BACKGROUND OF GST

The Goods and Services Tax (GST) is a value-added tax levied on

most goods and services sold for domestic consumption. It is a
comprehensive indirect tax implemented to replace multiple cascading
taxes levied by the central and state governments in India. Here's a
brief background:
Origins:
The idea of GST in India was first mooted by the Chelliah Committee
in 1993.
It aimed to create a unified tax system, removing the complexities and
inefficiencies of the previous tax structure.
Implementation:
The GST regime was officially launched in India on July 1, 2017,
replacing various indirect taxes such as VAT, excise duty, service tax,
etc.
It is governed by the GST Council, which includes representatives
from the central and state governments.
Key Features:
GST is a destination-based tax, meaning it is levied at the point of
consumption rather than the point of origin.
It is levied at multiple rates, including 0%, 5%, 12%, 18%, and 28%,
with certain items exempted or taxed at a nil rate.
GST has a dual structure, comprising Central GST (CGST) levied by
the central government and State GST (SGST) levied by the state
governments.
Integrated GST (IGST) is levied on interstate transactions and is
collected by the central government.
 Benefits:
Simplification: GST aims to streamline the tax structure, reducing the
compliance burden on taxpayers.
Increased Revenue: It is expected to boost tax revenues by widening
the tax base and reducing tax evasion.
Economic Growth: GST facilitates seamless movement of goods
across state borders, promoting trade and economic growth.
Challenges:
Initial Implementation Challenges: The transition to the GST regime
faced teething problems such as technological glitches, compliance
issues, and confusion regarding tax rates.
Compliance Burden: Despite efforts to simplify compliance
procedures, small businesses, in particular, have faced challenges in
adapting to the new system.
Rate Rationalization: There have been ongoing debates regarding the
rationalization of tax rates to ensure equity and simplicity.
Overall, GST represents a significant reform in India's tax system,
aiming to create a unified market and promote economic growth.
However, its effectiveness and impact continue to be subjects of
debate and scrutiny.

NEED OF GST
The implementation of the Goods and Services Tax (GST) in India
was driven by several compelling needs and objectives:
 Simplification and Rationalization of Tax Structure: Prior to
GST, India had a fragmented tax system with multiple indirect
taxes levied by the central and state governments. This complex
structure led to cascading taxes, where taxes were levied at each
stage of production and distribution. GST aimed to streamline
this by replacing various indirect taxes with a single, unified tax,
reducing compliance burdens and eliminating tax cascading.
 Creation of a Unified National Market: The fragmented tax
structure resulted in barriers to interstate trade and hindered the
development of a common market within India. GST sought to
create a seamless national market by harmonizing tax rates and
procedures across states, facilitating the free movement of goods
and services across state borders.
 Elimination of Tax Cascading: Under the previous tax regime,
businesses faced the burden of paying taxes on top of taxes at
each stage of the supply chain. This led to inflated prices for
goods and services. GST introduced a system of input tax credits,
allowing businesses to claim credit for taxes paid on inputs,
thereby eliminating the cascading effect and reducing the overall
tax burden on businesses.

 Promotion of Economic Efficiency: By streamlining tax

procedures, reducing compliance costs, and eliminating tax
barriers to trade, GST aimed to enhance economic efficiency and
competitiveness. It encouraged businesses to operate more
efficiently and allocate resources more effectively, leading to
increased productivity and economic growth.
 Combatting Tax Evasion and Informal Economy: The
complexity of the pre-GST tax system made it easier for
businesses to engage in tax evasion and operate in the informal
economy. GST introduced greater transparency and
 accountability in the tax system, with digitalized processes and
increased documentation requirements. This helped to curb tax
evasion, expand the tax base, and bring more economic activities
into the formal sector.
 Harmonization with International Standards: GST brought
India's tax system more in line with international best practices
and standards. Many countries around the world have adopted
GST or similar value-added tax systems, making it easier for
Indian businesses to understand and comply with international
tax requirements.
The introduction of GST was aimed at modernizing India's tax system,
promoting economic growth, enhancing efficiency, and creating a
more conducive environment for business and investment.

