CHAPTER 1

INTRODUCTION

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 HISTORY OF TAX

CONCEPT OF TAX
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an
individual or legal entity) by a governmental organization in order to fund government spending and
various public expenditures (regional, local, or national) and tax compliance refers to policy actions
and individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the
right time and securing the correct tax allowances and tax reliefs.

The first known taxation took place in Ancient Egypt around 3000–2800 BC.

A failure to pay in a timely manner (non-compliance), along with evasion of or resistance to

taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or
as its labor equivalent.

Most countries have a tax system in place, in order to pay for public, common, or agreed national
needs and for the functions of government. Some levy a flat percentage rate of taxation on personal
annual income, but most scale taxes are progressive based on brackets of annual income amounts.

Most countries charge a tax on an individual's income as well as on corporate income. Countries or
subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property taxes,
sales taxes, use taxes, payroll taxes, duties and/or tariffs.

In economic terms, taxation transfers wealth from households or businesses to the government. This
has effects that can both increase and reduce economic growth and economic welfare. Consequently,
taxation is a highly debated topic.

MEANING OF TAX
Taxes are mandatory contributions levied on individuals or corporations by a government
entity whether local, regional, or national. Tax revenues finance government activities, including
public works and services such as roads and schools, or programs such as Social Security and
Medicare. In economics, taxes fall on whoever pays the burden of the tax, whether this is the entity
being taxed, such as a business, or the end consumers of the business’s goods. From an accounting

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perspective, there are various taxes to consider, including payroll taxes, federal and state income
taxes, and sales taxes.

IMPORTANT POINT
• Taxes are mandatory contributions collected by governments.
• The Internal Revenue Service (IRS) collects federal income taxes in the United States.
• There are many forms of taxes and most are applied as a percentage of a monetary exchange
(for example, when income is earned or a sales transaction is completed).
• Other forms of taxes, such as property taxes, are applied based on the assessed value of a
held asset.
• Understanding what triggers a tax situation can enable taxpayers to manage their finances to
minimize the impact of taxes.

FEATURES OF TAX
The main characteristic features of a tax are as follows:
• A tax is a compulsory payment to be paid by the citizens who are liable to pay it. Hence,
refusal to pay a tax is a punishable offence.
• There is no direct quid-pro-quo between the tax payers and the public authority.
• A tax is levied to meet public expenditure incurred by the government in the general interest
of the nation.
• A tax is payable regularly and periodically as determined by the taxing authority.
• A tax is a legal correction.

TYPES OF TAXS
There are two main categories of taxes, which are further sub-divided into other categories.
The two major categories are direct tax and indirect tax. There are also minor cess taxes that fall into
different sub-categories. Within the Income Tax Act, there are different acts that govern these taxes.

1. DIRECT TAX
Direct tax is tax that are to be paid directly to the government by the individual or legal entity. Direct
taxes are overlooked by the Central Board of Direct Taxes (CBDT). Direct taxes cannot be
transferred to any other individual or legal entity.

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Sub-categories of Direct Taxes
The following are the sub-categories of direct taxes:

a) Income Tax: This is the tax that is levied on the annual income or the profits which is
directly paid to the government. Everyone who earns any kind of income is liable to pay
income tax. For individuals below 60 years of age, the tax exemption limit is Rs.2.5 lakh per
annum.
For individuals between the age of 60 and 80, the tax exemption limit is Rs.3 lakh. For
individuals above the age of 80, the tax exemption limit is Rs.5 lakh. There are different tax
slabs for different income amounts.
Apart from individuals, legal entities are also liable to pay taxes. These include all Artificial
Judicial Persons, Hindu Undivided Family (HUF), Body of Individuals (BOI), Association of
Persons (AOP), companies, local firms, and local authorities.

b) Capital Gains: Capital gains tax is levied on the sale of a property or money received
through an investment. It could be from either short-term or long-term capital gains from an
investment. This includes all exchanges made in kind that is weighed against its value.

c) Securities Transaction Tax: STT is levied on stock market and securities trading. The tax is
levied on the price of the share as well as securities traded on the ISE (Indian Stock
Exchange).

d) Prerequisite Tax: These are taxes that are levied on the different benefits and perks that are
provided by a company to its employees. The purpose of the benefits and perks, whether it is
official or personal, is to be defined.

e) Corporate Tax: The income tax paid by a company is defined as the corporate tax. It is
based on the different slabs that the revenue falls under. The sub-categories of corporate
taxes are as follows:

• Dividend Distribution Tax (DDT): This tax is levied on the dividends that companies
pay to the investors. It applies to the net or gross income that an investor receives from
the investment.

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 • Fringe Benefit Tax (FBT): This is tax levied on the fringe benefits that an employee
receives from the company. This includes expenses related to accommodation,
transportation, leave travel allowance, entertainment, retirement fund contribution by the
employee, employee welfare, Employee Stock Ownership Plan (ESOP), etc.

• Minimum Alternative Tax (MAT): Companies pay the IT Department through MAT
which is governed by Section 115JA of the IT Act. Companies that are exempt from
MAT are those that are in the power and infrastructure sectors.

2. INDIRECT TAX
Taxes that are levied on services and products are called indirect tax. Indirect taxes are
collected by the seller of the service or product. The tax is added to the price of the products and
services. It increases the price of the product or service. There is only one indirect tax levied by the
government currently. This is called GST or the Goods and Services Tax.

GST: This is a consumption tax that is levied on the supply of services and goods in India. Every
step of the production process of any goods or value-added services is subject to the imposition of
GST. It is supposed to be refunded to the parties that are involved in the production process (and not
the final consumer).

