: Chelliah Committee report recommended “VAT/GST” and recommendations accepted by the Government. 1999: Empowered Committee formation on State VAT. * Girish Garg, Basie Concepts and Features of Good and Service Tax In India, International Journal of scientific rescarch and management (SRM) Volume 2Issuc ? Pages 542-54 2014 * Girish Gare, Basic Concepts and Features of Good and Service Tax In India, Intemational Journal of scientific research and management (IISRM) Volume 2 Issue 2 Pages 542-54 2014 Page |7 & scanned with OKEN Scanner2000: Introduction of Uniform Floor State Tax Rates and abolition of tax-related incentives granted by State Governmen 200: implementation of VAT system in Haryana, 2004: trong progress towards introduction of CENVAT. 2005-06: Implementation of VAT based taxation system in 26+ states in India. 2007: First GST Stuffy released by Mr. P. Shome in January; Finance Minister speech carries the introduction of GST in Budget; CST phase out starts in April 2007; joint working group created and reports submitted. 2008: C rolls out the GST Structure of Taxation System in April 2008. 2009: Date proposed for Implementation as April 1, 2010. 201 Department of Revenue commented on GST discussion paper and finance minister suggested probable GST rate, 2011; Team was created to lay down the road map for GST and 115th Demeritstitutional Amendment Bill for GST was laid down by the Parliament. 2012: Negative list regime for service tax was implemented, 2013: Parliamentary Standing committee submitted its report on the Bill. 2014: 115th Amendment Bill lapsed and was reintroduced in 122nd Demeritstitutional Amendment Bill, Page| 8 & scanned with OKEN Scanner(2) Limitations and Issues pertaining to the Existing Indian Taxation System: Various taxes are imposed on the Indian population by Central and State Governments like Central Excise, Service Tax, VAT, ete. Before the introduction of VAT in Sales Tax and CENVAT in Central Excise and Service Tax, the Indian Taxation System was very complex and this had cascading effects. The tax imposed on one destination was also taxed on another destination. However, in recent times, the taxation system has seen remarkable revolutions.” Many changes in taxation were implemented, that is, VAT, and implementation of Service Tax by Central Government, In Central Excise taxation system, the government introduced CEVAT by setting off taxes on inputs, while producing output products. With introduction of VAT based taxation system in India, the foundation stone of GST implementation was laid® ining in Indian indirect tax The following points highlight the primary and severe issues pert structure system: () The CENVAT (excise duty) was imposed on the products manufactured in India. But issues originated regarding product valuations. The issue regarding implementation of CENVAT only at the manufacturing level acted as a critical barrier to efficient and neutral flow of tax credit, This led to the replacement of VAT to GST in many countries. The Indian Demeritstitution has distributed the taxation system between Central and State Governments. The State government has right to npose any sort of tax on any matter or item under the state. In Service Tax, the Central government enjoys the power to impose tax but in Work Contracts, the State government has the dominance. This som of system creates distortions in revenue generation and distribution for the government? *Pinki. Supriya Kamna, Richa Verma(2014), “Good and Service Tax ~ Panacca For Indircet Tax System In India”, ~Tactful Management Research Journal”, Vol2, Issue 10, July2014 * Girish Garg, (2014)."Basie Concepts and Features of Good and Service Tax in India” * Agogo Mawuli 2014): “Goods and Service Tax- An Appraisal"Paper presented at th and Review Symposium, Holiday Inn, Port Moresby,29-30 the PNG Taxation Research, Page |9 & scanned with OKEN ScannerGill) Various things like copyrights, patents, software are not Demeritsidered for taxation system by the government. So, complexity again arose for classifying these goods under the taxation policies, Gy) With the booming of the service sector, the Central government has monopolistic right to impose tax. The State Governments, on the other hand, are losing their revenue by not imposing o) Demeritsidering CST on interstate sales of goods, no set off was allowed, which increased the cascading effect. (1) For better monitoring and administration of taxes, major transformations in technology are required, which is costly and time Demeritsuming and has to be redressed. (vil) Lack of cross verification of