UNIVERSITY OF MUMBAI Rayat Shikshan Sanstha’s MAHATMA PHULE ARTS, SCIENCE AND COMMERCE COLLEGE, PANVEL,DIST-RAIGAD APROJECT ON “GOODS AND SERVICES TAX (GST)”" BACHELOR IN COMMERCE (ACCOUNTING AND FINANCE) SUBMITTED BY -ABIU TABASSUM MD SAGIR: B.COM (ACCOUNTING AND FINANCE) SEMESTER VI ROLL NO-24608 SUBMITTED TO UNIVERSITY OF MUMBAI NAME OF PROJECT GUIDE PROF.NAYAN KOLI ACADEMIC YEAR 2024-25Rayat Shikshan Sanstha’s MAHATMA PHULE ARTS, SCIENCE AND COMMERCE COLLEGE, PANVEL,DIST-RAIGAD APROJECTON “ GOODS AND SERVICES TAX (GST)”" BACHELOR IN COMMERCE (ACCOUNTING AND FINANCE) SUBMITTED BY -ABJU TABASSUM MD SAGIR B.COM (ACCOUNTING AND FINANCE) SEMESTER VI ROLL NO-24608 SUBMITTED TO UNIVERSITY OF MUMBAI NAME OF PROJECT GUIDE PROF.NAYAN KOL! ACADEMIC YEAR 2024-25Rayat Shikshan Sanstha’ MAHATMA PHULE ARTS SCIENCE AND COMMERCE COLLEGE ,PANVEL CERTIFICATE This is to certify that Miss. ARJU TABASSUM MD SAGIR has worked and duly completed. Her Project Work for the degree of Bachelor in Commerce (Accounting & Finance) under the Faculty of Commerce in the subject PROF.NAYAN KOLI & and her project is entitled, “GOODS AND SERVICES TAX” under my supervision. I further certify that the entire work has been done by the leamer under my guidance and that no part of it has been submitted previously for any Degree or Diploma of any University. Itis her own work and facts reported by her personal findings and investigation. Project Guide External Examiner Date of submission:DECLARATION T the undersigned Miss. ARJU TABASSUM MD SAGIR declare that the work embodied in this project work titled here by, “GOODS AND SERVICES TAX” Forms my own contribution to the research work carried out under the guidance of Mr.Nayan koli Sir is a result of my own research work and has not been previously submitted to any other University for any other Degree/Diploma to this or any other University. Wherever reference has been made to previous works of others, it has been clearly indicated as such and included in the bibliography. I Here by further declare that all information of this document has been obtained and presented in accordance with academic rules and ethical conduct. ‘Name and signature of the learner Certified by , ‘Name and signature of the Guiding TeacherAcknowledgement. To list who all have helped me is difficult because they are so numerous and the depth is enormous. I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project. I take this opportunity to thank the University of Mumbai for giving chance to do this project. I would like to thank my Principal,Dr. Ganesh A Thakur for Providing the necessary facilities required for completion of this project. I would like to take this opportunity to thank our coordinator Prof.Mr. Nayan koli for his moral support and guidance. I would also like to express my sincere gratitude towards my project guide Mr. Nayan Koli, whose guidance and care made this project successful. I would like to thank my College Library, for having provided various reference books and magazines related to my project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my Parents and Peers who supported me throughout my project.TABLE OF CONTENTS Chapter TITLE Page No. No. EXECUTIVE SUMMARY 8 1 INTRODUCTION 9-16 im Background of Goods and Service Tax outside India 11-12 12 Background of Goods and Service Tax in India 13 13 Preparation for GST 13 14 Need for GST 14-15, 1.3 | GST-A cure for ills of Existing indirect tax 16 2; RESEARCH METHODOLOGY 17-26 21 Method of Collecting Data 17 2.2 | Objective of Study 18-19 2.3 | Some other elementary benefits of GST model in INDIA 20-21 2.4 | Simplification of various terms of GST 22-24 2.5 | Scope of GST 25 3. LITERATURE REVIEW 26-27 4. DATA ANALYSIS AND INTERPRETATION 28-66 4.1 | Dual GST Model To be introduced in India 28-30 42 | GST Ponal 3 43 | GSTIN 31-32 44 | GST Registration 33 45 | GST Composition Scheme 4.6 | Migration to GST 4.7 | Penalties for Not Registering Under GST 4.8 | Multiple Registrations Under GST 36 4.9 | Input Tax Credit 36 4.10 | GST Software 37-38 4.11 | GST Rate List 2019 39-444.12 | No Tax 45 4.13. | GST Monthly Returns 46 4.14 | Needs to file Return in GST regime 47 4.15 | Salient Features of GST Returns 47 4.16 | HSN/ SAC code under GST 48-52 4.17 | GST calculation §3-54 418 | Impact of Benefits on GST 55-57 4.19 | Overall Impact of GST 58-59 4.20 | On India 60-61 4.21 | On Indian Economy 62 4.22 | Negative List Under GST 63 4.23 | List of taxes not covered under GST 64 4.24 | Limitation of GST 65-66 5. CONCLUSION 67-68 6. RECOMENDATION 69 7. BIBLOGRAPHY 70GOODS AND SERVICES TAX One Nation One TaxExecutive summary Goods and Service Tax or GST as it is known is all set to be a game changer for the Indian Economy Taxation system. GST evolved an all India One Nation One Tax regime. It has now been more than a decade since the idea of national Goods and Services Tax (GST) was mooted by Kelkar Task Force in 2004, The Task Force strongly recommended fully integrated ‘GST" on national basis. The Union Finance Minister Shri P. Chidambaram, while presenting the Central Budget (2006-2007), announced for the first time a proposal to introduce a national level GST by April 1, 2010, However, GST missed several deadlines and continued to be surrounded by clouds of uncertainty. Since now, the former finance minister of India Arun Jaitley in his budget speech 0F 2015 has announced time and again that the tax will be introduced on | April 2016. In India, there are different indirect taxes applied on goods and services by central and state government. GST is intended to include all these taxes into one tax with seamless Input Tax Credit and charged on both goods and services. Thus, excise duty, special additional duty, service tax, VAT to name a few will get repealed and will be added into GST. For this, GST will have 3 parts CGST, SGST and IGST. The central taxes like excise duty will be subsumed into CGST and state taxes like VAT into SGST. For the introduction of GST in the above form, the Government needs to get the Constitution Amendment Bill passed so that the proposed objective of subsuming all taxes and allowing states to tax subjects in Union list and vice versa is achieved. However, the Lok Sabha passed the Bill on 6th May 2015 and Rajya Sabha on 3rd August 201.6, Subsequent to ratification of the Bill by more than 50% of the States, Constitution (122nd Amendment) Bill, 2014 received the assent of the President on 8thSeptember, 2016 and became Constitution (101st Amendment) Act, 2016, which paved the way for introduction of GST in IndiaCHAPTER 1 INTRODUCTIONIn the following year, on 27th March 2017, the Central GST legislations - Central Goods and Services Tax Bill, 2017, Integrated Goods and Services Tax Bill, 2017, Union Territory Goods and Services Tax Bill, 2017 and Goods and Services Tax (Compensation to States) Bill, 2017 were introduced in Lok Sabha. Lok Sabha passed these bills on 29th March 2017 and with the receipt of the President's assent on 12th April 2017, the Bills were enacted. The enactment of the Central Acts is being followed by the enactment of the State GST laws by various State Legislatures. Telangana, Rajasthan, Chhattisgarh, Punjab, Goa and Bihar are among the first ones to pass their respective State GST laws. Government is endeavouring to roll out GST by Ist July 2017, by achieving consensus on all the issues relating thereto. It is geared to attain July Ist deadline for implementation of GST across India. GST is a path breaking indirect tax reform which will create a common national market by dismantling inter-State trade barriers. GST has subsumed multiple indirect taxes like excise duty, scrvice tax, VAT. CST. luxury tax. entertainment tax, entry tax, etc. For successful implementation of GST, it is necessary that the Government at both centre and state levels, agree to merge all their taxes into CGST/SGST. Further, the base for taxation for both has to be the same. The exemptions, abatements ctc. under GST need to be common for both centre and all states to avoid litigation. Further exemptions/cxclusions should be minimum to avoid break of credit chain. The law needs to provide for single point compliances. absence of multistate audits etc. for the assesses. Conceptually GST is expected to have numerous benefits like reduction in compliances in the long run since multiple taxes will be replaced