GST resulted in the elimination of other kinds of taxes and charges such as Value Added Tax (VAT),
octroi, customs duty, Central Value Added Tax (CENVAT), as well as customs and excise taxes.
The products or services that are not taxed under GST are electricity, alcoholic drinks, and petroleum
products. These are taxed as per the previous tax regime by the individual state governments.

3. OTHER TAXES
Other taxes are minor revenue generators and are small cess taxes. The various sub-categories of
other taxes are as follows:

• Property Tax: This is also called Real Estate Tax or Municipal Tax. Residential and
commercial property owners are subject to property tax. It is used for the maintenance of

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 some of the fundamental civil services. Property tax is levied by the municipal bodies based
in each city.
• Professional Tax: This employment tax is levied on those who practice a profession or earn
a salaried income such as lawyers, chartered accountants, doctors, etc. This tax differs from
state to state. Not all states levy professional tax.
• Entertainment Tax: This is tax that is levied on television series, movies, exhibitions, etc.
The tax is levied on the gross collections from the earnings. Entertainment tax also referred
as amusement tax.
• Registration Fees, Stamp Duty, Transfer Tax: These are collected in addition to or as a
supplement to property tax at the time of purchasing a property.
• Education Cess: This is levied to fund the educational programs launched and maintained by
the government of India.
• Entry Tax: This is tax that is levied on the products or goods that enter a state, specifically
through e-commerce establishments, and is applicable in the states of Delhi, Assam, Gujarat,
Madhya Pradesh, etc.
• Road Tax and Toll Tax: This tax is used for the maintenance of roads and toll
infrastructure.

INDIAN TAX STRUCTURE

Tax structure in India is a three-tier federal structure. The central government, state
governments, and local municipal bodies make up this structure. Article 256 of the constitution states
that “No tax shall be levied or collected except by the authority of law”. Hence, each and every tax
that is collected needs to backed by an accompanying law.

Tax system in India

The tax system in India allows for two types of taxes—Direct and Indirect Tax.

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Direct Tax:
Direct Tax is levied directly on individuals and corporate entities. This tax cannot be transferred or
borne by anybody else. Examples of direct tax include income tax, wealth tax, gift tax, capital gains
tax.
Income tax is the most popular tax within this section. Levied on individuals on the income earned
with different tax slabs for income levels. The term ‘individuals’ includes individuals, Hindu
Undivided Family (HUF), Company, firm, Co-operative Societies, Trusts.

Indirect Tax:
Indirect taxes are taxes which are indirectly levied on the public through goods and services. The
sellers of the goods and services collect the tax which is then collected by the government bodies.

• Value Added Tax (VAT)– A sales tax levied on goods sold in the state. The rate depends on
the government.
• Octroi Tax– Levied on goods which move from one state to another. The rates depend on
the state governments.
• Service Tax– Government levies the tax on service providers.
• Customs Duty– It is a tax levied on anything which is imported into India from a foreign
nation.

BENEFITS OF TAXES
The purpose of taxes is to provide the government with funds for spending without inflation. Taxes
are used by the government for a variety of purposes, some of which are:

• Funding of public infrastructure

• Development and welfare projects
• Defense expenditure
• Scientific research
• Public insurance
• Salaries of state and government employees
• Operation of the government
• Public transportation
• Unemployment benefits

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 • Pension schemes
• Law enforcement
• Public health
• Public education
• Public utilities such as water, energy, and waste management systems

Tax is levied on a wide range of income stemming from salary, profits from business, property
rental, etc. There are also wealth taxes, sales taxes, property taxes, payroll taxes, value-added taxes,
service taxes, etc.

GST (GOODS AND SERVICES TAX)

INTRODUCTION OF GST
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the
supply of goods and services. It is a comprehensive, multistage, destination-based tax:
comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multi-
staged as it is, the GST is imposed at every step in the production process, but is meant to be
refunded to all parties in the various stages of production other than the final consumer and as a
destination-based tax, it is collected from point of consumption and not point of origin like previous
taxes.

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Goods and services are divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18%
and 28%.

However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead
are taxed separately by the individual state governments, as per the previous tax system.

There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In
addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks,
luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%,
Post-GST, most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First
Amendment of the Constitution of India by the Indian government. The GST replaced existing
multiple taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which consists of the finance
ministers of the central government and all the states.

The GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to
reshape the country's $2.4 trillion economy, but its implementation has received criticism. Positive
outcomes of the GST includes the travel time in interstate movement, which dropped by 20%,
because of disbanding of interstate check posts.

HISTORY OF GST OF INDIA

Formation
The reform of India's indirect tax regime was started in 1986 by Vishwanath Pratap Singh,
Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added
Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister
Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the state level.

A single common "Goods and Services Tax (GST)" was proposed and given a go-ahead in 1999
during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel,

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which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set
up a committee headed by the Finance Minister of West Bengal, Asim Dasgupta to design a GST
model.

The Asim Dasgupta committee which was also tasked with putting in place the back-end
technology and logistics (later came to be known as the GST Network, or GSTN, in 2015). It later
came out for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government
formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee
recommended rolling out GST as suggested by the 12th Finance Commission.

After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election and the election of
a Congress-led UPA government, the new Finance Minister P Chidambaram in February 2006
continued work on the same and proposed a GST rollout by 1 April 2010. However, in 2011, with
the Trinamool Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as
the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been
done.

The UPA introduced the 115th Constitution Amendment Bill on 22 March 2011in the Lok Sabha to
bring about the GST. It ran into opposition from the Bhartiya Janata Party and other parties and was
referred to a Standing Committee headed by the BJP's former Finance Minister Yashwant Sinha. The
committee submitted its report in August 2013, but in October 2013 Gujarat Chief Minister Narendra
Modi raised objections that led to the bill's indefinite postponement. The Minister for Rural
Development Jairam Ramesh attributed the GST Bill's failure to the "single handed opposition of
Narendra Modi".

