A Synopsis on

Impact and Challenges of GST (GOOD SERVICE TAX) in India: -

MASTER OF BUSINESS ADMINISTRATION

By – Prince Ramanan

INDORE INSTITUTION OF BUSINESS MANAGEMENT AND

RESEARCH
AB-ROAD INDORE (M.P)

2020-2022
 1.INTRODUCTION
“The goods and services tax law in India is a comprehensive, multi-stage, destination-based tax
that is levied on every value addition”. Taxation policy plays a very crucial role on the economy
of a country. The main source of revenue of the government comes from the taxes levied on the
citizens who can be direct or indirect. When the impact and incidence fall on same person it is
called as direct tax and when the impact and incidence fall on two different people i.e., the
burden can be shifted to any other person it is called as indirect tax. Before the introduction of
GST India had a complicated indirect tax system with multiple taxes imposed by union and state
separately, with the introduction of GST all the indirect taxes will be under an umbrella and
ensuring a smooth national market with high economic growth rate. GST is a single point tax
levied on the supply of goods and services, right from the manufacturer to the consumer. Credits
of input taxes paid at each
stage will be available in the subsequent stages on value addition, thus making GST an essential
tax only on value addition at each stage which ensures that there is no cascading of taxes [2].
GST will reduce the overall tax burden of customer which is currently estimated at 25-30%. The
Goods and services taxor GST which is popular as what it is all over the world was first
introduced in France in the year 1954 and subsequently more than 160 countries had
implemented the GST law like Germany, Italy, UK, South Korea, Japan, Canada, Australia, etc.
Most of the countries had adopted unified GST while some countries like Brazil, Canada follow
a dual GST system where tax is imposed both by central as well as by state government. India
had adopted the dual system of GST as CGST and SGST. The idea of GST in India was
proposed by Atal Bihari Vajpayee in 1999 and a committee was set up under the leadership of
Asim Das Gupta the then finance minister of West
Bengal to design a GST model. It was supposed to be implemented from 1st April 2010 under
flagship of P Chidambaram the then finance minister of UPA government but due to political
issues and conflicting interests of various stakeholders it did not came into force. In May 2016
the constitutional amendment bill for GST was passed by Lok Sabha and deadline of 1st April
2017 to implement GST was set by Arun Jaitley the finance
minister of India. Finally, the goods and service tax were launched at midnight on 1st July 2017
by the president of India, Pranab Mukherjee and Prime minister of India, Narendra Modi.
Experts have enlisted the benefits of GST as under:
·It would introduce “one country one tax”
·It would absorb all the indirect taxes at the central and state level thus eliminating the cascading
effect of tax
·It would bring down the prices of goods and services which in turn will help the companies as
consumption will increase
·Higher threshold for registration which will exempts many small traders and service provider.
· In the GST system, when all the taxes are integrated it would eliminate the number of
compliances like return filling
· It would help to eliminate the separate tax imposition on goods and services which
requires the transaction to split its value among goods and services leading to greater
complications
· It would wider the tax regime by covering all the sectors including the unorganized
sectors thus widening the tax base. This would lead to better and more revenue collection
by the government.
 · GST would simplify the working procedures and would minimize the tax burden of E-
commerce and logistics companies
· Employment generation for youths as GST trained experts

The Taxation was born and shaped with civilization. The structure and complexity of the tax
system have been developed along with the development of civil society. The sovereign
authority of the Government to extract tax is the life of taxation, Governments’ need for
resources is its bargaining power and human instinct of reluctance to sacrifice money is the
reason for its mandatory imposition.

The Goods and Services Tax is a combination of two words “Goods” & “Services”. Where Goods
means every kind of movable property other than money and securities but includes actionable
claim, growing crops, grass and things attached to or forming part of the land which are agreed
to be severed before supply or under a contract of supply2 {Sec. 2(52)} and Services means
anything other than goods, money and securities but includes activities relating to the use of
money or its conversion by cash or by any other mode, from one form, currency or
denomination, to another form, currency or denomination for which a separate consideration is
charged.

Implementing VAT/GST Worldwide in almost 160 countries there is GST/VAT, Under the GST
scheme, no difference between goods and services is made for levying of tax. It defines that
goods and services appeal the same rate of tax. India is planning at present which will carry 8
Lakh Crore revenue to the government by tax rate at 5%, 12% and 18%. A tax structure of 5%,
12%, 18% and 28%, with lower rates a four-tier GST for essential items and the highest for
luxury was decided by the all- powerful GST Council. It is planned to get input tax credit (ITC)
whether for provision of service or sale of goods to a person, under the GST scheme. GST has
caught the attention of the market which has been one of the key things given its implications
on earnings of companies. Large numbers of items have kept under 18% tax slab by the
government.

