Abstract

Taxes are being the major source of revenue
for the Indian government. India is the hub of taxes where people pay many
taxes and confused them as far as the payment is concerned. GST is a blanket of
indirect tax that will reduce several indirect state and federal taxes such as
value added tax and excise duty. The GST is an attempt to change the whole
scenario of current indirect tax. GST merges all indirect taxes under an
umbrella and helps in creation of smooth market that is expected to remove the
burden of existing indirect tax system and play an important role in growth of
the Indian economy.

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The Goods and Services Tax was launched at
midnight on July 1, 2017 by former president of India, Pranab Mukherjee and
Prime Minister of India, Shree Narendra Modi. Transactions made within a single
state are levied with central GST by the central government and state GST by
the state government. Ahuja A. (2018)

Key words: Federal Taxes,
Scenario, Transactions, Value Added Tax

 

 

 

 

 

Introduction

The idea of a Goods and
Services Tax (GST) for India was first mooted sixteen years back, during the
Prime Minster ship of Shree Atal Bihari Vajpayee. Thereafter, on 28th February,
2006, Union Finance Minister in his Budget for 2006-07 proposed that GST would
be introduced from 1st April, 2010 (?????? ). The Empowered Committee of State
Finance Ministers (EC), which had formulated the design of State VAT, was
requested to come up with a roadmap and structure for the GST. Joint Working
Groups of officials having representatives of the States as well as the Centre
were set up to examine various aspects of the GST and draw up reports
specifically on exemptions and thresholds, taxation of services and taxation of
inter-State supplies. Based on discussions within and between it and the
Central Government, the EC released its First Discussion Paper (FDP) on GST in
November, 2009. The FDP spelled out the features of the proposed GST and has
formed the basis for the present GST laws and rules (?????).

 For interstate transactions and imported goods
or services, an Integrated GST is levied by the central government. The study
of GST helps us to learn objectives and features of
GST and also helps us to know the working of GST. GST implies the idea of one
country – one tax. It encourages the idea of consumption based tax instead of
manufacturing based tax. It also eliminates the cascading effect of indirect
taxes on single transaction. It reduces tax evasion and corruption. It will
take some time for the people to understand the concept of GST completely.

Objectives
of the Study

•        
To study
the concept of GST

•        
To gain understanding
of feature of GST

•        
To explore
the working mechanism of GST

•        
To
understand the pros and cons of GST

•         
To provide
suggestion for effective functioning of GST

 

OVERVIEW
OF GST

The goods that are traded within a state is called
Intra-State supply and the goods that are traded between two states are called
Inter-State Supply. Intra-State Supply further consist of Central GST(CGST) and
State GST(SGST). CGST is levied by the Central Government and SGST and
Integrated GST is levied by State Government. This has been represented with
the help of   figure 1.

        Fig.1:
Classification of GST

Literature
Review: Sehrawat M. (2015)

The view and opinions of various authors have been explained
as follows:

i.       
Ahmed E. and Poddar S.(2009) studied the concept of GST in
his paper entitled “GOods and Service Tax Reform and Inter government
consideration in India” and stated that GST introduction will provide
simpler and transparent tax system with increase in output and productivity of
economy in India. He also stated that the benefit of GST is critically
dependent on rational design of GST.

ii.     
Vasanthagopal R. (2011) concluded that switching to smaller
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 as well.

iii.   
Mawuli A. (2014) stated that GST is not good for low income
countries and does not provide broad based growth to poor countries. If still
these countries want to implement GST then the rate of GST should be less than
10% for growth.

iv.   
Kumar N.(2014) asserted that the implementation of GST in
India is helpful in removing economic distortion by current indirect tax system
and expected to encourage unbiased tax structure which is indifferent to
geographical location.

v.     
Pinki, Kamma S. and Verma R. (2014) concluded that the new
NDA government in India is positive toward implementation of GST and it is
beneficial for central government, state government and as well as for consumer
in long run if its implementation is backed by strong IT infrastructure.

Journey So
Far: Ahuja A. (2018)

Prime Minister Atal Bihari Vajpayee sets up a committee
which was headed by the finance minister of West Bengal Asim Dasgupta to design
a GST model. The committee was also tasked with the responsibility of putting
in place the back-end technology and logistics for implementing a uniform taxation
regime in India.

 

 

 

                                                        
Figure2: Journey of GST

In January 2017, Arun Jaitley announced July
1, 2017 as GST rollout deadline.

In march 2017, Four Key GST Bills i.e. Central
GST (CGST), Integrated GST (IGST), State GST (SGST) and Union Territory GST
(UTGST) was passed by Lok Sabha and Rajya Sabha.

Important
Features of the GST: Sehrawat M (2015)

 

a)   
Ambits
of GST:

1.      It is
applied to all taxable goods and services except the exempted goods and
services and on transactions below the threshold limit.