In the 2014 Lok Sabha election, the Bhartiya` Janata Party (BJP)-led NDA government was elected
into power. With the consequential dissolution of the 15th Lok Sabha, the GST Bill – approved by
the standing committee for reintroduction – lapsed. Seven months after the formation of the then
Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha,
where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to
implement GST.

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In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for GST.
However, the Opposition, led by the Congress, demanded that the GST Bill be again sent back for
review to the Select Committee of the Rajya Sabha due to disagreements on several statements in the
Bill relating to taxation. Finally, in August 2016, the Amendment Bill was passed. Over the next 15
to 20 days, 18 states ratified the Constitution amendment Bill and the President Pranab Mukherjee
gave his assent to it.

A 21-member selected committee was formed to look into the proposed GST laws. After GST
Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated
Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill
2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017
(The Compensation Bill), these Bills were passed by the Lok Sabha on 29 March 2017. The Rajya
Sabha passed these Bills on 6 April 2017 and were then enacted as Acts on 12 April 2017.

Thereafter, State Legislatures of different States have passed respective State Goods and Services
Tax Bills. After the enactment of various GST laws, Goods and Services Tax was launched all over
India with effect from 1 July 2017. The Jammu and Kashmir state legislature passed its GST act on
7 July 2017, thereby ensuring that the entire nation is brought under a unified indirect taxation
system. There was to be no GST on the sale and purchase of securities. That continues to be
governed by Securities Transaction TAX.

Implementation
The GST was launched at midnight on 1 July 2017 by the President of India, and the
Government of India. The launch was marked by a historic midnight (30 June – 1 July) session of
both the houses of parliament convened at the Central Hall of the Parliament. Though the session
was attended by high-profile guests from the business and the entertainment industry including
Ratan Tata, it was boycotted by the opposition due to the predicted problems that it was bound to
lead for the middle and lower class Indians.

The tax was strongly opposed by the opposing Indian National Congress. It is one of the few
midnight sessions that have been held by the parliament - the others being the declaration of India's
independence on 15 August 1947, and the silver and golden jubilees of that occasion. After its
launch, the GST rates have been modified multiple times, the latest being on 22 December 2018,

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where a panel of federal and state finance ministers decided to revise GST rates on 28 goods and 53
services.

Members of the Congress boycotted the GST launch altogether. They were joined by members of the
Trinamool Congress, Communist Parties of India and the DMK. The parties reported that they found
virtually no difference between the GST and the existing taxation system, claiming that the
government was trying to merely rebrand the current taxation system. They also argued that the GST
would increase existing rates on common daily goods while reducing rates on luxury items, and
affect many Indians adversely, especially the middle, lower middle and poorer income groups.

WHY WAS GST REQUIRED?

The GST is the biggest and most important tax reform in India. The inclusion of various
indirect taxes into the GST reduces manufacturing and production costs and also aids in the country's
economic growth.
The rates and regulations for VAT varied by state. Also, it's been noticed that states frequently seek
to lower these rates to entice investors. This resulted in loss of revenue for both the Central
government as well as other State governments.
GST, on the other hand, implements standard tax regulations throughout all states, covering a wide
range of businesses. According to a preset and pre-approved formula, the taxes are distributed
between the Central and State governments in this case. Furthermore, because there is no additional
state-levied tax, it is much easier to sell services and goods uniformly across the country.

FEATURES OF GST

1. SINGLE INDIRECT TAX

GST has been introduced as a single, unified tax reform. It has eliminated many existing
indirect center and state taxes like Central Value Added Tax, Special Additional Duty of Customs,
Service Tax, and VAT and converted them into a single tax. The elimination of these indirect taxes
has not only made tax compliance easier for businesses but has also helped in making many of the
goods and services more affordable for the consumers.

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 2. INPUT TAX CREDIT SYSTEM
One of the most prominent GST features in India is the input tax credit. If a manufacturer or
service provider has already paid input tax on a purchase, the same can be deducted from their total
output tax liability. The input and output invoices need to match to take advantage of the tax credit.
This helps in removing the cascading tax effect or the traditional ‘tax-on-tax’ regime. Moreover, it
also helps in reducing tax evasion.

3. GST COMPOSITION SCHEME

SMEs with an annual turnover of up to Rs. 1 crore or Rs. 75 lakhs in specified states can also
voluntarily opt for the composition scheme. With this scheme, the businesses can pay a fixed GST
rate of 1% on their turnover. However, such businesses can then not use the input tax credit benefit.
A business needs to select between whether they want to use the composition scheme or the input tax
credit feature.

4. FOUR-TIER TAX STRUCTURE

GST has a 4-tier tax structure of 5%, 12%, 18%, and 28%. All the goods and services can
only be taxed as per this tax structure. Many of the essential commodities such as food items do not
have any GST.

KEY FEATURES OF GST

1. Dual Goods and Service Tax: CGST and SGST
2. Destination-Based Consumption Tax: GST will be a destination-based tax. This implies
that all SGST collected will ordinarily accrue to the State where the consumer of the goods or
services sold resides.
3. Computation of GST: on the basis of invoice credit method the liability under the GST will
be invoice credit method i.e. convent credit will be allowed on the basis of invoice issued by
the suppliers.
4. Payment of GST: The CGST and SGST are to be paid to the accounts of the central and
states respectively.
5. Goods and Services Tax Network (GSTN): A not-for-profit, Non-Government Company
called Goods and Services Tax Network (GSTN), jointly set up by the Central and State
Governments will provide shared IT infrastructure and services to the Central and State
Governments, tax payers and other stakeholders.