with one tax. It is expected to bring down prices and hence the inflation since it will remove the impact of tax on tax and enable seamless credit. It is expected to generate revenue for the country as the tax base will increase as the GST rate will be somewhere around 27% with both goods and services covered. It is also expected to make exports from India competitive and India a preferred destination for forcign investment since GST is a globally accepted tax. France was the first country to implement GST in the year 1954. Within 62 years of its advent, about 160 countries across the world have adopted GST because this tax has the capacity to raise revenue in the most transparent and neutral manner. Before the impending GST, addressing issues faced by the financial service industry is important.1.1 Background of Goods and Service Tax outside India Goods and Service also known as the Value Added Tax (VAT) or Harmonized Sales Tax. Following are some successfully implemented GST models in other counties: > France: - + Rate of GST 19.6% + France was the first country to introduce GST 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-a-vis India is going to introduce. In China, GST applies only to goods and the provision of repairs, replacement and processing services, > Australia: - * Rate of GST 10% + GST is administered by the Tax office on behalf of the Australian Government, and is appropriated to the states and territories. + Every company whose turnover exceeds $75,000 is liable for registration under GST and in default 1/11th of the income and some amount is form of penalty. * There are provisions for credit back of GST, submission of returns according to limit decided, Maintenance of records ete. There they have to keep records for 5 years for the purpose of GST.> Canada: - * GST is imposed at 5% in Part IX of the Excise Tax Act. GST is levied on goods and services made in Canada except items that are cither "exempt" or "zero-rated" + When, a supplicr makes a zero-rated supply, he is eligible to recover any GST paid on purchases but the supplier who makes supply of Exempt goods he is not eligible take input tax credit on purchases for the purpose of making the exempt goods and services. > New Zealand: - © Rate of GST 12.5%. * Exceptions are rent collected on residential rental properties, donations and financial services.Background of Goods and Service Tax in India GST is intended to include all these taxes into one tax with seamless Input Tax Credit and charged on both goods and services. For this, GST will have 3 parts CGST. SGST and IGST. The central taxes like excise duty will be subsumed into CGST and state taxes like VAT into SGST. However, the Lok Sabha passed the Bill on 6th May 2015 and Rajya Sabha on 3rd August 2016. Subsequent to ratification of the Bill by more than 50% of the States, Constitution (1 22nd Amendment) Bill, 2014 received the assent of the President on 8thSeptember, 2016 and became Constitution (11st Amendment) Act, 2016, which paved the way for introduction of GST in India. Preparation for GST The GST will require legislative and constitutional changes. As the time gap between formation and implementation is very less. Therefore, following things nced to be done: - © Constitutional amendment to enable state to levy service tax. © Centre to tax goods beyond factory Gates. © Laws of central excise act 1944 and finance act 1994 needs to be replaced. Existing VAT laws needs to be repealed. © Itis highly expected that all steps are taken to ensure that no pending © work relating to Sales Tax, VAT or other Indirect Taxes remains © outstanding before implementation of GST so that everybody can © concentrate on new law. Central and State Government should be prepared to fulfil the © expectations for Trade and Industries. © Record keeping will have to be changed and IT software will have to be © updated in order to comply with GST provisions. © Trade and Industries will have to rethink market strategies, stock transfer pricing and Godown keeping policies in different states. * Uniform dispute settlement machinery. © Adequate training for both tax payers and tax enforcers.1.4 Need for GST Deficiencies in the aetna Vela EXPEC Deficiencies in the existing Value-Added Taxation In the present regime, a manufacturer of excisable goods charges excise duty and value added tax (VAT) on intra-State sale of goods. However, the VAT dealer on his subsequent intra-State sale of goods charges VAT (as per prevalent VAT rate as applicable in the respective state) on value comprising of (basic value + excise duty charged by manufacturer + profit by dealer). Further, in respect of tax on services, service tax is payable on taxable services provided. Wee.f. | July 2012, service tax is levied on all ‘services’ other than the Negative list of services as provided under Section 66D of the Finance Act, 1994 or else otherwise exempted vide the Mega Exemption Notification No. 25/2012-ST dated 20 June 2012 (“the Mega Exemption Notification”). Presently, from 1 June 2016, service tax is levied @ 15% [Service tax @ 14%, Swachh Bharat Cess (SBC) @ 0.5% (w.e.f. November 15, 2015) and Krishi Kalyan Cess (KKC) @ 0.5% (w.c.f. June 1, 2016)] on specified services provided by service providers in India.The existing indirect tax framework in India suffer from various shortcomings. Under the existing indirect tax structure, the various indirect taxes being levied are not necessarily mutually exclusive. % To illustrate. when the goods are manufactured and sold both central excise duty (CENVAT) and State-Level VAT are levied. Though CENVAT and State-Level VAT are essentially value added taxes, set off of one against the credit of another is not possible as CENVAT is a central levy and State-Level VAT is a State levy. Moreover, CENVAT is applicable only at manufacturing level and not at distribution levels. The existing sales tax regime in India is a combination of origin based (Central Sales Tax) and destination based multipoint system of taxation (State-Level VAT). Service tax is also a value added tax and credit across the service tax and the central excise duty is integrated at the central level. Despite the introduction of the principle of taxation of valuc added in India - at the Central level in the form of CENVAT and at the State level in the form of State VAT — its application has remained piecemeal and fragmented on account of the following reasons.1.5, GST -A cure for ills of Existing indirect tax Pa at * A comprehensive tax structure covering both goods and services viz. Goods and Service Tax (GST) would address these problems. Simultancous introduction of GST at both Centre and State levels would integrate taxes on goods and services for the purpose of set-off relief and will ensure that both the cascading effects of CENVAT and service tax are removed and a continuous chain of set-off from the original producer's point’ service provider's point up to the retailer's level/consumer’s level is established. > In the GST Regime. the major indirect taxes have been subsumed in the ambit of GST. The present concepts of manufacture or sale of goods or rendering of services are no longer applicable since the tax is now levied on “Supply of Goods and/or services”.CHAPTER2 RESEARCH METHODOLOGY The aim of this chapter is to discourse the methods used in the research. It is also a vital component in order to achieve the objectives of the decision, clear, accurate and reliable. In this chapter also, we can sce the step is generally adopted to know how to collect analysis and interpretations of data. It covers the aspects of research contrive, research process, population and sampling. data aggregation technique, development of instrumentation and data analysis adopted. The purposes of this chapter are to describe the research methodology of this study, explain the sample selection, describe the procedure used in designing the instrument and collecting the data, and provide an explanation of the statistical procedures used to analyse the data. The research method has been chosen to determine the effect of goods and services tax (GST), 2.1. METHOD OF COLLECTING DATA Vv Primary Data While doing this particular rescarch, primary data was being gathered simply by distributing hard copies of survey questionnaire designed using SPSS to the public. The researchers gathered the data straight