Asst Prof.

Ameya C Lohar
GDM Arts, KRN Commerce & MD Science College
Jamner Dist – Jalgaon

E-mail – ameya.c.lohar@gmail.com Contact No - 9960336255

AN OVERVIEW OF CHALLENGES AND ISSUES OF GOODS AND SERVICE

TAX IN INDIA

GENESIS OF GST IN INDIA

 It has been more than a decade since idea of GST was mooted by Kelkar Task
Force in 2004.
 Shri P. Chidambaram while presenting Central Budget 2007-08 announced GST
will be introduced from 1 st April 2010.
 The Task ushering GST got momentum in year 2014 (122nd Amendment Bill).
 122nd Amendment Bill , 2014 received the assent of President on 8 th September,
2016 and became Constitution 101st Amendment Act, 2016, which paved the way
for introduction of GST in India.
 GST has subsumed multiple Indirect taxes like Excise Duty, Service Tax, VAT,
CST, Luxury Tax, Entertainment Tax, Entry Tax etc. GST rates in India are 0%,
5%, 12%, 18%, 28%.
 France was the first country to implement GST in 1954. Within 62 years of its
advent 160 countries across the world has adopted GST.

Objective of Study

1. To Cognize the concept of GST

2. To Study the Features of GST
3. To Assess the Challenges and Issues of GST
Research Methodology

Secondary Data from Journals, Books, Articles, Newspapers, web articles (internet
sources) and Government Report etc. has been collected which focuses on different
aspects of Goods and Services Tax.

Concept of Goods and Services Tax

 India has adopted Dual GST model. Central and States will simultaneously levy
GST on taxable supply of Goods or Services or Both.
 Centre also has the power to tax Intra-State sales and States are empowered to tax
services. GST extends to whole of India including Jammu and Kashmir.
 GST is a value added tax levied on manufacture, sale and consumption of goods
and services.
 GST offers comprehensive and continuous chain of tax credits.
 The burden is borne by final consumer where supplier at each stage is permitted to
avail credit of GST.
 Only the value added at each stage is taxed under GST, there is no tax on tax or
Cascading effect.
 HSN (Harmonised System of Nomenclature) code is used for classifying the
goods under GST.
Silent Features of GST

 Every transaction on goods and services will be covered by GST except exempted
goods and services.
 There is Dual GST model, first central GST and second is state GST. Central GST
will be paid to central government and state GST will be paid to respective state
government
 The power of making law on taxation of goods and services lies with both central
and state government and the administration of CGST will be controlled by central
government and SGST will be controlled by respective state government
 The GST slab rates has been set at 0%,5%,12%,18% and 28% for different goods
and services
 GST aims to make India a common market with common tax rates and procedure
and remove the economic barriers.
 GST Eliminates double taxes and multiple taxes. GST subsumes majority of
Central and State Level existing taxes.
 GST is expected to bring happiness and sparkle to the Government revenue by
widening the tax base.
 It boosts to ‘Make in India’ initiative of India making goods and services
competitive in national and international market.
 It Mitigates the Ill effects of cascading different taxes at different stages.
 Common GST Electronic portal has been set on www.gst.gov.in where Tax return
to be filled separately to central government for CGST and state government for
SGST.
Challenges and Issues of GST

 Multiple tax rates: When the GST was conceived it was supposed to be a single
uniform rate across all product categories, but the shape that the GST has taken is
far removed from the actual concept of one country-one tax. What instead we have
got is a multi-ties tax structure with 4 different tax rates --5, 12, 18 and 28 per cent.
 Increase in Operating Costs: Most small businesses in India do not employ tax
professionals, and have traditionally preferred to pay taxes and file returns on their
own to save costs. However, they will require professional assistance to become
GST compliant as it is a completely new system thereby it increases operating
cost.
 Creating Invoices and Filing Return Not Easy: Small shopkeepers are mainly
struggling in creating different invoices for goods with different GST rates. There
are so many types of items with different GST categories, it is almost impossible to
maintain separate invoices.

 Different Rates at Different Location: Since GST is still not implemented

completely by every business around the country, the prices of some products are
changing the location. The price is also affected by the logistics cost and dealer
margins for different places. You will see the obvious difference between the price
of the same car in Mumbai and Delhi, even after the implementation of GST.

 Fear of high tax rates: One of the earlier expectations from GST was moderate
tax rates on goods and services. However, with a peak rate at 28 per cent (which
can go up to 40 per cent.

 Taxation of free supplies between related parties: The GST law proposes to tax
any free supplies between two related parties. The problem arises especially in
case of related parties located in different states. Such transactions between related
parties in different states mean each party would have to generate invoice,
maintain documents, etc. There is no centralized registration under GST and
therefore, this would create compliance issue for companies.
 GST preparedness among clients is missing: Clients' understanding of GST
provisions and its impact on their business is still at a nascent stage, and many are
still identifying the locations and places they need to be registered in.

 Policy Change during the Middle of the Year: GST will go live three months
into the financial year 2017-18. So, for FY 2017-18, business will follow the old
tax structure for the first 3 months, and GST for the rest of the time. It is
impossible to cross over from one tax structure to the other in just a day
 Online Procedure: GST compliance, return filing and payments all have to be
done online. Many small businesses are not tech-savvy and do not have the
resources for fully computerized compliance. Even as the rest of the nation gets
ready to go digital, businesses in small cities across India face a huge technology
problems.
 No clarity on tax holidays: Many manufacturers (textile, pharmaceutical, FMCG
industries) enjoy tax holidays and state benefit schemes. There is still no
notification regarding these benefits. This will mean increased costs for these
industries, which will probably be passed on to the end consumers.
 Switch in Business Software: Most businesses adopt accounting software or
ERPs for filing tax returns which have excise, VAT, and service tax already
incorporated in them. The transition to GST will crave businesses to modify their
ERPs, too; either by upgrading the software or by purchasing new GST-compliant
software. This will edge to increased costs of buying new software and training
employees on how to use it.
V. Conclusion

 GST has simplified the existing tax system and helps to overcome the cascading
effect of tax.
 GST will reduce prices of different goods and services.
 GST plays a dynamic role in the growth and development of our country.
 GST will endeavor to generate tax revenue for government where it can be used as
expenditure on public services and Infrastructure development.
 Employment generation for youths as GST trained experts
 GST may assure the possibility of overall gain for Industry, Trade and Agriculture
sectors of society.
 The new system of taxation is considered to be more improved system over the
pre-existing Central and State level tax system.
 Higher threshold for registration which will exempts many small traders and
service providers.

Thus Goods and Services Tax is basically taxed on business transactions which are
unlikely to have a direct impact on the common man. However, in case businesses
persistent to face working capital problems due to input credit blocks arising out of the
input tax credit matching mechanism, as they may be prompted to upsurge prices, which
would ultimately be borne by the end consumer. Such a practice may, however, be
checked by the anti-profiteering mechanism applicable under the Goods and Services Tax
law. The government on the whole is trying to reduce the burden of compliance for
businesses by relaxing the return filing requirements. The government is taking remedial
measures to smoothen the road to GST. It is important to take a leaf from global
economies that have implemented GST before us, and who overcame the teething troubles
to experience the advantages of having a unified tax system and easy input credits. As
GST has been implemented in the Indian economy most of the current challenges of this
move will be a story of the past. India has become a single market where goods can move
freely and there will lesser compliances to deal with for businesses.
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