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 6. GST on Imports: Centre will levy IGST on inter-State supply of goods and services. Import
of goods will be subject to basic customs duty and IGST.
7. Maintenance of Records: A taxpayer or exporter would have to maintain separate details in
books of account for availment, utilization or refund of Input Tax Credit of CGST, SGST and
IGST.
8. Administration of GST: Administration of GST will be the responsibility of the GST
Council, which will be the apex policy making body of the GST. Members of GST Council
comprised of the Central and State ministers in charge of the finance portfolio.
9. Goods and Service Tax Council: The GST Council will be a joint forum of the Centre and
the States. The Council will make recommendations to the Union and the States on important
issues like tax rates, exemption list, threshold limits.

TYPES OF GST
The GST types in India, namely, CGST, SGST, UTGST and IGST, have specific taxation rates.
These rates are fixed by the Government of India and will be applicable as decided by the
government.

What is SGST?
The State Goods and Services Tax is one of the GST types which the government of a
particular state imposes. The state government taxes goods and services within the state (intrastate,
for example Mysore), and the state government is the sole beneficiary of the collected revenue.
The SGST replaces various state-level taxes such as lottery tax, luxury tax, VAT, purchase tax and
sales tax.
However, if the transaction of the goods is interstate (outside the state), then both SGST and CGST
are applied. But, if the goods and services are transactions within the state, only SGST is imposed.
The SGST of various goods and services depends on the government notification published from
time to time.
SGST Rates
Commodities SGST
Common Groceries such as Tea, Salt, Spices, Sugar, etc. 0% or 2.5%
Processed foods, electronic goods 2.5% or 6%
Capital Goods, toiletries, etc. 9%
Premium luxury commodities 14%

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What is CGST?
The Central goods and Services tax applies to the intrastate (within the state) supply of goods
and services. The central government taxes it. The CGST Act governs this type of GST. Here, the
revenue generated from the CGST is collected along with the SGST and is divided between the
central and state government.
For instance, when a trader makes a transaction within the state, the goods are taxed with SGST and
CGST. The GST rate is divided equally between SGST and CGST, while the revenue collected
under the CGST belongs to the central government.
CGST Rates
Commodities CGST
Common Groceries such as Tea, Salt, Spices, Sugar, etc. 0% or 2.5%
Processed foods, electronic goods 2.5% or 6%
Capital Goods, toiletries, etc. 9%
Premium luxury commodities 14%

What is IGST?
The Integrated Goods and Services tax is a type of GST, where the tax applies on the
interstate supply of goods and services. This GST type is also imposed on the goods and services that
are imported as well as exported. The IGST Act governs it, and the central government is responsible
for the collection of IGST.
The collected IGST is equally divided into central and state government portions. The State portion
of the IGST is provided to the state where the goods and services are received. The remaining IGST
received goes to the central government.
IGST Rates
Commodities IGST
Common Groceries such as Tea, Salt, Spices, Sugar, etc. 5%
Processed foods, electronic goods 12%
Capital Goods, toiletries, etc. 18%
Premium luxury commodities 28%

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What is UGST?
The Union Territory Goods and Services Tax is a type of GST imposed on the goods and
services in the union territories. This is similar to the SGST but applies only to the union territories.
The UGST is applicable in Dadra, Nagar Haveli, Chandigarh, Andaman and Nicobar along with
Pondicherry and Delhi. Here the revenue collected by the government belongs to the Union territory
government. As the UGST is a replacement for the SGST, they are collected along with the CGST.

OBJECTIVES OF GST
The major objectives of GST are

• The elimination of other taxes - The introduction of the GST Act led to the replacement of
other indirect taxes. The major taxes are grouped into the GST.
• Increases compatibility - The tax compliance is easier for MSME or small-scale businesses.
In addition, the presence of a single tax makes the process of filing a return easier.
• Increases transparency - The GST reduces the chances of corruption and increases
transparency. For example, in businesses there are reduced chances of a false input tax credit.
• Reduction of price - The GST bill imposes taxes exclusively on the net value-added part,
eliminating the previous tax-on-tax system and reducing the cost of commodities.
• Boost the country's revenue - A large tax-to-GDP ratio indicates increased government
revenues, indicating a healthy economy. In addition, a broader tax base and greater tax
compliance can lead to an increased government income from GST operations.
• High efficiency and productivity - The GST in India intends to eliminate logistical
restrictions and the time-consuming filing process for the input tax credit. Furthermore, by
eliminating the entry tax, the productivity levels of businesses are predicted to rise.

GST COUNCIL
GST Council is the governing body of GST having 33 members, out of which 2 members are of
center and 31 members are from 28 state and 3 Union territories with legislation.
The council contains the following members
(a) Union Finance Minister (as chairperson)
(b) Union Minister of States in charge of revenue or finance (as member)
(c) the ministers of states in charge of finance or taxation or other ministers as nominated by each
states government (as member).

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GST Council is an apex member committee to modify, reconcile or to procure any law or regulation
based on the context of goods and services tax in India. The council is headed by the union finance
minister Nirmala Sitharaman assisted with the finance minister of all the states of India. The GST
council is responsible for any revision or enactment of rule or any rate changes of the goods and
services in India.

GOODS AND SARVICES TAX NETWORKS (GSTN)

The GSTN software is developed by Infosys Technologies and the Information Technology
network that provides the computing resources is maintained by the NIC.

"Goods and Services Tax Network" (GSTN) is a nonprofit organization formed for creating a
sophisticated network, accessible to stakeholders, government and taxpayers to access information
from a single source (portal). The portal is accessible to the Tax authorities for tracking down every
transaction, while taxpayers have the ability to connect for their tax returns.

The GSTN's authorized capital is ₹10 crore (US$1.3 million) in which initially the Central
Government held 24.5 percent of shares while the state government held 24.5 percent. The
remaining 51 percent were held by non-Government financial institutions.
However, later it was made a wholly owned government company having equal shares of state and
central government.