LITERATURE REVIEW
A literature review on GST (Goods and Services Tax) would
encompass a broad range of studies and research articles covering
various aspects of GST implementation, impact, challenges, and
implications. Here's a summarized overview of what such a literature
review might include:
1. GST Implementation and Design:
• Studies examining the design features of GST, including tax rates,
threshold limits, exemptions, and administrative mechanisms.
• Analysis of the legislative and procedural changes required for GST
implementation, including the role of the GST Council in decision-
making.
 2. Impact on Economic Growth:
• Research exploring the impact of GST on economic growth,
productivity, and competitiveness.
• Assessments of how GST has affected investment patterns, industrial
production, and GDP growth rates.
• Comparative studies between pre-GST and post-GST periods to
measure changes in economic indicators.
3. Tax Revenue and Fiscal Impact:
• Analysis of the fiscal implications of GST implementation, including
its effects on tax revenue collections for both central and state
governments.
• Studies on the distribution of tax revenue among states and the
central government under the GST regime.
• Evaluations of the effectiveness of GST in curbing tax evasion and
expanding the tax base.
4. Business and Industry Perspectives:
• Surveys and case studies exploring the experiences and challenges
faced by businesses in transitioning to the GST regime.
• Assessments of the impact of GST on different sectors of the
economy, such as manufacturing, services, and agriculture.
• Studies on compliance costs, input tax credit utilization, and
supply chain efficiency under GST.
5. Consumer Welfare and Price Dynamics:
• Research examining the impact of GST on consumer prices,
inflation, and purchasing power.
• Studies on price adjustments by businesses in response to
changes in tax rates and input tax credit availability.
• Assessments of the distributional effects of GST on different
income groups and consumer segments.
 6. International Comparisons and Best Practices:
• Comparative studies between India's GST system and similar value-
added tax systems in other countries.
• Analysis of international experiences with GST implementation,
including lessons learned and best practices.
• Studies on the role of international organizations and experts in
providing technical assistance for GST implementation.

7. Challenges and Policy Recommendations:

• Identification of challenges and bottlenecks encountered during GST
implementation, such as technological issues, compliance
complexities, and administrative hurdles.
• Policy recommendations for addressing challenges, improving
compliance, and enhancing the effectiveness of GST in achieving its
objectives.
8. Future Directions and Reforms:
• Research exploring potential reforms and refinements to the GST
regime, including changes in tax rates, threshold limits, and
compliance procedures.
• Analysis of emerging trends and developments in GST policy, both
in India and globally.
A comprehensive literature review on GST would provide insights into
its multifaceted implications for the economy, businesses, consumers,
and government finances, as well as identify areas for further
research and policy intervention.
 OBJECTIVE OF GST
The primary objectives of the Goods and Services Tax (GST) in India are as
follows:

1. To subsume multiple indirect taxes: GST aimed to replace various

indirect taxes like Value Added Tax (VAT), Central Excise Duty, Service
Tax, and other state-level taxes with a single tax to create a unified
national market.
2. To mitigate the ill effects of the cascading effect of taxes: Under the
previous tax system, there was a tax on tax or cascading effect, which
increased the cost of goods and services. GST aimed to eliminate this
cascading effect by providing input tax credit at each stage of the supply
chain.
3. To simplify the indirect tax system: The GST system aimed to simplify
the complex and fragmented indirect tax structure in India by introducing
a unified tax system across the country.
4. To enhance the ease of doing business: By subsuming multiple taxes
and introducing a harmonized tax system, GST aimed to reduce the
compliance burden on businesses, thereby enhancing the ease of doing
business in India.
5. To boost tax compliance and revenue collection: GST aimed to
broaden the tax base, increase tax compliance, and improve the overall
tax collection by creating a seamless flow of input tax credits and a robust
IT infrastructure.
6. To foster a common national market: GST aimed to create a common
national market by removing the economic barriers and facilitating the
free movement of goods and services across state borders.
 7. To promote exports: GST aimed to make Indian goods and services
more competitive in the international market by removing the embedded
taxes and providing a seamless flow of input tax credits.
8. To ensure better tax administration: GST aimed to improve tax
administration by introducing a robust IT system (GSTN) and
standardized processes, thereby reducing tax evasion and improving
transparency.

RESEARCH METHODOLOGY OF GST

The research methodology for studying the implementation and
impact of the Goods and Services Tax (GST) in India typically
involves a combination of qualitative and quantitative approaches.
Here's a general outline of the research methodology that could be
followed:
1. Literature Review:
o Review existing literature, research papers, reports, and

studies on GST implementation in India and other countries.

o Analyze the findings, challenges, and best practices from

previous research
.
2. Theoretical Framework:
o Develop a theoretical framework or conceptual model based

on existing theories and concepts related to tax reforms,

economic integration, and fiscal policies.
o Identify the key variables and factors that influence the

implementation and impact of GST.