and openly by conducting survey, assessment or interviewing people. The questions were set in the purpose to understand the relationship between independent variable (for example: implementation of gst) and dependent variable (for example: consumers” behaviour on spending). > Secondary data Moreover, secondary data was also being collected throughout this research. It basically is the data taken out from academic journals as well as articles written by previous authors or experts. For the purpose of our research, secondary data was used in doing our literature review, and we use the data that had previously noted down by past researchers to suppor the topic in our study.2.2.OBJECTIVE OF STUDY The study has following objeetives: 1) To cognize the concept of GST 2) To study the features of GST 3) To evaluate the advantages and challenges of GST 4) To furnish information for further research work on GST. GST is a tax on goods and services with value addition at cach stage having comprehensive and continuous chain of sct of benefits from the producer's / scrvice provider's point up to the retailer's level where only the final consumer sh7ould bear the tax. The main objective of the project Is to understand about need, requirements, purpose, benefits and backlogs of the GST. The country will benefit immensely in three ways from the GST: 1, The GST will greatly boost the GDP. Lesser taxes leads, to lower prices of goods and services. Lower prices lead, to increased purchasing power of the consumers. Increased purchasing power leads to more demand of the goods and services. More demands lead to more production, More production leads to Higher GDP. Hence, GST will boost the GDP.2. The GST will facilitate ‘Make in India’ by converting the geographical landscape of the country into a single market. Despite being one country, India is a union of 30 or more markets. Too many taxes in the current system like the Central Sales Tax (CST) on inter-state sales of goods; numerous intra-state taxes; and the extensive nature of countervailing duty exemptions, favour imports over domestic production. GST would get rid of the CST and subsume most of the other taxes. And since, it will also be applicable on imports, the major tax factor working against ‘making in India’ will disappear, greatly boosting the production and in turn exports. This will ultimately help bridge the current account deficit. 3, The GST would improve tax governance in two ways. a. like the value added tax (VAT), it is a self-collecting and sclf-enforcing tax. What it essentially means it that the companies buying supplies from outside parties will insist on tax payment on goods supplied as without this they can’t get sctofls. —on_—their_ ~=—sown final ~— product _ sales. b. due to the dual monitoring structure of the GST — one by the states and another by the Centre — it is difficult to evade tax. Even if one sct of tax authoritics overlooks or fails to detect evasion, there is the possibility that the other overseeing authority may not. To reap these benefits, it is important that the GST is well-designed and the revenue-neutral rate is such that protects revenue, simplifies administration, encourages compliance, avoids adding to inflationary pressures, and keeps India in the range of countries with reasonable levels of indirect taxes..3.Some other elementary benefits of GST model in INDIA. © Uniform GST Registration: - The model legislation for the introduction of goods and services tax (GST) will have a provision for registration of individuals and companies which pay the tax. The registration will be done through a uniform PAN- linked business identification number. The Department of Revenue in the Ministry of Finance had recently sent a proposal to state governments for making the 10-digit permanent account number (PAN) the starting point for registering GST payces. QO Input Credit in GST: - Input Credit Mechanism (ref fig.1) is available to you when you are covered under the GST Act. Which means if you are a manufacturer, supplier. agent, ecommerce operator, aggregator or any of the persons mentioned here, registered under GST, you are eligible to claim INPUT CREDIT for tax paid by you on your purchases. Figure (1) : Payment and Input Tax Credit Mod X receives G/S from ‘These are input taxes ‘Thus, a registered dealer is following suppliers which he paid on allowed to claim inputs any pays the following inward supplies which thus constitutes | taxes input tax credit | Gat: Rs ® Rs. 15300 Gst Rs, 2754 @ Total supply : 18054 ‘Outward supply less: input tax: 1360 Net payable : 1394 Tax Payable : bem ) Output tar: 2754Growth of Revenue in States and Union: - 11 is expected that the introduction of GST will increase the tax base but lowers down the tax rates and also removes the multiple point taxation. This will lead to higher amount of revenue (0 both the states and the union, Reduces transaction costs and unnecessary wastages: « If government works in an efficient mode, it may be also possible that a single registration and a single compliance will suffice for both SGST and CGST provided government produces effective IT infrastructure and integration of states level with the union, Reduces average tax burdens: - Under GST mechanism, the cost of tax that ‘consumers have to bear will be certain and it is expected that GST would reduce the average tax burdens on the consumers. Reduces the corruption: - I is one of the major problems that India is overwhelmed with, We cannot expect anything substantial unless there exists a political will to root it out, This will be a step towards corruption free Indian Revenue Services. Present CST will be removed and need not to be paid, At present, there is no input tax eredit available for CST. There are many indirect taxes in state and central level currently, which will be included by GST. i.c. you need to pay a single GST instead of all of them. 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 produets 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.2.4,Simplification of Various Terms of GST. GOODS SUPPLIED OR SERVICES PROVIDED WITHIN THE UNION TERRITORY BETWEEN STATES cesT ( vtest I cast ) { scst } | icsT jQ Intra-State Movement: - An intra-State supply If the goods remain within the same State. A supply of Services shall be— (a) An inter-State supply if the service provider and the service recipient are located in different States. (b) An intra-State supply if the service provider and the service recipient are located in the same State. Q Inter- State Movement: - An Inter-State supply if the supply involves the movement of goods from one State to another. Explanation: Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. O CGST: - CGST means Central Goods and Service Tax. CGST is a part of goods and service tax. It is covered under Central Goods and Service Tax Act 2016. Taxes collected under Central Goods and Service tax will be the revenue for central Government. Present Central taxes like Central excise duty. Additional Excise duty. Special Excise Duty, Central Sales Tax. Service Tax etc. will be subsumed under Central Goods and Service Tax. OQ SGST: - SGST means State Goods and Service Tax. It is covered under State Goods and service Tax Act 2016. A collection of SGST will be the revenue for State Government. After the introduction of SGST all the state taxes like Value Added Tax. Entertainment Tax. Luxury Tax, Entry Tax ete. will be merged under SGST. For example, if goods are sold or services are provided within the State then SGST will be levied on such transaction.QO IGST: - IGST means Integrated Goods and Service Tax. IGST falls under Integrated Goods and Service Tax Act 2016. Revenue collected from IGST will be divided between Central Government and State Government as per the rates specified by the government. IGST will be charged on transfer of goods and services from one state to another state. Import of Goods and Services will also be deemed to be covered under Inter-state transactions so IGST will be levied on such transactions. For example, if Goods or services are transferred from Rajasthan to Maharashtra then the transaction will attract IGST. O UTGST: - The full form of UTGST is Union Territory Goods and Service Tax. UTGST is a part of Goods and Service Tax in India, GST under supply of goods and services takes place in Union Territories like Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Delhi (National Capital Territory of Delhi), Lakshadweep, Puducherry etc. is accounted under UTGST. A separate Act is being implemented for Union Territory states to impose and administer GST in India in the name of UTGST Act. Under UTGST Act, the details of GST rates payable against the movement of goods and services in Union territories are explained, The UTGST bill is presented in respective states government to implement as UTGST Act. The above information is about the meaning of UTGST under GST in India, the mechanism of UTGST under GST system in India and union territory states falls under UTGST.2.5.SCOPE OF THE GST The scope of the project limits up to the study of GST under Indirect Tax System. GST shall cover all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified ‘on the recommendation of the Goods and Services Tax Council. Of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, exemption list and threshold limits. The Council shall function under the Chairmanship of the Union Finance Minister and will have the State Union Minister as its members. All goods and services are covered under GST Regime except Alcoholic liquor for Human Consumption, Tobacco Products subject to levy of GST and Centre may also levy excise duty GST Council yet to decide the incidence and levy of GST on following: a) Crude Petroleum b) High Speed Diesel (HSD) c)Motor Spirit (Petrol) d)Natural Gas ¢) Aviation Turbine FuelCHAPTER LITERATURE REVIEW The Proposed GST is likely to change the whole Scenario of current indirect tax system. It is considered as biggest tax reform since 1947. Currently, in India complicated indirect tax system is followed with imbrication of taxes imposed by union and states separately. GST will unify all the Indirect taxes under an Umbrella and will create a smooth national market. Experts says that GST will help the economy to grow in more efficient manner by improving the tax collection as it will disrupt all the tax barriers between states and integrated country via single tax rate, GST was first introduced by France in 1954 and now it is followed by 140 countries. Most of the countries followed unified GST while some countries like Brazil, Canada follow a dual GST system where tax is imposed by central and state both. In India also dual system of GST is proposed including CGST and SGST. Hooper and Smith (1997): - GST is actually collected at various stages of the production process. Accordingly, there is output tax, a GST tax charges by the suppliers on taxable goods and services and input tax, a tax incurred by businesses on goods and services purchases. It is noted that GST is not a cost to the sellers and would not appear in financial statements as expenditure. Recently, the government initiative to introduce Goods and Services Tax (GST) has been a growing topic of interest in Malaysia. Despite the increasing popularity and success of GST implementation around the world (Hooper & Smith, 1997). Malaysian citizens are not entirely convinced with this new tax scheme. There are debates mainly centred on the advantages and disadvantages derived from the new tax initiative. Dr. R. Vasanth Gopal (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As per as India is concerned Agogo Mawuli (May 2014) studied: - “Goods and Service Tax an Appraisal” and found that GST is not good for low-income countries and does not provide broad based growth to poor counties. If still these countries want to implement GST then the rate of GST should be less than 10% for growth, Ehtisham Ahmed and Satya Poddar (2009) studied: - “Goods and Service Tax Reforms and Intergovernmental Consideration in India” and found that GST introduction will provide simple and transparent tax system with increase in output and product ty of economy in India, But the benefits of GST are critically dependent on rational design of GST.CHAPTER 4 DATA COLLECTION 4.1. Dual GST Model To be introduced in India India will adopt a dual GST which will be imposed concurrently by the Centre and States, i.e. Centre and States will simultancously tax goods and services. Centre will have the power to tax intra-State sales & States will be empowered to tax services. GST will extend to whole of India except the State of Jammu and Kashmir. GST is a destination-based tax applicable on all transactions involving supply of goods and services fora consideration subject to exceptions thereof. GST in India will comprise of Central Goods and Service Tax (CGST) - levied and collected by Central Government, State Goods and Service Tax (SGST) - levied and No CENVAT after manufacturing stage Non-inclusion of several local levies in State VAT such as luxury tax. entertainment tax, etc. Nonintegrating of VAT & service tax Cascading of taxes on account of (i) levy of Non-VAT able CST and (ii) inclusion of CENVAT in the value for imposing VAT Double taxation of a transaction as both goods and services collected by State Governments/Union Territories with State Legislatures and Union Territory Goods and Service Tax (UTGST) - levied and collected by Union Territories without State Legislatures, on intra-State supplies of taxable goods and/or services. Inter-State supplies of taxable goods and/or services will be subject to Integrated Goods and Service Tax (IGST). IGST will approximately be a sum total of CGST and SGST/UTGST and will be levied by Centre on all inter-State supplies. © There is single legislation — CGST Act, 2017 - for levying CGST. Similarly, Union Territories without State legislatures [Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and Chandigarh] will be governed by UTGST Act, 2017 for levying UTGST. States and Union territories with their own legislatures [Delhi and Puducherry] have to enact their own GST legislation for levying SGST. Though there would be multiple SGST legislations, the basic features of law. such as chargeability. definition oftaxable event and taxable person, classification and valuation of goods and services, procedure for collection and levy of tax and the like would be uniform in all the SGST legislations, as far as feasible. This would be necessary to preserve the essence of dual GST. + In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State supplies and IGST for inter-State supplies) shall be paid by every taxable person and in this regard, provisions have been prescribed in the law. However, for providing relief to small businesses, a simpler method of paying taxes and accounting thereof is also prescribed, known as Composition Scheme. Along with providing relief to small-scale business, the law also contains provisions for granting exemption from payment of tax on specified goods and/or services. ‘ Input Tax Credit (ITC) of CGST and SGST/UTGST will be available throughout the supply chain. but cross utilization of credit of CGST and SGST/UTGST will not be possible, ic, CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST. However, cross utilization will be allowed between CGST/SGST/UTGST and IGST, ic. credit of IGST can be utilized for the payment of CGST/SGST/UTGST and vice versa. Utilization of Input Tax Credit ZK =~ a Input CGST anes ScsT Input IGST i) Output — ii) Output Ge i Deuput » Gurpue ii) Output — iii) Output CGsT IGsT GST Icst CcsT SGST ‘ Since GST is a destination-based consumption tax, revenue of SGST will ordinarily accruc to the consuming States, The inter-State supplier in the exporting State will be allowed to set off the available credit of IGST, CGST and SGST/UTGST (in that order) against the IGSTpayable on inter-State supply made by him. The buyer in the importing State will be allowed to avail the credit of IGST paid on inter-State purchase made by him. Thus. unlike the existing scenario where the credit chain breaks in case of inter-State sales on account of non- VAT able CST. under GST regime there is a seamless credit flow in case of inter-State supplies too, The revenue of inter-State sale will not accrue to the exporting State and the exporting State will be required to transfer to the Centre the credit of SGST/UTGST used in payment of IGST. The Centre will transfer to the importing State the credit of IGST used in payment of SGST/UTGST. Thus, the inter- State trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. A Central Agency is needed which can act as a clearing house and verify