IMPACT OF GST ON VARIOUS SECTORS

1) IT
Currently IT sector is paying 14 percent of tax to the authority and subjected to 18 to 20
percent after the imposition of GST. Also, an important point to notice here, that the long-
disputed issue of canned software taxation will also come to end as their will no difference
arises between goods and services after the GST. Overall impact could be suggested here is
neutral or slightly negative.

2) Telecom
In the current stage, the Telecom sector is paying 14 percent of tax to the government body,
but the scenario takes the shift after the imposition of GST. The rate arises to 18 percent and
the companies expect to pass the burden on the post-paid customers. There is also a lower

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 input tax credit in this sector's capex cost. Overall, it seems that this regime will be negative
to the industry and the sector will also be in state where they can't pass the entire tax burden
to the customers especially their prepaid segment.
3) Automobiles
Currently, automobile sector pays around 30 to 47 percent tax to the Government which is
now expected to range between 20-22 per cent, after the implementation of GST. And the
overall cost cutting can be expected for the end user by around 10 per cent. Transportation
time should also be reduced as the check points and octroi is cleared hands before. Overall
GST will bring a smile into the automobile sector.

4) Cement
In the current scenario, cement sector is presenting 27 to 32 per cent of their share to the tax
authority. After the rolling out of GST, this will improve the sector growth in various terms,
like transportation by 20-25 per cent and in the warehouse scheme as the rationalization
would be easy in terms of state wise fragmentation and also in the transportation cost as
reduced transit time.

5) Pharmacy
Here, the impact could be neutral as the sector only shares 6 per cent of his share to the tax
authority. The sector also avails the incentives in tax benefits of location wise. There are
various concessional benefits and exemptions held for this sector and will extend till the
expiry of the period. The implications of GST would also try to reduce the logistics cost and
would also try to see in to the matter of inverted duty structure.

6) Banking and Financial Institutions

The sector is paying 14 percent right now, but not on the interest part of transaction. After
the GST implied, the tax horizon can expand up to 18 to 20 percent on the fee-based
transactions. Overall input expense of operations will likely to increase and also hike in the
transactions of financial in nature such as loan processing fees, debit/credit charges,
insurance premiums etc.

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IMPACT OF GST 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 credits 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
expected 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.

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ADVANTAGES AND DISADVANTAGES OF GST

ADVANTAGES OF GST
The advantages of GST in India are as follows:
• Creation of Common National Market
GST aims to create an integrated tax structure with a common market and remove the
economic barriers, paving the way for an integrated economy is the features of GST and even
advantages and disadvantages of input tax credit.

• Boost to Make in India Initiative

GST gives a major boost to the Make in India initiative of the government of India by
making goods and services produced in India competitive in domestic as well as international
markets is the benefits of GST.

• Removal of Cascading Effect and Multilayer taxation

In a layman's language, the cascading effect means charging Tax on Tax. GST is an indirect
tax that has brought most of the indirect taxes under one single umbrella. It provides credit in
the form of an Input Tax credit (ITC) on tax previously paid to ensure that there is no
overlapping of taxes. GST is levied only on the value-added of the goods or services, thus
giving a halt to the multilayer taxation structure.

• Reduction of Litigation
GST aids in the minimizing of litigation costs under different taxation systems as it
establishes clarity towards the taxation assessment and liability. Through documented and
revised structure GST provides a seamless flow of credit amongst business units.

• Composition scheme for small and medium businesses

Under GST, small businesses that have a turnover of up to 1.5 Crore INR can bring down
their compliance and tax burden by choosing the composition scheme over the regular
structure of GST. They can charge GST at flat rates of 1%, 5%, and 6%.

20
 • Simple and easy online access
The whole procedure of GST (from registration to furnishing of GST returns) is available
online and is easily accessible. It has become quite helpful for new businesses especially, as
they just have to register on a single portal for all their needs.

• Enhanced Efficiency in Logistics

With the implementation of GST, the restrictions on inter-state movement of goods have
reduced considerably. Before GST, logistics companies had to maintain multiple warehouses
in different parts of the country at multiple locations to avoid state-level entry taxes charged
on interstate movements.

• Regulation of the Unregulated Sectors

In the pre-GST times, certain specific businesses in India like the textile and the construction
sectors were highly unregulated and had loopholes for tax evasion. However, with the
implementation of GST, these sectors have been regulated by reducing the burden of tax
compliance and simplifying the taxation structure.

• Automated procedures with great use of IT

There are simplified and automated procedures for various processes such as registration,
return, tax payment, etc. and all interaction is through a common GSTN portal.

• Benefits to Agriculture and Industry

GST has given more relief to industry, trade, and agriculture through more comprehensive
and wider coverage of input tax set-off and service tax set-off subsuming several Central and
State taxes in GST.

DISADVANTAGES OF GST

• Updating of IT Software
Under the GST regime, businesses either need to update their current accounting or ERP
software or purchase GST software to prop up their businesses. This leads to an increase in
IT expenses to the businesses in terms of procuring the GST software and training the staff
for using the software efficiently. However, Masters India, one of the leading GST Suvidha

21
 Providers (GSP) has developed customized GST software and APIs to ease the compliance
procedures for different business users.

• Increased operational expenses

As we have already discussed that GST has changed the way tax is assessed, business owners
require the opinion of the tax experts to remain GST-compliant. However, this has increased
the operational expense of the entity as they are required to bear the extra cost of employing
tax specialists or hiring consultants.

• The increased tax burden on Small and Medium Enterprises (SME's)

Small and Medium businesses, particularly in the manufacturing sector have confronted
various challenges under GST. Before the GST regime, business units having turnover up to
INR 1.5 crore were required to pay the Customs Duty. But under GST any taxpayer whose
turnover surpasses INR 40 lakhs needs to pay the tax.