3. Data Collection:
a. Primary Data:
 o Conduct surveys or interviews with stakeholders, such as
businesses, consumers, tax officials, and policymakers, to
gather primary data on their experiences, perceptions, and
opinions regarding GST.
o Use structured questionnaires, focus group discussions, or
in-depth interviews to collect qualitative and quantitative
data.

b. Secondary Data:
o Collect and analyze secondary data from government
sources, such as GST Council reports, tax revenue data,
economic indicators, and other relevant statistics.
o Obtain data from reputable organizations, industry
associations, and research institutes.

4. Sampling:
o Determine the appropriate sampling method (e.g.,

probability or non-probability sampling) based on the

research objectives and target population.
o Select a representative sample of businesses, consumers, or

other stakeholders for data collection.

5. Data Analysis:
a. Quantitative Analysis:
o Use statistical techniques such as regression analysis, time-
series analysis, or econometric modeling to analyze the
impact of GST on variables like tax revenue, economic
growth, prices, and business performance.
 o Employ software like SPSS, Stata, or R for data analysis and
hypothesis testing.
b. Qualitative Analysis:
o Employ techniques like content analysis, thematic analysis,
or grounded theory to analyze qualitative data from
interviews, open-ended survey responses, and other sources.
o Identify emerging themes, patterns, and insights related to
the implementation and perception of GST

.
6. Validation and Triangulation:
o Validate the findings by triangulating data from multiple

sources (primary and secondary) and using mixed methods

(qualitative and quantitative).
o Cross-check the results for consistency and reliability.

7. Interpretation and Recommendations:

o Interpret the analyzed data in the context of the research

objectives and theoretical framework.

o Derive conclusions and recommendations based on the

research findings.
o Suggest policy implications, areas for improvement, and

future research directions.

8. Reporting and Dissemination:

o Present the research findings and recommendations in the

form of a research report, thesis, or publication.

o Share the research outcomes with relevant stakeholders,

policymakers, and the academic community.

It's important to note that the specific research methodology may vary
based on the research objectives, scope, and resources available.
Additionally, ethical considerations, such as maintaining
confidentiality and obtaining informed consent from participants,
should be addressed throughout the research process.

LIMITATIONS OF GST
The Goods and Services Tax (GST) system in India, despite its many benefits,
has some limitations and challenges. Here are some of the notable limitations
of GST:

1. Complex GST Structure : While GST aimed to simplify the tax system,
the presence of multiple tax slabs (0%, 5%, 12%, 18%, and 28%) and
various exemptions and exceptions has made the structure somewhat
complex, especially for small businesses and consumers.

2. Exclusion of Certain Items : Certain items like alcohol, petroleum

products, and electricity have been kept out of the GST purview, which
limits the full realization of a truly unified and simplified tax system.

3. Cascading Effect Persists : Although GST eliminates the cascading

effect of taxes to a large extent, it still persists in certain cases due to the
exclusion of certain items from the GST regime and the presence of non-
creditable taxes like stamp duty, property tax, and entry tax.
4. Compliance Burden : Despite the objective of simplification, the GST
compliance process, including filing returns, maintaining records, and
reconciling input tax credits, can be burdensome, particularly for small
and medium enterprises (SMEs) with limited resources.
5. Transition Challenges : The transition from the previous tax system to
GST posed significant challenges for businesses, requiring them to adapt
to new processes, software, and compliance requirements, which led to
initial disruptions and increased costs.

6. Inter-State Transactions : While GST aimed to create a seamless

national market, the distinction between intra-state and inter-state
transactions, with different tax rates and compliance requirements,
continues to create complexities for businesses operating across multiple
states.

7. Revenue Implications : The implementation of GST led to initial

revenue shortfalls for some states, as the new system disrupted the
existing tax collection mechanisms, requiring compensation from the
central government.

8. Tax Evasion and Fraud : Despite efforts to curb tax evasion, cases of
fraudulent practices, such as fake invoicing and misuse of input tax
credits, have been reported, posing challenges for tax authorities.
9. Technological Challenges : The robust IT infrastructure required for
GST implementation, including the Goods and Services Tax Network
(GSTN), has faced technical glitches and operational issues, leading to
delays and inconveniences for taxpayers.
10. Lack of Harmonization : While GST aimed to harmonize taxes
across states, variations in tax rates, rules, and interpretations among
different states continue to exist, creating complexities for businesses
operating across multiple states.
It's important to note that the GST system is still evolving, and efforts are
ongoing to address these limitations through policy changes, technological
improvements, and stakeholder feedback. Regular review and refinement of the
GST system are essential to overcome these challenges and realize its full
potential.