GST IN INDIA: A REVOLUTIONARY TAX REFORMMUSKAAN AHUJASHAGUN RASTOGISHERIN SUNNYSOHAIL KHANAbstractTaxes 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.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.
adddddddddKey words: Federal Taxes, Scenario, Transactions, Value Added TaxIntroductionThe idea of a Goods and Services Tax (GST) for India was first mooted sixteen years back, during the Prime Ministership of Shri 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 StudyTo study the concept of GSTTo gain undersatanding of feature of GSTTo explore the working mechanism of GSTTo understand the pros and cons of GSTTo provide suggestion for effective functioning of GSTOVERVIEW OF GSTThe 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 GSTLiterature ReviewThe view and opinions of various authors have been explained as follows:Ahmed E. and Poddar S.(2009) studied the concept of GST in his paper entitled “GOods and Service Tax Reform and Intergovernment consideration in India” and stated that GST introduction will provide simplerand transparent tax system with increase in output and productivity of economy in India. He also stated that the benefit of GST are critically dependent on rational design of GST.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 morehan 130 countries in world and a new preferred form of indirecttax syste in Asia as well.Mawuli A.(2014) stated that GST is not good for low income countries and does not provide broadbased growth tp poor countries. if still these countries wantto impliment GST thenthe rate of GST should be less than 10% for growth.Kumar N.(2014) asserted that the implimentaion 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. Pinki, Kamma S. and Verma R.
(2014) concluded that the new NDA government in India is positive toward implimentation of GST and it is beneficial for central government, state government and as well as for consumer in long run if its implimentation is backed by strong IT infrastucture.Journey So FarPrime 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 GSTIn 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: ??????(2017)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 artical 366(12A) 3) Petroleum produducts 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) Tabaco products are included in GST along with the central excise tax. Imposition and Collection of GST1) The power of making law on taxation of good and seviceslies 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 component CGST and SGST as discussed above. CGST will be collected by the central government wheras state government will collect SGST 3) IGST is levied on supplies in the course of interstate trade incuding 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).GST Council 1) It is set up by presidentunder article 279-A.
It is chaired by union finance minister. 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. 3) The decision of council is made by 3/4th majority of the votes cast and quorum of council is 50%. 4) It will make recommendation on the following: a) Taxes, surcharge, cess of central and state which will be integrated in GST.
b) Goods and services which may be exemmpted from GST. c) Interstate commerce – IGST – proportion of distribution between state and centre. d) Registration threshold limit for GST. e) GST floor rates. f) Special rates during calamities.
g) Provision with respect to special category states specially north east states. 5) It may also work as dispute settlement authority for GST.The Working of GSTBusinesses have 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 business??????(2017)To get register under GST the following step need to be followed:Diagram 1. Registration of Business:The first step to register for a GST idntification number, the business need to check whether to register or whether the business should be registerunder voluntarily.
Business having annual sale of Rs. 20,00,000 are liable to register under GST.Types of registration under GST:Voluntary RegistrationGroup Registration.Divisional/Branch Registrationvoluntary registration RegistrationVoluntary 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 inputtax credit and eligible to enjoy all facilities provided under the law.
Group RegistrationGroup 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 RegistrationA 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.DeregistrationA business can deresgistration within 30 days from the date of registration under the following circumstances:If the business has ceased to exit.
No longer fulfill the requirment of registration.2. Issuance of Tax InvoicesWhen 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 GSTBasically, all taxable person will be required to account for GST based on accrual (invoive) 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 ReturnsGST 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 acount 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 turnoverexceeding rs.
20,00,000.Application to otherbtaxable person on request and subject to approval. Six months Special cases Source:??????? : 5.
Input Tax Credit MechanismBusiness have to harge and collect GST on all taxable goods and services supplied to the consumers. Only businesses registered under GST can charge and collect GST. Business 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 amont 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 persoal ccident premium, medical expenses, family benefit and etc.Apportionment rules have to be applied when the taxable person makes a mixed supply.
6. Claiming GST RefundAny refund of tax may be offset against other unpaid GST,custome 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 GSTIf 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 periodOnline payment through:BankInternet/online paymentManual paymentpayment via cheque/bank, draft/money order must be paid to the sugeested.Benefits of GSTOverall 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.DisadvantagesDiagram 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.6Suggestions for Improvement of GSTWith 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 certainimprovements 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 assessees with up to 10 crore turnover.3.
Rates should be rationalised and reduced to make India competitive amd 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 tranfer pricing issues/litigation. These rules need to be rationalised, 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 CONCLUSIONFrom 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.
pdf6. https://www.indiafilings.com/learn/gst-advantages-disadvantages7. http://dpncindia.com/blog/suggestions-for-improvement-under-gst8.