Nonetheless, SMEs with a turnover of up to 1.5 Crore INR can choose the composition
scheme and pay tax on turnover instead of GST and enjoy lesser compliance. However, the
problem is that businesses who opt for a composition scheme will then not have the facility to
claim any input tax credit (ITC). To smoothen the implementation process of GST, the
government is trying its best to make several changes through various meetings of the GST
Council. The government of India is consistently updating the GST procedures by
introducing new and simplified GST Returns and e-Invoicing.

GST RATES IN INDIA

The GST rate slabs are decided by the GST Council. The GST Council revises the rate slab of
goods and services periodically. The GST rates are usually high for luxury supplies and low for
essential needs. In India GST rate for various goods and services is divided into four slabs: they are
5% GST, 12% GST, 18% GST, & 28% GST.

The GST rates for various products have been revised several times by the GST council since the
inception of the Goods and Services Tax (GST). The latest rate revision was brought into effect in
the 41st GST Council Meeting which was held on Aug 27, 2020. Before that, there have been many
GST Council Meetings in which certain rate revisions were introduced.

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GST RATES ON COVID-RELATED ESSENTIALS

Covid-related essentials Present GST rate Revised GST rate

Pulse oximeters 12% 5%

Hand sanitizers 18% 5%

Equipment to check body temperature 18% 5%

Furnaces for cremation and their installation 18% 5%

Ambulances 28% 12%

GST RATES ON COVID MEDICINES AND TASTING KITS

Covid-related medicines and testing kits Present GST rate Revised GST rate

Testing kits 12% 5%

Specified inflammatory diagnostic kits 12% 5%

GST RATES ON OXYGEN AND OXYGEN-RELATED MEDICAL DEVICES

Oxygen and oxygen-related medical devices Present GST rate Revised GST rate

Medical grade oxygen 12% 5%

Oxygen concentrator or generator 12% 5%

Ventilators 12% 5%

Mak, canula, or helmet 12% 5%

23
BiPAP machine 12% 5%

High flow nasal canula device 12% 5%

GST RATES ON COVID-RELATED DRUGS

Covid-related drugs Present GST rate Revised GST rate

Tocilizumab 5% NIL

Amphotericin B 5% NIL

Heparin and other anti-coagulants 12% 5%

Remdesivir 12% 5%

Any other drugs recommended by ministry of health NA 5%

GST RETURNS
Every registered taxable person shall, for every calendar month or part thereof, furnish, in such
form and in such manner as may be prescribed, a return, electronically, of inward and outward
supplies of goods or services, input tax credit availed, tax payable, tax paid and other particulars as
may be prescribed within 20 days after the end of such month:

Provided that a registered taxable person paying tax under the provisions of Section 8 of this Act
shall furnish a return for each quarter or part thereof, electronically, in such form and in such manner
as may be prescribed, within 18 days after the end of such quarter:

Every registered taxable person, who is required to furnish a return under sub section (1), shall pay
to the credit of the appropriate Government the tax due as per such return not later than the last date
on which he is required to furnish such return.

24
 A return furnishes under the sub-section (1) by a registered taxable person without payment of full
tax due as per such return shall not be treated as a valid return for allowing input tax credit in respect
of supplies made by such person. Every registered taxable person shall furnish a return for every tax
period under sub section (1), whether or not any supplies of goods or services have been affected
during such tax period.
Note: Subject to the provisions of Section 25 and 26, if any taxable person after furnishing a
return discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit,
inspection or enforcement activity by the tax authorities, shall rectify such omission in the return to
be filed r the month or quarter, as the case may be, during which such omission are noticed, subject
the payment of interest, where applicable and as specified in the Act:

TYPE OF GST RETURNS

There are different types of GST returns. Here is a list of all the returns to be filed as prescribed
under the GST Law along with the due dates.

Return Form Description Frequency Due Date

GSTR-1 Details of outward supplies of Monthly 11th* of the next month with effect from October
taxable goods and/or services 2018 until September 2020. *Previously, the due
affected. date was 10th of the next month.

Quarterly 13th of the month succeeding the quarter. Was end

(If opted of the month succeeding the quarter until December
under the 2020)
QRMP
scheme)

GSTR- 2 Details of inward supplies of taxable Monthly 15th of the next month.
Suspended goods and/or services effected
from claiming the input tax credit.
September
2017 onwards

GSTR- Monthly return on the basis of Monthly 20th of the next month.
3 Suspended finalization of details of outward
from supplies and inward supplies along
September with the payment of tax.
2017 onwards

25
GSTR-3B Simple return in which summary of Monthly 20th of the next month from the month of January
outward supplies along with input 2021 onwards^ Staggered^^ from the month of
tax credit is declared and payment of January 2020 onwards up to December 2020. *
tax is affected by the taxpayer. *Previously 20th of the next month for all
taxpayers.

Quarterly 22nd or 24th of the month next to the quarter***

GSTR-4 Return for a taxpayer registered Annually 30th of the month succeeding a financial year.
under the composition scheme under
section 10 of the CGST Act
(supplier of goods) and CGST
(Rate) notification no. 02/2019
dated 7th March 2020 (Supplier of
services).

GSTR-5 Return for a non-resident foreign Monthly 20th of the next month.
taxable person.

GSTR-6 Return for an input service Monthly 13th of the next month.
distributor to distribute the eligible
input tax credit to its branches.

GSTR-7 Return for government authorities Monthly 10th of the next month.
deducting tax at source (TDS).

GSTR-8 Details of supplies effected through Monthly 10th of the next month.
e-commerce operators and the
amount of tax collected at source by
them.

GSTR-9 Annual return for a normal taxpayer. Annually 31st December of next financial year.