2.Background: -

Taxation policy in ancient India was highly logical and based on the principles of economic
theory and equity in comparison with the current taxation policies of the government. The tax
system of our ancients was quite reasonable, rational, convenient, elastic, appealing and based
on the principles of maximum welfare with some exceptions.
GST was first discussed on 2003 after the suggestions of Kelkar task force under the
chairmanship of Vijay Kelkar. A proposal to introduce national level GST by April 2010 was made
on the budget speech of year 2006- 07. After several efforts and discussion, a 122 and
constitutional amendment bill for GST was brought into parliament, following which 101st
Constitutional (Amendment) Act 2016 was enacted and passed from Lok Sabha (House of the
people) on 3 august 2016 and on 8th august 2016 from Rajya Sabha (Council of States).
A new era has been started in the indirect taxation system of our country. It’s a tax system
which has converted entire country in integrated market. “One Tax One Nation” is the motto of
this indirect tax system. GST is a destination and consumption based indirect tax which is
imposed over the supply of goods and services directly from the manufacturer to the
consumer. Thus, the final consumer will bear only the GST charged by the last dealer in the
supply chain, with set-off benefits at all the previous stages.

3.History of GST in India: -

· 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee (EC) to
create a structure for GST, based on their experience in designing State VAT.
Representatives from the Centre and states were requested to examine various aspects of
the GST proposal and create reports on the thresholds, exemptions, taxation of inter-state
supplies, and taxation of services. The committee was headed by Asim Dasgupta, the
finance minister of West Bengal. Dasgupta chaired the committee till 2011.
·2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry,
indicated that the existing tax structure had many issues that would be mitigated by the
GST system.
·February 2005: The finance minister, P. Chidambaram, said that the medium-to-long
term goal of the government was to implement a uniform GST structure across the country,
covering the whole production-distribution chain. This was discussed in the budget session
for the financial year 2005-06.
·February 2006: The finance minister set 1 April 2010 as the GST introduction date.
·November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned
that states will have to prepare and make reforms for the upcoming GST regime.
·February 2007: The 1 April 2010 deadline for GST implementation was retained in
the union budget for 2007-08.
·February 2008: At the union budget session for 2008-09, the finance minister
confirmed that considerable progress was being made in the preparation of the roadmap
for GST. The targeted timeline for the implementation was confirmed to be 1 April 2010 .
·July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic
skeleton of the GST system. The 1 April 2010 deadline was being followed then as well.
·November 2009: The EC that was headed by Asim Dasgupta put forth the First
Discussion Paper (FDP) describing the proposed GST regime. The paper was expected to
start a debate that would generate further inputs from stakeholders .
·February 2010: The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerized
commercial taxes in states. Following this, the implementation of GST was pushed by one
year.
·March 2011: The government led by the Congress party puts forth the Constitution
(115th Amendment) Bill for the introduction of GST. Following protest by the opposition
party, the Bill was sent to a standing committee for a detailed examination .
·June 2012: The standing committee starts discussion on the Bill. Opposition parties
raise concerns over the 279B clause that offers additional powers to the Centre over the
GST dispute authority.
·November 2012: P. Chidambaram and the finance ministers of states hold meetings
and set the deadline for resolution of issues as 31 December 2012.
·February 2013: The finance minister, during the budget session, announces that the
government will provide Rs.9,000 crore as compensation to states. He also appeals to the
state finance ministers to work in association with the government for the implementation
of the indirect tax reform.
·August 2013: The report created by the standing committee is submitted to the
parliament. The panel approves the regulation with few amendments to the provisions for
the tax structure and the mechanism of resolution.
·October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of
Rs.14,000 crore per annum, owing to the destination-based taxation rule.
May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra
Modi was voted into power at the Centre.
December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution
(122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be
sent for discussion to the standing committee.
·February 2015: Jaitley, in his budget speech, indicated that the government is looking
to implement the GST system by 1 April 2016.