the claims and inform the respective Governments to transfer the funds. This is possible only with the help of a strong IT Infrastructure. ‘ Resultantly, Goods and Services Network (GSTN) - a Special Purpose Vehicle — has been set to provide a shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders for implementation of GST. The functions of the GSTN, inter alia, include: * Facilitating registration; + Forwarding the returns to Central and State authorities: * Computation and settlement of IGST: + Matching of tax payment details with banking network: + Providing various MIS reports to the Central and the State Governments based on the taxpayer return information: + Providing analysis of taxpayers' profile; and + Running the matching engine for matching. reversal and reclaim of input tax credit.4.2. GST PORTAL The government's portal (ref fig.2) for GST compliance is finally live and open for business registrations. The GST portal is hosted at https://www.gst.gov.in/ and so far, only registrations are cabled on it. Existing taxpayers or new businesses can apply to register and submit the required documents. All the existing registered taxpayers will be granted provisional registration initially and would be required to submit additional documents within 6 months. Figure (2) 43. GSTIN For any dealer registered under state VAT law, a unique TIN number is issued by the respective state tax authorities. Similarly. a service provider is assigned a service tax registration number by the Central Board of Excise and Custom (CBEC). Going forward, in the new GST regime, all these taxpayers will get consolidated into one single platform for compliance and administration purposes and will be assigned registration under a single authority. The goverment has set up GSTN-a special purpose vehicle to provide the IT infrastructure necessary to support GST digitally. It is expected that 8 million taxpayers will be migratedfrom various platforms into GST. All of these businesses will be assigned a unique Goods and Services Tax Identification Number (GSTIN). But most are yet not aware of the new registration process and the identification number. Proposed GST Identification Number (GSTIN) ‘A complete break-up of the proposed GST Identification Number. Each taxpayer will be allotted a state-wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). * The first two digits of this number will represent the state code as per Indian Census 2011 * The next ten digits will be the PAN number of the taxpayer * The thirteenth digit will be assigned based on the number of registration within a state * The fourteenth digit will be Z by default * The last digit will be for check code A format of proposed GSTIN has been shown in the image below. GSTIN - GST Identification Number ~ Format of GSTIN 22 AAAAAOO00A1 oars aoe Nemoto = Seema ete (Cee the same PAN "Z"by digit alder ina state default44. GST Registration Every business carrying out a taxable supply of goods or services under GST regime and whose turnover exceeds the threshold limit of Rs. 20 lakh/ 10 Lakh as applicable will be required to register as a normal taxable person. This process is of registration is referred as GST registration. GST Registration lance of GS’ atior GST registration is critical because it will enable you to avail various benefits that are available under the GST regime. One such benefit is to avail seamless input tax credit. Multiple taxes are being clubbed under GST and thus the cascading of taxes that is prevailing currently will no longer be the case. Also, timely registration will help you avoid any kind of interface with tax authorities. Casual Registration A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a person will be treated as a casual taxable person as per GST. Example: A person who has a place of business in Bangalore supplies taxable consulting services in Pune where he has no place of business would be treated as a casual taxable person in Pune.4.5. Composition Dealer This is an option available to small businesses and taxpayers having a turnover less than Rs. 75 lakhs. They can opt for Composition scheme where they will tax at a nominal rate of 1% or 2.50% (for manufacturers) CGST and SGST each (rates will be notified later). They will be required to maintain much less detailed records and file only 1 quarterly return instead of three monthly returns. However, they cannot issue taxable invoices, i.c., collect tax from customers, but are required (o pay the tax out of their own pocket. They cannot also claim any input tax credit. Composition levy is available to only small businesses. It is not available to interstate sellers, e-commerce traders, and operators. GST will apply when turnover of the business exceeds Rs 20 lakhs (Limit is Rs 10 lakhs for the North-Eastern States). [Earlier the limit was Rs 1Olakhs and Rs Slakhs for NE states.] 4.6. Migration to GST All existing Central Excise and Service Tax assesses and VAT dealers will be migrated to GST. To migrate to GST, assessees would be provided a Provisional ID and Password by CBEC/State Commercial Tax Departments. ayProvisional IDs would be issucd to only those assessces who have a valid PAN associated with their registration. An assessee may not be provided a Provisional ID in the following cases: 1. The PAN associated with the registration is not valid 2. The PAN is registered with a State Tax authority and Provisional 1D has been supplied by the said State Tax authority. 3. There are multiple CE/ST registrations on the same PAN ina State. In this case, only 1 Provisional [D would be issued for the Ist registration in the alphabetical order provided any of the above 2 conditions are not met. The assesses need to use this Provisional ID and Password to login to the GST Common Portal https:/Avww.gst.gov.in where they would be required to fill and submit the Form 20 along with necessary supporting documents. 4.7. Penalties for Not Registering Under GST An offender not paying tax or making short payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs. 10,000. The penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud. However, for other genuine errors. the penalty is 10% of the tax due.4.8. Multiple Registrations Under GST + A person with multiple business verticals in a state may obtain a separate registration for cach business vertical. & PAN is mandatory to apply for GST registration (except for a non-resident person who can get GST registration on the basis of other documents). + A registration which has been rejected under CGST AcUSGST Act shall also stand rejected for the purpose of SGST/CGST act. 4.9. Input Tax Credit One of the fundamental features of GST is the seamless flow of input credit (ref fig.3) across the chain (from the manufacture of goods till it is consumed) and across the country. How to Avail INPUT CREDIT ‘Take Input Tax Credit from IGST, OGST & ‘SGST paid on purchases Take Input Tax Credit from CGST & IGST paid on purchases ‘Take Input Tax Credit from SGST & IGST paid on purchases4.10. GST software The brink of one of the biggest business changes of our times viz. Goods oe een and Services Tax. So far, most of the big businesses have already > identified vendors for implementation of GST software. Many of the large : enterprises had floated a Request for Proposal/Request for Information (RFP/RFI) late last year, asking software providers to present them with their solutions. They would have then evaluated these providers, over multiple product demos and extensive question and answer rounds, to reach a stage where they can now begin the implementation process, and undertake business process mapping and solution. GST software, a list of some of the key features that software provides. 