GSTR- Annual return optional for filing by Annually 31st December of next financial year, only up to FY
9A(Suspended) a taxpayer registered under the until 2018-19.
composition levy anytime during the FY 2017-18
year. and
FY 2018-19

GSTR-9C Certified reconciliation statement Annually 31st December of next financial year.

26
GSTR-10 Final return to be filed by a taxpayer Once, when Within three months of the date of cancellation or
whose GST registration is cancelled. GST date of cancellation order, whichever is later.
registration
is cancelled
or
surrendered.

GSTR-11 Details of inward supplies to be Monthly 28th of the month following the month for which
furnished by a person having UIN statement is filed.
and claiming a refund

27
 CHAPTER 2
RELEVANCE OF STUDY

28
 GST is aimed at reducing corruption and sales without receipts. GST reduces the need for small
companies to comply with excise, service tax and VAT. GST brings accountability and regulation to
unorganized sectors such as the textile industry.

OBJECTIVES OF THE STUDY

The study has the following objectives:

• To know the GST Rate Structure.

• To grasp the impacts of GST in Indian Economy.
• To identify the sectors, stand to lose or gain from the implementation of GST.
• To study the challenges for the implementation of GST in India.

NEED OF THE STUDY

GST is aimed at reducing corruption and sales without receipts. GST reduces the need for
small companies to comply with excise, service tax and VAT. GST brings accountability and
regulation to unorganized sectors such as the textile industry…

SCOPE OF THE STUDY

The scope of study is extended to understand the concept of GST, its impact and
implementation in India. Being explanatory research it is based on the secondary data. The data
collection is done through various sources like newspapers, articles from different journals and from
different websites.

29
 CHAPTER 3
RESEARCH METHODOLOGY

30
TYPE OF RESEARCH AND USED
Research can be classified in many different ways on the basis of methodology of the research,
the knowledge it creates, the user groups, the research problem it investigates, etc. Following is the
methodology that we have used in research.

QUANTITATIVE RESEARCH
In natural and social sciences, and sometimes in other fields, quantitative research is the
systematic empirical investigation of observable phenomena via statistical, mathematical, or
computational techniques.

The objective of quantitative research is to develop and employ mathematical models, theories, and
hypotheses pertaining to phenomena. The process of measurement is central to quantitative research
because it provides the fundamental connection between empirical observation and mathematical
expression of quantitative relationships.

Quantitative research is generally closely affiliated with ideas from 'the scientific method', which can
include:
• The generation of models, theories and hypotheses.
• The development of instruments and methods for measurement.
• Experimental control and manipulation of variables.
• Collection of empirical data.
• Modelling and analysis of data.

TYPES OF DATA USED

Type of data collection
• Primary data
• Secondary data
Here, we have used both primary and secondary data while conducting research

31
What is primary data?
Primary data is the data collected directly by the researchers from main sources through
interviews, surveys, experiments, etc. primary data are usually collected from the source –where the
data originally originated from and are regarded as the best kind of data in research. In this project
questionnaire method for survey is used for collection of primary data.

What is secondary data?

Secondary data is the data that have been already collected by and readily available from
other sources. Such data are cheaper and more quickly obtainable than the primary data and also may
be available when primary data cannot be obtained at all. Here, various websites, books and journals
are been referred for secondary data.

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 CHAPTER 4
LITERATURE REVIEW

33
INTRODUCTION
The introduction of the Goods and Services Tax (GST) in India has attracted considerable attention
from policymakers, scholars, economists, and the general public. This literature review explores
prior research, academic discussions, and policy analyses related to the structure, implementation,
and impact of GST in India.

REVIEW OF EXISTING LITERATURE

Several studies have evaluated the impact of GST on the Indian economy, highlighting its potential
to simplify the indirect taxation system and boost transparency.
• Kumar (2017) analyzed the structural shift introduced by GST and emphasized its role in
eliminating the cascading effect of taxes. He argued that GST would positively influence
economic growth in the long run.
• Rao and Chakraborty (2018) conducted an empirical study on the revenue implications of
GST and found mixed results, noting that while GST increased compliance, short-term
revenue collection varied by state.
• Gupta (2019) focused on the impact of GST on small and medium enterprises (SMEs),
indicating initial compliance challenges but long-term benefits through reduced logistics
costs and uniform tax structure.
• NITI Aayog reports and government white papers have emphasized the technological
backbone of GST via GSTN (Goods and Services Tax Network), and the shift towards a
digitized tax system aimed at curbing tax evasion.

Additionally, several World Bank and IMF publications have recognized India's GST as one of the
most ambitious tax reforms undertaken by a developing economy, albeit highlighting implementation
challenges.

IDENTIFIED RESEARCH GAPS

Despite the volume of literature available, some areas require further exploration:

• Lack of sector-specific analyses of GST impact (e.g., informal sectors, agricultural input
chains).
• Limited long-term comparative studies across states regarding GST revenue growth.

34
 • Insufficient research into public perception and awareness about GST mechanisms and
compliance requirements.

RELEVANCE TO CURRENT STUDY

The reviewed literature offers critical insights into the theoretical and practical implications of GST.
However, this study contributes uniquely by examining the real-world impact, awareness levels, and
operational challenges faced by taxpayers and businesses post-GST implementation, using a mix of
primary and secondary data.

SUMMARY
In summary, the literature indicates that GST holds the promise of a unified tax regime,
simplification of processes, and economic formalization. However, gaps in sector-specific studies
and public adaptability persist, necessitating further empirical research such as this study.

35
 CHAPTER 5
SWOT ANALYSIS OF GST

36
WHAT IS A SWOT ANALYSIS?
As per Wikipedia SWOT analysis (alternatively SWOT matrix) is an acronym for strengths,
weaknesses, opportunities, and threats and is a structured planning method that evaluates those four
elements of an organization, project or business venture. A SWOT analysis can be carried out for a
company, product, place, industry, or person.