2.      Exempted
goods and services includes alcohol for human consumption, electricity, custom
duty, real estate.Proposed article 366(12A)

3.      Petroleum
products crude oil, HSD (high speed diesel), motor spirit(petrol), natural
gas, ATF(Aviation Turbine Fuel) are initially exempted from GST till the GST
council announces date of their inclusion.

4.      Tobacco
products are included in GST along with the central excise tax.

 

a)   
Imposition
and Collection of GST:

1.      The power
of making law on taxation of goods and services lies with both union and state
legislative assemblies. A law made by union on GST will not overdue a state GST
law.(Proposed article 246A)

2.      GST has
two components CGST and SGST as discussed above. CGST will be collected by the
central government whereas state government will collect SGST

3.      IGST is
levied on supplies in the course of interstate trade including imports which is
collected by central government exclusively and distributed to imported states
as GST is destination based tax. The proportion of distribution between center
and states is decided on recommendation of GST Council (proposed article 269A).

 

b)   
GST
Council:

1.1.   It is set
up by president under article 279-A. It is chaired by union finance minister.

1.2.   It will
constitute union minister of state in charge of revenue and minister in charge
of finance or taxation or of any other field nominated by state government. The
2/3rd representation in council are from states and 1/3rd are from union.

1.3.   The
decision of council is made by 3/4th majority of the votes cast and quorum of
council is 50%.

1.4.   It will
make recommendation on the following:

2.      Taxes,
surcharge, chess of central and state which will be integrated in GST.

3.      Goods and
services which may be exempted from GST.

4.      Interstate
commerce – IGST – proportion of distribution between state and centre.

5.      Registration
threshold limit for GST.

6.      GST floor
rates.

7.      Special
rates during calamities.

8.      Provision
with respect to special category states specially north east states.

8.1.   It may
also work as dispute settlement authority for GST.

 

The Working of GST: (custms.gov.my)                                                                                 
Businesses has to register under GST if their
annual sales turnover has exceeded the prescribed limit. Only a registered
person will get the refund. GST is charged on the value or selling price of the
products. The amount of GST incurred on input (input tax) can be deducted from
the amount of GST charged (output tax) by the registered person.  If the
amount of output tax is more than the input tax in the relevant taxable period,
the difference will not be refunded. However, if the input tax is more than the
output tax, the difference will be refunded by the Government. The working
of GST can be understood as follows:  

Procedure for Registration of the business:                                                                  
To get register under GST the following step
need to be followed:

1. Registration of
Business:

The first step to register for GST identification number, the business
need to check its annual turnover. If annual turnover is more than Rs.20,00,000
the business is liable to register under GST.  

Types of registration:

       
i.           
Voluntary Registration

     
ii.           
Group Registration

   
iii.           
Divisional/ Branch Registration

Voluntary registration

 Registration Voluntary
registration is for those whose annual income is less than Rs.20,00,000. Voluntary registration is allowable
but remains in system for at least 2 years. Once registered, you are required
to charge and collect GST and at the same time are entitled to claim input tax
credit and eligible to enjoy all facilities provided under the law.

Group
Registration

Group registration is a facility that allow
several companies to group and centralise their administration for the GST
accounting purpose. Each company must be registered individually before they
can be grouped as asingle registered person.(?????,
2017).

 

Divisional/Branch
Registration

A
taxable person who is carrying on its business in several divisions or branches
upon request and subject to stipulated terms and conditions can be registered
in the names of those divisions/branches. This is a facility for any taxable
person with a number of self accounting units to register each unit separately
for GST. Each division/branch will be given a separate GST identification
number and make its own returns. However, the taxable person remains accountable
for all GST liability of all divisions/branches.

Deregistration

Businesses can ………. within 30 days from the date of registration
under the following circumstances:

•        
If the business has ceased to exit.

•        
No longer fulfill the requirement of registration.

2.  Issuance of Tax
Invoice:

When GST is charged,
tax invoice are isuued which shows GST and price of the commodity separately.
The tax invoice has to be issued within 21 days after the time of the supply.

 

3. Accounting for GST:

Basically, all taxable
person will be required to account for GST based on accrual (invoice) basis of
accounting i.e. all output tax and input tax are to be accounted and claimed
based on the time when the invoice was issued or received. However, certain
categories of taxable person may be allowed to use the payment (cash) basis of
accounting. the facility may be given to businesses that carry out their
activities solely on a cash payment basis.

 

4. Filing GST Return:

GST returns must be submitted to the GST office not later than
the last day of the following month after the end of the taxable period.
taxable period is regular interval period where a taxable person is liable to
account and pay to the government his GST liability. The standard taxable
period is on quarterly basis. However, a registrant may apply to be placed in
other taxable period (monthly or 6 monthly) subject to specific condition as
follow:

Table 1: Filing GST Returns

Categories

Periods

Conditions

Standard Taxable Period

Three months

•       
Application to all taxable turnover not exceeding rs. 20,00,000

Non-standard Taxable Period

One month

•        
Application to taxable person with annual
turnover exceeding Rs.20,00,000.
•       
Application to other taxable person on request and subject to
approval.