4.Review of Literature: -
· Kelkar (2009) committee recommended that GST will bring qualitative change in the
indirect tax system of the country and the GDP will grow due to reduction of production
cost leads to enhance consumption by the consumers.
·Ehtisham Ahmed and Satya Poddar (2009) suggest in “Goods and Services Tax reforms
and intergovernmental consideration in India” introduction of GST will provide simple and
transparent tax system leading to increase in productivity and output of economy but
depends on rational design of GST.
·Pinki, Supriya Kamma and Richa Verma (2014) in “Goods and Services Tax-Panacea for
indirect tax system in India” concluded that the NDA government is positive towards
execution of GST will benefit the government and all the stakeholder in long run but
importance to be given in IT infrastructure.
·Monika Sehrawat and Upasana Dhanda (2015) in “GST in India: A key tax reform”
concluded that introduction of GST will undoubtedly boost the Indian economy but focus
should be given on rational design of GST model and timely implementation.
· N. Kumar, 9 (2014) concluded that GST will help in eradicating economic distortion by current
Indian tax system and is expected to encourage unbiased tax structures which will be
indifferent to geo locations.

5.Objective: -
(1) To understand the concept of Goods and Service Tax Laws through survey of
literature.
(2) To study and understand the features of GST
(3) To assess the advantages and challenges in implementation of GST

6. Hypothesis: -
·No particular hypothesis has been taken for testing purpose as because the study is
explanatory in nature for the literature review aspects substantiating the Goods and
Service Tax Laws of India. It covers a wide range of academic literatures on Goods and
Services Tax. Additionally, as per the need of the study, further considerations
have been made

7.Methodology: -

This is a descriptive cum conceptual research paper, which studies the concept and
framework of GST based on past literature, books, journal, magazines, research papers and
articles etc. The study is based on secondary sources of data or information. Different
books, newspapers and relevant websites, Govt. Publications and research papers, have
been consulted in order to make the study effective one.
(a) Research Design: - GST also known as the Goods and Services Tax is
defined as the giant indirect tax structure designed to support and enhances the
economic growth of a country. The primary objective behind development of
GST is to subsume all sorts of indirect taxes in India like Central Excise Tax,
VAT/Sales Tax, Service tax, etc.
(b) Variables to be used: - The main aim of GST is to remove the complexity of
the preceding tax regime and develop an easy to implement tax system in the
country. Almost, all the leading countries of the world have a uniform tax
collection system. This uniform tax system was much needed to attract foreign
investment in India
(c) Sample design: -
NAME EXPLANATION LEVIED BY

CGST
Central Goods and Service Central Government
Tax

SGST/UTGST Sate Goods and Service

Tax / Union Territory Goods State/ Union Territories
and Service Tax

IGST Integrated Goods and

Service Tax Central Government

(d) Tools for Data collection: - The Data was collected from different types
of review of literatures, online surveys, newspapers, reference,
Government news, research papers, journals etc.

 Tools for data analysis: -The platform is expected to store information

related to relevant transactions
 Based on the data filed by millions of taxpayers that will migrate to the system,
analytics will help in identifying leakages and ensure more focused economic-
policymaking.
 As per the GST system architecture, the decision-making will be based on data
rather than assumptions
 The system shall feature more meta tags so that the time taken by various
functions in capturing/entering the data is verified.
(e) Hypothesis Testing: - No Hypothesis testing has been conducted as because
the study is in expletory in nature for the literature review aspects.

8.Bibliography: -
1. Abda, S. (2017), Effects of Goods and Services tax on Indian Economy,
International education and Research Journal, 3(5), 584–585.
2.B, MitraPriya. (2017), GST- A Game Changer, International Journal of Management
Research and Social Science (IJMRSS), vol. 4(1), pp. 10-12.
3. Dani, S., (2016), A Research Paper on an Impact of Goods and Service Tax (GST) on
Indian Economy, Business and Economics Journal, Bus Eco J 7: 264. doi:
10.4172/2151-6219.1000264.
4. Kapil Kapoor (2017), GST New Tax Regime: Issues and Challenges, International
Journal of Recent Scientific Research, vol. 8(4), pp. 16786- 16790 .
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Impact ahead, International Research Journal of Engineering and Technology,
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Applied Research, vol. 3(1), pp. 626-629.
7. Nayyar, A. and Singh, I. (2017), A Comprehensive Analysis of Goods and Services
Tax (GST) in India. Indian Journal of Finance, DOI: 10.17010/ijf/2018/v12i2/121377.
8. Rupa, R. (2017), GST in India: An Overview, International Education and Research
Journal, https://www.researchgate.net/publication/315331885.
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Indian Economy, Business and Economics Journal, vol. 7 (4). DOI: 10.4172/2151-
6219.1000264.
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11. http://www.gstcouncil.gov.in/
12. http://www.gstindia.com/
13. http://www.gstindia.com/basics-of-gst-implementation-in-india/