returns filed under Central and State taxation systems led to lot of discrepancies. (vill) Under the Indirect taxation system, there were more than 15 different taxes which had to be filled under different norms. So, it required immediate and one system regulation of filling and calculating taxes. (i) The Indian taxation system was cumbersome and full of burdens and different taxes on same products in different states led to high inflation, which had to be redressed. Despite of the existence of multiple taxes in the Indian Economy like Excise Tax, Custom Duty, Service Tax ete., still the GDP of India is much less as compared to the GDP of other countries like USA - 13.84%, China - 6.99%, Japan - 4.3%, and France - 2.05%. So, the GDP data of various countries demonstrates that there is utmost need of tax reform, that is, implementation of Goods and Services Tax (GST) in India.'' °* A Primer on Goods and Services Tax in India, Centre for Budget and Governance Accountability, new delhi.2011 "Nitya Tax Associates Basics of GST, Taxmann , | st Edition August 2016 [4] G Page | 10 & scanned with OKEN Scannerx OBJECTIVE OF GST One Nation, One Tax and One Market can be termed as the basic objective of the GST, in a layman’s understanding, Central and State taxes are merged into a single tax which in return would lessen the burden of double taxation, facilitating a common national market. The end Demeritsumer of a good or service is the one who will be paying the GST, thus this will improve competitiveness of original goods and services in the market which directly impact on GDP extension of the country.GST is a target based Demeritsumption tax which goes hand in hand with the VAT rule". ADVANTAGES OF GST ‘The upcoming GST will bring about the following advantages to the country: The GST will help to removing economic differences and bring about common national market. The dream of one country, one act and one tax rate can be fulfilled!® It will help to make transparent and corruption free tax administration in two ways. First relates to the self policing incentives inherent to value added tax. To claim input tax credit, each dealer has an incentive to request documentation from the dealer behind him in the value-added/tax chain. Provided the chain is not broken through wide ranging exemptions, especially on intermediate goods, this self-policing feature can work very powerfully in the GST. The second relates to the dual monitoring structure of the GST- one by the States and another by the Centre." If GST Act might have well designed and tax rate is more than ‘Revenue Neutral Rate’ (RNR is the rate which neutralize revenue effect of state and central government due to change in tax system, means ,the rate of GST which will give at least the same level of revenue that is Girish Garg, (2014)."Basic Concepts and Features of Good and Service Tax in India”. "GST India Economy and Policy AartiSaxena Overview of Proposed Goods.nd Services Tax (GST) Regime in India, Deputy Page | 11 & scanned with OKEN Scannercurrently earned by state and central governments from indirect taxes is known as RNR) and tax base becomes more buoyant, then, resources available for the governments will be increase which can be used for poverty alleviation and development activities in the country and states. As production cost will decrease which can support would support to increase export from our country.” This tax will facilitate ‘Make in India’ by making one India. The current structure unmakes India, by fragmenting Indian markets along state lines. These distortions are caused by three features of the current system: The Central Sales Tax on inter- State sales of goods; numerous intra- State taxes; and the extensive nature of countervailing duty exemptions that favours mports over domestic production. Ina single action; the GST would rectify all these distortions: the GST would be eliminated; most of the other taxes would be subsumed into the GST; and because the GST would be applied in imports, the negative protection favouring imports and disfavouring domestic manufacturing would be eliminated. As taxable sale limit is brought down ic. only €10 lakhs, it is expected that tax base will be comprehensive in the country. (It was 1.5 crore for exeise duty). It will also diversify tax system and put equal burden on goods and services. These are the main advantages of upcoming GST. While a new business is starting in India, businesses currently have to get VAT registration from the State's Sales Tax Department at first. Since, each State has different procedures, forms and fees for VAT registration, itis very tough for businesses which are operating in multiple States to obtain and maintain compliance with VAT regulations. With the accomplishment of GST in India, the procedure for GST registration would be centralized and uniformed similar to service tax registration. Under GST rule, business would no longer have to attain multiple VAT registration ~ as a single GST registration would be valid across India. The procedure for GST Page | 12 & scanned with OKEN Scannerregistration would also be uniformed, thereby civilizing the easiness of starting a new business in India.