It involves scanning of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm or Country usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm or Country can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a
SWOT analysis.

WHY IS SWOT ANALYSIS DONE?

The SWOT analysis provides information that is helpful in matching the resources and
capabilities to the competitive environment in which it operates. It helps in analyzing your
organization’s strengths and weaknesses, and the opportunities and threats that you face. It helps you
focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities
available to you.

37
Through this article I am trying to make a SWOT analysis of the introduction of GST Act in India by
the Modi Government. The Goods and Service Tax Bill or GST Bill was introduced to bring reform
in the indirect tax regime within India. With the implementation of GST in India, the government is
hoping to create a common
Indian market and thereby to reduce the cascading effect of tax on the cost of goods and services.

STRENGTHS OF GOODS AND SERVICE TAX IN INDIA

The strengths in the SWOT analysis are its resources and capabilities that can be used for
developing a competitive advantage over others. Some of the Strength of GST Act are

• The GST Tax is applicable on all goods and services except some exempted products
mentioned in the exemption list of the Act
• GST will subsume taxes like Central Excise Duty (1944), Central Sales Tax (1956) Service
Tax (1994) and a host of state levied taxes including Value Added Tax (VAT)

38
 • It will drop out the cascading effects of tax on production and distribution of goods and
services
• Better Compliance and online submission of details would result in less paper work.
• This would eventually lead to more tax revenue GST would be dual taxation system. It would
be charged intra-State by Central and State governments. It would be called CGST (Central
Goods and Service Tax) and SGST (State Goods and Service Tax) thereby eliminating loss of
revenue of states and Central Government

WEAKNESSES OF GOODS AND SERVICE TAX IN INDIA

The absence of certain strengths is a weakness as per SWOT Analysis.

• The dual model of GST results in complicated billing and reconciliation.

• The system is fully technology driven, but India is a developing country where people are not
habitual of technology.
• GST is a subsume of various States and Central taxes but many more are left at the discretion
of State Government.

OPPORTUNITIES OF GOODS AND SERVICE TAX IN INDIA

The external environmental analysis may reveal certain new opportunities for profit and growth.
Some opportunities include:

• The rates of tax are set at ground level which will help States and Unions to collect more
revenue. This will result in Growth of Revenue for State and Central Government
• GST will reduce average tax burden of consumers. They will be certain about their taxes
which will reduce evasion of taxes.
• GST can provide the opportunity of Corruption Free Indian Revenue Services. This may help
in uprooting the Black money economy and bringing all under traders and Service providers
under the Tax regime.
• Low prices of manufactured products
• Increase in GDP
• Increase in export due to price competitiveness

39
THREATS OF GOODS AND SERVICE TAX IN INDIA

Changes in the external environmental also may present threats to the system. Some of such threats
include:

• The mechanism in GST is still complicated, it cannot completely eliminate black money and
tax evasion
• Initial Burden on Consumers due to a temporary increase of cost of goods and services
• GSTC (Goods and Service Tax Council) will set the benchmark for resolving the dispute on
recommendations of GSTC. It means GSTC will lay down the criteria for GSTC itself. It is
against the principle of natural justice.
• GST is not a guarantee in itself that it would not be influenced by political parties and
politicians will not use it as a win-loss game.

40
 CHAPTER 6
CONCLUSION & SUGGESTIONS

41
CONCLUSION

Study highlighted the overall overview of GST. The Government to put in more effort to ensure
that Consumers have a clear understanding and develop a positive perception towards leading
acceptance. Good understanding among customers is important as it can generate a positive
perception towards the taxation policy Custom Department could initiate and promote an extensive
publicity program which could help to create awareness and generate positive perception among
customers in understanding the rationale and importance of GST in India.

SUGGESTIONS

• The customers suggested that there should be a smooth, transparent and simple transition
provisions which is easily understandable.
• Special focus on awareness and training of all officers, professionals and assesses should be
given on GST.
• Since the public are very clear about GST, any disputes on GST introduction should be
protectively addressed by way of speedy redress.
• The people are not well informed on the implementation of the GST. Therefore, in order
ensure efficient implementation of the GST, the Government should come out with a proper
guideline to the society on the procedures for the implementations of GST.
• Gradual stages may be employed for the implementation like the agricultural sector, then
industrial and then the service sector.
• The relevant authorities especially the customers department must work closely with other
departments like information, Inland Revenue and other enforcement authority ensure good
implementation.
• Lastly, the government must ensure a good management of the income collected from the
GST.

42
 REFERENCES

1. Bangar, V., & Bangar, Y. GST: Concepts and Applications. Aadhya Prakashan.
2. Govindarajan, M. GST Made Simple – A Guide for Students and Professionals. Cengage
Learning.
3. Wikipedia
4. ChatGPT
5. Kumar, A. (2017). Impact of Goods and Services Tax (GST) on Indian Economy.
International Journal of Management Studies, 4(3), 45-52.
6. Rao, M. G., & Chakraborty, P. (2018). GST in India: Progress and Challenges. National
Institute of Public Finance and Policy.
7. Gupta, S. (2019). GST and its Impact on SMEs in India. Journal of Finance and Economic
Policy, 6(2), 101-110.
8. Government of India (2017). The Constitution (One Hundred and First Amendment) Act,
2016. Ministry of Law and Justice.
9. NITI Aayog (2018). GST: A Game Changer for Indian Economy. Policy Brief.
10. World Bank (2018). India Development Update: India's Growth Story and the Role of GST.
Washington, D.C.: World Bank Group.
11. IMF (2018). India: Selected Issues – Goods and Services Tax Implementation and Impact.
International Monetary Fund Country Report No. 18/254.
12. Kelkar, V. (2009). Report of the Task Force on GST. Thirteenth Finance Commission.

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