Six months

•       
Special cases

Source:(http://www.customs.gov.my/en/cp/pages/cp_hdw.aspx)

5. Input Tax Credit Mechanism

Business
can collect GST on all taxable goods and services supplied to the consumers.
Only businesses registered under GST can charge and collect GST. Businesses are
allowed to claim whatever amount of GST paid on the business input by
offsetting against the output tax. 

•        
The excess amount of output tax shall be
remitted to the government within the stipulated period.

•        
In the case where the amount of input tax
cannot be fully recovered, business can make a claim for the refund from the
government.

NOTE:

•        
Maximum time period to claim the input tax is
6 years from the date of supply.

•        
Input tax credit cannot be claim on blocked
input such as GST paid on passenger motor car, club subscription fee, medical
and personal accident premium, medical expenses, family benefit and etc.

•        
Apportionment rules have to be applied when
the taxable person makes a mixed supply.

6. Claiming GST Refund

Any refund of tax may be offset
against other unpaid GST, custom and excise duties. Refund will be made to the
claimant within 14 working days if the claim is submitted online or within 28
working days, if claim is submitted manually.

 

7. Paying GST

If output tax exceeds
the input tax, the difference shall be remitted to the government together with
the GST return not later than the last day of the following month after the end
of taxable period
online payment through:

•        
Bank

•        
Internet/online payment

•        
Manual payment

•        
Payment via cheque/bank, draft/money order
must be paid to the suggested.

 

Benefits
of GST

·        
Overall
reduction in Prices for Consumers: Due to implementation of GST the
consumable products have become cheaper the tax interest rate have reduced from
early interest rates. The prices of necessity goods have decreased. This also
reduces the burden on general public.

·        
Reduction
in Multiplicity of Taxes, Cascading and Double Taxation :

Earlier their were different taxes charged on different
products but after the introduction of GST one nation one tax has been
implemented.

•        
Broader
Tax Base and decrease in “Black” transactions :

GST has lead to reduction of black marketing as now there is
more transparency in the transactions

•        
Free Flow
of Goods and Services – No Check points : Now for the commerce transactions
only one tax has to be paid which leads to the reduction of the problem of
double counting.

 

Disadvantages

Diagram

And headings

•                    
Some Economist say that GST
in India would impact 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.

•                    
Some Experts says that
CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax,
VAT and CST. Hence,
there is no major reduction in the number of
tax layers.

•                    
Some retail products
currently have only four percent tax on them. After GST, garments and clothes could become more
expensive.

•                    
The aviation industry would
be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate
will surpass fifteen percent and effectively double the tax rate.

•        
Adoption and migration to the
new GST system would involve teething troubles and learning for the entire ecosystem.6

 

Suggestions for Improvement of GST

 

With
the implementation of GST, India took a step towards uni?ed common national market. It aims to
bring in increased ef?ciency and compliance and
also boost government’s ‘ease of doing
business’ initiative. However, being a
new, evolving law, there are certain
improvements required. Few areas that need
consideration are as given below:

1. Processes must be reduced so that business
can operate efficiently in the best interest of the people and for economic
growth. filing 37 return per GSTIN could be a very time to comply with.

2. Relief must be given to small scale operation
and particularly reduced processes should be applicable to them. They do not
have financeor resources to comply. Much of India’s business is one or more
than one. The facility to file quarterly returns should be extended to asseses with up to 10
crore turnover.

3. Rates should be rationalized and reduced to
make India competitive and in interest of compliance and economic growth. The
highest rate should be kept at 18% and there should be only few items that
should fall under 28% slab. Daily use items such as soaps, creams, movie
tickets and etc should not be taxed at 28% slab.

 

4.
Valuation rules lack clarity and are debatable. This is likely to lead zero
litigation and transfers pricing issues/litigation. These rules need to be
rationalized, simplified and be fair.

 

5.
The issues being faced by the exporters should be dealt with and the refund
procedure should be activated immediately. 7

 

 

•                    
CONCLUSION

From
the above study, it can be concluded that GST will bring one nation one tax.

Implementation
of GST is one of the best decision taken by Indian government. GST simplifies
existing indirect tax system and helps to remove inefficiencies created by the
existing current heterogeneous taxation system only if there is a clear
agreement. Efficient formulation of GST has lead to resource and revenue gain
for both center and state majorly through widening of tax base and improvement
in tax compliance. It can be further concluded that GST has a positive impact
on various sectors and industry. In reality, that extra
revenue that the government is expecting to generate won’t come from the consumers’
pocket but from the reduction of tax theft. Ways
have to be found for lowering the overall compliance cost, and necessary
changes may have to be made for the good of the masses. GST will become good
and simple, only when the entire country works as a whole towards making it
successful. 

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