1. Cloud based GST Software: - Clear tax GST is a cloud-based software i.e. developed and maintained on intemet which empowers us to provide our users with the following features * Create a syne between working offline and backup on connectivity with internet + Providing an updated version of our software without bothering the user with additional efforts to update the software + Easy access to software from anywhere at any time without worrying about internet connectivity2. No desktop for installation: - As the software is hosted on cloud, user need not have a desktop system for installation of our software. Clear Tax GST software can be downloaded as an offline software on system / mobile app. mobile website / desktop website. User need not bear additional cost of installation of the software and utilities. Hence, You can login from anywhere and anytime. At the point of creating an invoice our software makes sure that all mandatory fields are accurately filled In case of any mistake, an alert or notification will be given for every error made in an inyoice along with report of all such invoices. GST and E-Way Bill App weeny ast4.11. GST RATES LIST 2019 Ome RATG: ADALOTOONGGs : (BOB | QPABMEO SPH 60a0s20Ee PGP ORS! Mea pscied Ya -« GST council has made the much-awaited announcements around tax rates on various categories of goods on day one of a two-day meeting of the said council at Srinagar. There has been a hype around these rates for a while and now these rates are finally in the public domain. As soon as the GST rates were announced a huge wave of curiosity hit across industry and trade bodies. Everyone is evaluating their position as a result of this change. So. in this article, we bring you our analysis of these GST rates. We know that the GST slabs are pegged at 5%. 12%, 18% & 28%, According to the GST council, the tax structure for common-use goods are as under: GST Rates on Goods O 5% Tax Slab Given below are the items that have been added to the $% GST tax rate slab along with the other existing items- Cashew nuts/cashew nuts in shell lec and snow Bio gas Aggarbatti Kites Coir mats, matting and floor covering > > > > Insulin > > > > Pawan Chakki that is Wind-based Atta ChakkiPostage or revenue stamps, stamp-postmarks, first-day covers, etc. Numismatic coins Braille paper, braille typewriters, braille watches, hearing aids and other appliances to compensate for a defect or disability Fly-ash blocks Walking sticks ‘Natural cork Marble rubble Accessories/parts for carriages designed for differently-abled individuals 12% Tax Slab After the GST council meeting on 11th June, the following items were added to the 12% GST rates category- Preparations of vegetables, fruits, nuts or other parts of plants, including pickle, murabba, chutney. jam, jelly Ketchups, sauces and mustard sauce but excluding curry paste, mayonnaise and salad dressings, mixed condiments and mixed dressings Bari made of pulses including mungodi Menthol and menthol erystals. peppermint, fractionated/de-terpenated mentha oil, dementholised oil, Mentha piperita oil and spearmint oil Alll diagnostic kits and reagents Plastic beads Exercise books and note books Glasses for corrective spectacles and flint buttons Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs Fixed Speed Diesel Engines Two-way radio (Walkie talkic) used by defence, police and paramilitary forces cte. Intraocular lens Corrective spectaclesPlaying cards, chess board, carom board and other board games, like ludo, etc. Debagged/roughly squared cork Items manufactured from natural cork Agglomerated cork 18% Tax Slab The items mentioned below have been added to the 18% GST tax rate slab among the other existing items- Kajal pencil sticks Dental wax Plastic Tarpaulin School satchels and bags other than of leather or composition leather: toilet cases, Hand bags and shopping bags of artificial plastic material, cotton or jute; Handbags of other materials excluding wicker work or basket work Headgear and parts thereof Precast Conerete Pipes Salt Glazed Stone Ware Pipes Aluminium foil All goods, including hooks and eyes Rear Tractor tyres and rear tractor tyre tubes Rear Tractor wheel rim. tractor centre housing. tractor housing transmission, tractor support front axle Weighing Machinery other than electric or electronic weighing machinery Printers other than multifunction printers Ball bearing. Roller Bearings, Parts & related accessories Transformers Industrial Electronics Electrical Transformer Static Converters (UPS)CCTV including CCTV with video recorders Set top Box for TV Computer monitors not exceeding 17 inches Electrical Filaments or discharge lamps Winding Wires, Coaxial cables and Optical Fiber Perforating or stapling machines (staplers). pencil sharpening machines Baby carriages Instruments for measuring length. for use in the hand (for example, measuring rods and tapes, micrometers, callipers) Bamboo furniture Swimming pools and paddling pools Televisions/Monitors (upto 32 inches) Power banks powered by Lithium-ion batteries Sports goods, games consoles and related items with HS code 9504 All items with HS code 8483 including gear boxes, transmission cranks and pulleys 28% Tax Slab The council meeting was held to ‘reduce’ the tax rates on certain items based on customer preferences. Hence, no additional items were added to the highest GST rates slab of 28%. * Used or retreaded pneumatic rubber tires4.12, NO TAX Apart from other items that enjoy zero GST tax rate. these are the commodities added to the list after 11th June rate revision — > Hulled cereal grains like barley. wheat, oat, rye, ete. > Bones and horn-cores unworked and waste of these products. > Palmyra jaggery > Alltypes of salt > Dicalcium Phosphate (DCP) of animal feed grade conforming to IS specification No. 5470 :2002 Kajal [other than kajal pencil sticks] Picture books. colouring books or drawing books for children Human hair ~ dressed, thinned, bleached or otherwise worked Sanitary Napkins Unit container-packed frozen branded vegetables (uncooked/steamed) vvvVvvVVv Vegetables preserved using various techniques including brine and other preservatives that are unsuitable for immediate human consumption. > Music Books/manuscripts4.13. GST Monthly Returns: - GST return procedure (refer fig No. 3) Based on the category of registered person such as monthly return is to be filed by Regular, Foreign Non-Residents, ISD and Casual Tax Payers whereas Compounding/Composite tax payers has to file quarterly retumns: ‘Two months period for) UNMATCHED [ ITC Reversed to be paid Reconeiliation of >] along with Interest by unmatched transaction. Purchaser.4.14. Needs to file Return in GST regime + Every registered dealer is required to file return for the prescribed tax period. A Return needs to be filed even if there is no business activity (i.e. Nil Return) during the said tax period of return. + Government entities / PSUs, ete. not dealing in GST supplies or persons exclusively dealing in exempted / Nil rated / non —GST goods or services would neither be required to obtain registration nor required to file returns under the GST law. + However, State tax authorities may assign Departmental ID to such government departments / PSUs / other persons and will ask the suppliers to quote this ID in the supply invoices for all inter-State purchases being made to them. 4.15. Salient Features of GST Returns + Filing of returns would only be through online mode. Facility of offline generation and preparation of returns will also be available. The returns prepared in the offline mode will have to be uploaded. * There will be a common ¢-return for CGST, SGST, IGST and Additional Tax. * A registered Tax Payer shall file GST Return at GST Common Portal cither by himself or through his authorised representative. * There would be no revision of Returns. Changes to be done in subsequent Returns4.16. HSN / SAC CODE UNDER GST HSN & SAC Codes Under GST What is HSN Code? The Harmonized Commodity Description and Coding System generally refers to “Harmonized System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It first came into effect in 1988. How does HSN code work? It has about 5,000 commodity groups. each identified by a six-digit code, arranged in a legal and logical structure. It is supported by well-defined rules to achieve uniform classification.Why is HSN important? The main purpose of HSN is to classify goods from all over the World in a systematic and logical manner. This brings in a uniform classification of goods and facilitates international trade. HSN Worldwide The HSN system is used by more than 200 countries and economies for reasons such as: * Uniform classification + Base for their Customs tariffs + Collection of international trade statistics Over 98% of the merchandise in international trade is classified in terms of the HSN. Harmonized System of Nomenclature number for each commodity is accepted by most of the countries. The HSN number remains same for almost all goods. However, HSN number used