* . Currently, VAT registration and VAT payment is compulsory in India once a business crosses a yearly earnings of &5 lakhs in some States and %10 lakhs in a few other States. The multiple VAT legislation enacted by each State creates bewilderment and complexities!" Once GST is imposed in India, businesses with revenue of less than 10 lakhs per annum would not have to in. Further, busi index for GST nor collect GST aga whose annual sales tumover of 10 lakhs to 850 lakhs may have to pay GST only at a lesser rate. Therefore, once GST is rolled out, thousands of start-ups and small businesses currently having annual sales earnings of 85 lakhs ~ 10 lakhs would be absent of the tax and they should be relief from collection and filing of GST retums. Currently, businesses like restaurant or computer services which sell goods and provide services as a package basis have to execute both VAT and service tax regulations. This creates more intricacy and difficulty for the businesses. They estimate tax on different rates for different items. With the accomplishment of GST this dissimilarity between goods and services will be conquer.” Further rising of invoices will be easier for businesses as one rate would be adopted forall goods and services. DISADVANTAGES OF GST Presently, more than 160 countries of the world have implemented GST. However, each country where GST was implemented experienced inflation for next 3 to 5 years. Some possible disadvantages of GST are as following: «Critics say that GST would affect negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent. '= Dasgupta S. The historic GST has become a reality, Article from Economic Times, 2017. “P. chaurasia, S. Singh, P. Kumar Sen (2016), ~ Role of Goods and Service Tax in the growth of Indian economy", ‘International journal of science technology and management”. vol 5 issue 2, February 2016, © Sunitha, G. & Sathischandra, P. 2017. Goods and Services Tax (GST): As @ new path in Tax reforms in Indian economy. International Journal of Research in Finance and Marketing. 7(3) 55~ 66, Page | 13 & scanned with OKEN Scanner2. Some Economist says that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST and hence GST brings nothing new for which we should cheer.’ 3. As GST brought small traders in the tax net, it will difficult to small traders to compete with strong / big traders Their survival can become something difficult. 4. There is need of various expositions (Monthly, annually, total 37 expositions are required as per present situation) are complicated would difficult to the traders and at the same time I. T. infrastructural support with safety and reliability is required." 5. As GST is on purchasing/Demeritsumption, its revenue will go to state in which article sold or service is rendered instead of produced, Means, state from which resources are used to produce goods will not receive tax revenue. For instance, Andhra Pradesh and Telangana are producing cement that is sold in other states of the country, they will get revenue” 6, As octtoi or Local Body Tax is abolished, its monetary compensation for Urban Local Bodies should be done properly from the concem State Government. But, experience in our country is not satisfactory because even after 73rd and 74th Demeritstitutional amendments States are supposed to appoint State Finance Commissions. Nevertheless, all states have not appointed State Finance Commissions regularly. Therefore, Corporations like Brihanmumbai will loss the strong source of revenu 7. Drawback in GST regime for businessmen is filling of Tax retum, Under current Vat laws, in case of most of the states, quarterly returns are to be submitted, in addition, a yearly return is required, while service tax laws ask for submission of two half yearly returns and a yearly return, " M. Sehrawat, U. Dhanda (2015), “GST in India: A key tax reform”, “Intemational journal of research granthaalayah”. vol3. issue 12, December 2015. "Dr. R. Vasanthagopal 2011}. "GST in India: A Big Leap in the Indirect Tax: of Trade, Economies and Finance, Vol. 2, No.2, April 2011 © GovindaRao, Goods and Services Tax in India: Challenges and Meritspects, Topics: Macroeconomic Policy, 25th Avg, 2014 2 Kumar, N. 2014, Goods and Service Tas in India-A Way Forward. Global Journal of Multiiseiplinary Studies. 