in some of the countries varies little, based on the nature of goods classified. HSN in India India is a member of World Customs Organization (WCO) since 1971. It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8- digit classification.Understanding the HSN Code The HSN structure contains 21 sections. with 99 Chapters, about 1,244 headings, and 5,224 subheadings. + Each Section is divided into Chapters. Each Chapter is divided into Headings. Each Heading is divided into Sub Headings. + Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail. Structure of HSN code 76 HSN Classification Code List Regional Taritt Sub-Heading National TariffServices Accounting Code (SAC) in GST Like goods, services are also classified uniformly for recognition, measurement and taxation. Codes for services are called Services Accounting Code or SAC. For example: Legal documentation and certification services concerning patents, copyrights and other intellectual property rights-~ 998213 «The first two digits are same for all services i.e. 99 «The next two digits (82) represent the major nature of service, in this case, legal services + The last two digits (13) represent detailed nature of service. for patents etc. legal documentation PROPOSED NEW SCHEME OF CLASSIFICATION OF SERVICES Heading & Group Service Code Tariff) [Crecit-granting services including stand-by commitment, guarantees & securities [Financial easing services |Other financial services (except investment banking, insurance services and loo7119 pension services) Group 99712 Investment banking services: [997720 investment bankurg servicesHSN codes to be declared: BELOW RS 1.5 CR HSN Why is HSN important under GST? The purpose of HSN codes is to make GST systematic and globally accepted. HSN codes will remove the need to upload the detailed description of the goods. This will save time and make filing easier since GST returns are automated. A dealer or a service provider must provide HSN/SAC wise summary of sales in his GSTR-1.4.17. GST calcul: + The GST shall have two components: one levied by the Centre (referred to as Central GST or CGST), and the other levied by the States (referred to as State GST or SGST). Rates for Central GST and State GST would be approved appropriately, reflecting revenue considerations and acceptability. + The CGST and the SGST would be applicable to all transactions of 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 of thresholds for goods and services prescribed for the States and the Centre.THE FOLLOWING COMPARISON SHOWS THE BENEFITS OF GS’ Particulars Without GST With GST Cost of Produ Add: - Profit Margin (Rs.) 2,000.00 Manufacturer Price 7,000.00, 7,000.00 ‘Add: - Excise Duty @ 12% Add: - VAT @ 12.5% Add: - CGST @ 12% COG to Wholesaler (a) 7,840.00 Add: - Profit Margin @ 10% Add: - VAT @ 12.5% 784 Add: - CGST @ 12% Add: - SGST @ 12% COG to Retailer (b) = VAT @ 12.5% 1,185.80 Add: - CGST @ 12% 1,016.40 Add: - SGST @ 12% Cost Saving to Consumer 1 0 % of Cost Saving 1.59 NOTE: - Input tax credit available to wholesaler is Rs.980 and Rs. 1,680 in case of without GST and with GST respectively. Likewise Input tax credit available to Retailer is Rs. 1,078 and Rs. 1,848 in case of without GST and with GST respectively.4.18. IMPACTS OF BENEFITS ON GST — Benefits The basis of Goods and Services Tax is the seamless flow of Input Tax Credit (ITC) along the entire value addition chain. At every step of the manufacturing process, businesses will have the option to claim the tax already paid in the previous transaction. Understanding this process is crucial for businesses. A detailed explanation here. To understand this, let us first understand what is Input Tax Credit. It is the credit an individual receives for the tax paid on the inputs used in manufacturing the product. So, if there is a 10% tax that the individual must submit to the government, he can subtract the amount he has paid in taxes at the time of purchase and submit the balance amount to the government.Benefits of GST To Trade: + eee Oo Reduction in range of taxes Mitigation of cascading/ double taxation More efficient balance of taxes particularly for exports Development of Common National Market or Common Economic Market Simpler tax administration regime with less rates and exemptions. Increase in cost competitiveness’ for local enterprises with reduction in tax cost and also reduced cost of compliance To Government: a Simpler tax framework Broadening tax base Improved compliance and revenue collections Efficient utilization of resources Investments out of savings by consumers - due to mitigation of cascading effect, contributes to increase in availability of funds out of savings of consumer - which may be used for financing developmental activities To Consumer: * Reduction in cost of goods and services due to removal of cascading effect of taxes Increase in buying force and real income Increase in savings due to decline in cost Increase in investments due to inerease in savings.Stage 1: Manufacturing Take apparel manufacturing as an example and 10% as the GST applicable. The manufacturer buys raw material worth INR 500 that is inclusive of the GST of 50 (10% of 500). He then adds his own value of INR 50 to the materials during the manufacturing process. This brings the gross value of the product toINR 550. Now, the total tax amount on the output of the apparel comes to INR 55 (10% of 550) In the current tax system, the manufacturer would be required to pay a tax of INR 5S: however, under GST he can set some of his tax off as he has already paid it while purchasing the raw materials. Therefore, the final GST that the manufacturer will incur will be of INR 5 (total tax amount till now minus the tax he has already paid) i.e. INR 5 (55-50) Stage 2: Wholesale Here. the apparel is passed from the manufacturer to the wholesaler at a gross value of NR 550 that is inclusive of the GST of INR 55 (10% of 550). The wholesaler then adds his value (his margin) of INR 50 making the total INR 600 (550 + 50). This brings the total tax amount on the final to INR 60 (10% of 600). Like the manufacturer, the wholesaler too can set off this tax amount with the tax that he has already paid for while purchasing the goods from the manufacturer. Thus, the final GST for the wholesaler would be INR 5 (60 — 55) Stage 3: Retailer In this final step, the retailer buys the apparel from the wholesaler at a gross value of INR 600 that is inclusive of the GST of INR 60 (10% of 600). He then adds his value or margin of INR 50 making the total cost of the goods INR 650. The GST applicable here is INR 65 (10% of 650), but since the retailer has already paid a tax while purchasing the goods, he can set it off. Thus, the final GST incidence for the retailer would be INR 5 (65 — 60). At the end, since the retailer will sell the product at INR 650, the GST paid by the customer would be INR 65(10% of 650) only. This number would have been much higher in our current tax structure. Thus, GST can be a win-win scenario that will benefit the entire value chain and make it easier for both businesses and consumer4.19. Overall Impact of GST a) Change in law and procedure: Since it is a major indirect tax reform in India, there would be new legislations and procedures. The entire indirect tax code would be a new one. b) Change in tax-rates: The standard rate of 12.5 % for central excise, Service tax, along with residuary rate of VAT at 12.5-14.5% brings the overall rate to 25%-30%, But, post GST, the general rate will be 18%; a net gain of almost 7%-12%, Most of the dealers and consumers would experience the change in tax rates, cither significantly or marginally. When the tax rates are increased for some products it could Icad to tax cvasion as well. ¢) GST based on HSN: The central excise tariff-based classification would no longer be applicable. It would reduce the interpretational issues in respect of class of commodities. The Harmonized Commodity Description and Coding System generally refers to “Harmontzed System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It first came into effect in 1988. d) Ailment of tax credit; GST would facilitate near seamless credit across the entire supply chain and across all States under a common tax base. At present no cross credits are available across central excise/service tax to local VAT/sales tax. Under the GST law, the input tax credit (ITC) (set off) would be given for Central GST against CGST and the States would give input tax. credit (ITC) SGST to SGST. Cross utilization of credit between Central GST and State GST would not be allowed, ) Credit ailment based on vendor's invoices: The credit of excise duty paid available based on the excise invoice raised by manufacturer or service2) h) provider. The credit is available under the Service Tax law when the invoice amount is paid within 3 months of the invoice date. In respect of joint charge and reverse charge, based on reccipt of payment on the basis of payment challans of the assessce. Under State VAT law, credit is allowable on the basis of tax invoice. Under GST the credits could be availed based on the invoices of vendors under CGST and SGST. But the onus may shift onto the assessce to ensure that the amount of the CGST/SGST has been deposited in the respective Government treasury by the vendor. This provision has been added to bring in tax discipline but smaller businesses may find transaction cost increasing due to this. Avoidance of Double Taxation: Presently, several transactions suffer VAT as well as Service Tax such as works contract or licensing of software. This could be resolved under the GST regime by redefining what is goods and service. Changes in the Accounting Software: Dealers and service providers need to modify/replace the accounting and taxation software. Initially there could be investment costs, costs of training in GST of people at cach level starting from junior/mid to higher level managerial staff, management group/stakeholders. ‘Training; Comprehensive training would be required to the staff members of the business community, both at senior level and also at junior level across the purchase, sales and finance functions. VAT + CE/ ST officers would also need to understand the law well. Competent Professionals: There are specialized consultants for Excise Duty. Service Tax and VAT. With the GST. only a single consultant maybe required who can handle all GST matters. Compliance for the SME may necessitate competent tax preparers Amending existing contracts: Assesses have to incorporate an extra clause in the existing contracts to collect CGST and SGST as applicable4.20. ON INDIA: - Goods and Services Tax (GST) is expected to provide the much-needed stimulant for economic growth in India by transforming the existing basis of indirect taxation towards free flow of goods and services within the economy and also eliminating the cascading effect of tax on tax. In view of the important role that India is expected to play in the world economy in the years to come, the expectation of GST being introduced is high not only within the country, but also in neighbouring countries and in developed economies of the world.Some of the imp Impacts are: - A) Increased FDI: The flow of Foreign Direct Investments may increase once GST is implemented as the present complicated/ multiple tax laws are one of the reasons foreign Companies are wary of coming to India in addition to widespread corruption. B) Growth in overall revenue: It is estimated that India could get revenue of $15 billion per annum by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. Over a period, the dilution of the principles may sce that only part of this is accruing. C) Single point taxation: Uniformity in tax laws will lead to single point taxation for supply of goods or services all over India. This increases the tax compliance and more assesses will come into tax net. D) Simplified tax laws: This reduces litigation and waste of time of the judiciary and the assessee duc to frivolous proceedings at various levels of adjudication and appellate authorities. Present law appears to be much worse and an amalgam of the bad parts of VAT/ ST/ CE. E) Increase in exports and employment: GST could also result in increased employment, promotion of exports and consequently a significant boost to overall economic growth and factors of production -land labour and capital.4.21, ON INDIAN ECONOMY: - + Reduce tax burden on producers and foster growth through more production. This double taxation prevents manufacturers from producing to their optimum capacity and retards growth. GST would take care of this problem by providing tax credit to the manufacturer. + Various tax barriers such as check posts and toll plazas lead to a lot of wastage for perishable items being transported, a loss that translated into major costs through higher need of buffer stocks and warehousing costs as well. A single taxation system could eliminate this roadblock for them. * A single taxation on producers would also translate into a lower final selling price for the consumer. + Also, there will be more transparency in the system as the customers would know exactly how much taxes they are being charged and on what base. * GST would add to government revenues by widening the tax base. * GST provides eredits for the taxes paid by producers earlier in the goods/services chain. This would encourage these producers to buy raw material from different registered dealers and would bring in more and more vendors and suppliers under the purview of taxation. * GST also removes the custom duties applicable on exports, Our competitiveness in foreign markets would increase on account of lower cost of transaction. * The proposed GST regime, which will subsume most central and state-level taxes. is expecied to have a single unified list of concessions/exemptions as against the current mammoth exemptions and concessions available across goods and services The introduction of Goods and Services Tax would be a very noteworthy step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would alleviate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of reduction in the overall burden on goods and services. Introduction of GST would also make Indian products competitive in the domestic and international markets. Last but not the least, this tax, because of its transparent character, would be easier to administer. However, once implemented, the system holds great promise in terms of sustaining growth for the Indian economy.4.22. NEGATIVE LIST UNDER GST SECTION 7(2)(a) read with SCHEDULE III Schedule III: -Activities or transactions which shall be treated neither as a supply of goods nor a supply of services 1. Services by an employce to the employer in the course of or in relation to his employment. 2. Services by any Court or Tribunal established under any law for the time being in force. 3. Functions performed by the MPs, MLAs, Members of municipality and Member of other local authorities. 4. Duties performed by any person who holds any constitutional post. 5. Duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause. 6. Services of funeral, burial, crematorium or mortuary including transportation of the deceased. 7. Sale of land and sale of building where entire consideration has been received after issuance of completion certificate 8. Actionable claims other than lottery, betting and gambling.4.23. List of taxes not covered under GS’ ¥ Stamp Duty v Electricity Cess ¥ Extra Entertainment Tax Levied by Local Bodies ¥ Property Tax ¥ Entry Fee at Municipal Corporation Border v Road Tax ¥ Toll Tax v Extra Excise Duty on Tobacco Products4.24LIMITATION OF GST Why no to GST? For quite some time now, it has been elear that the people most keen on this “reform” are big industrialists, especially multinationals. Since they arc big, they cannot evade state or central taxes on goods. Their crib is that they have to compete with companies in the unorganised sector which often pay no tax. FIRST, as we noted above, it helps the big more than the small. Since the proposal is that companies with a tumover of Rs 1.3 crore will have to pay GST. it means many small companies will end up paying taxes. The big companies will benefit, as they will now get deductions on the taxes paid by their small suppliers. Since the initial GST rate could be anywhere from 15-25 percent (depending on what is left out of its ambit), that’s a huge tax bite for the small. the key beneficiaries of GST will be sectors such as batteries, footwear, plywood. electrical appliances, ceramics, adhesives and paints, where the unorganised sector accounts for 35-70 percent of total market size.” The latter's loss will be the gain of their competitors in the organised sector.