30). jon System", International Journal Page | 14. & scanned with OKEN ScannerIn GST law, one would require to file not less than 37 returns for a fiseal year. This includes several files such as monthly outward supplies return, monthly inward supplies retum, monthly summary returns and one annual return etc. TAXES TO BE SUBSUMED CENTRAL TAXES TO BE SUBSUMED The following Central Taxes will be subsumed under the Goods and Services Tax law; * Central Excise Duty (CENVAT) + Additional Excise Duties and the Excise Duty levied under the Medicinal and Toiletries Preparations Act, 1955 + Service Tax + Additional Customs Duty, also known as the countervailing duty (CVD) + Special Additional Duty of Customs (SAD) -4% + Surcharges and Cesses levied by the Centre might also get subsume cluding cess on tea, coffee, rubber, ete. * Central Sales Tax to be climinated. STATE TAXES TO BE SUBSUMED IN GST Following State taxes and levies will be subsumed under GST; + VAT or sales tax + Octroi and Entry Tax + Purchase Tax + Lusury tax + Taxes on lottery, gambling and betting + Entertainment tax (unless it is levied by the local bodies) + Surcharges & State Cesses (related to the supply of goods and serviees) TAXES NOT TO BE SUBSUMED ‘The following taxes may not be subsumed under GST; «Property Tax Page | 15 & scanned with OKEN Scanner«Stamp Duty + Electricity Duty + Basic Customs Duty (duties levied at the time of Import of goods into India), + Exports Duty + Road & Passenger Tax & Toll Tax (in the nature of fees and not in the nature of taxes on goods and services). WHAT CAN BE DONE TO MIN 2017. IISE THE DISADVANTAGES OF THE GST ACT, Even though, GST is one of the revolutionary reforms about indirect taxes in the country after independence there are some possibilities that ean effect on the public interest and the common predetermined objectives of the Governments.” We should take care of following things: GST should not increase the vertical imbalances of resources and responsibilities among governments, particularly for Urban Local Bodies. Hope, finance commissions will take sufficient care of it.”* If GST led to regional imbalance of development, there should be legal provision to correct the same. Reliable I. T. infrastructure, trained man power and tax payers’ attitude should be changed. ‘The definition of goods and services should be clear otherwise it would lead to conflicts. * Secretary (State Taxes), Department of Revenue, Ministry of Finance, Government of India ® Rathod, M. (2017), An Overview of Goods and Service Tax (Gst) In India, Journal of Commerce and Management, 1-6 Page | 16 & scanned with OKEN ScannerCONCLUSIO! It is encouraging that when GST was introduced in New Zealand in 1987, it resulted in 45% higher revenue than expected, mainly due to improved compliance. The same can be expected from this reform in India, GST is the most logical steps towards the comprehensive indirect tax reform in the country since independence. All sectors of economy whether the industry, business including Govt. departments and service sector shall have to bear impact of GST. Alll sections of economy viz., big, medium, small seale units, intermediaries, importers, exporters, traders, professionals and Demeritsumers shall be directly affected by GST. GST will create a single, unified Indian market to make the economy stronger. Experts say that GST is likely to improve tax collections and Boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions However, there seem to be some crucial drawbacks in this ‘reform’ as discussed above in this paper. Will this reform be a bane or a boon for this country’s economic system? The GST was implemented in country in April 2017 and in my opinion, it is too soon to answer this question. Page | 17 & scanned with OKEN ScannerREFERENCE Books GST Manual with GST Law Guide & GST Practice Referencer (Set of 2 Volumes) (9th Edition, September 2018), Taxmann Bare Act on Goods and Services Tax Acts and Rules (GST), Universal Law Publishing Co, Websites https://indiankanoon.org/search/?formInput=gst&pagenum=5 hip://gstcouncil. gov in/sites/defaulvfiles/CGST pdt https://www scribd.com/doe/34573677/What-is-GST hutps://cleartax.in/s/Merits-and-Demerits-gst hutps://www profitbooks.nev/advantages-disadvantages-gst/ Page | 18 & scanned with OKEN Scanner