GST & Its Implications

Submitted to Prof. Vaishali Apte

Submitted By: Study Group 9

Amulya Reddy (15020241018)
George Thomas (15020241048)
Kaushik Warrier PC (15020241055)
Kewal Prashant (15020241057)
Komal Singh (15020241059)
Kuldeepsinh Chavda (15020241062)

27 February 2016
1

GST & Its Implications

What is the GST?
Goods and Services Tax i.e. GST could be a comprehensive tax which can be
levied on manufacturing, sale and consumption of products and services at a
national level and is alleged to be one among the largest taxation reforms
in India.
In easy words, it's a
tax
levied
at each stage
whenever
a consumer buys goods or services. This manner of taxation is already in
effect in 150countries. It will convert the entire country into a unified market
and replace all the indirect taxes presently in place with the one revenue
enhancement system.
What is the necessity of introducing GST?
Currently in India, there are numerous taxes being managed otherwise by
Central and state government like Central excise duty, service tax and
customs
duties
at
the
Central
level
and
VAT
(value-added
tax), entertainment tax, luxury tax or lottery taxes at state level.
Everything may get replaced by one single purpose of taxation i.e. GST.
It would facilitate additional seamless movement across the state and can cut
back the transactional
price of
running
the
business,
thereby additionally reducing the compliance of following multiple tax rules
and
obligations. This
can
be extremely relevant nowadays, viewing the
expansion that
India's
economy can
do. It
should additionally cut
back corruption and convey additional potency in running businesses.
Will it facilitate you?
As mentioned above, we've got an awfully advanced tax structure system in
India that makes it very troublesome for any business as they're expected to
pay and fulfil plenty of legal obligations. GST can facilitate and modify the
method to an
excellent extent
and
thereby cut
back the operating
costs that ultimately are passed
on
to
the consumers.
Since it's
additionally about
to increase
Indias value and financial
gain overall, consumers will expect additional indirect profit once its roll out.
How is it about to facilitate India in earning additional revenue?

GST can increase the GDP (Gross domestic product) of India and can increase
its total revenue collections. It will additionally facilitate additional exports
and has the potential to boost employment, with the exception
of tantalising additional foreign investors.
A very important implication of GST is that it would reduce tax burden on
producers and foster growth through more production. Manufacturing is a
costly business under the current taxation system where a producer has to
pay taxes not only on raw material procurement, but also on the final receipts
from sale of goods. This double taxation prevents manufacturers from
producing to their optimum capacity and retards growth. GST, on the other
27 February 2016
2

hand, would take care of this problem by providing tax credit to the
manufacturer. Basically, the tax already paid by him will be deducted from his
final sale tax receipts and he would only have to pay the difference, i.e. for
the value added to the product by him. Also, due to absence of tax credits
applicability for interstate transactions, a manufacturer producing in one
state has to pay taxes on sale of those goods in other states as well. This
adds to their cost and leads to lower productivity. The 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. Currently, for a customer, the tax burden of goods in
anywhere between 25-30 per cent while GST proposes a tax rate of 18 per
cent in the first year of implementation and would be brought down over the
second year and in later years. The consumer would not only be able to
purchase more goods with the same amount of money, he would also look to
buy more, thereby spurring market demand. 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. Until now,
services had been exempted from taxes. GST, however, brings them under
the purview of taxation as well. This would eliminate tax evasion by
corporations that escape taxes by bundling their goods along with services or
whose products fall on the borderline of a good and a service, such as
software products. Also, 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. This would bring in more
and more vendors and suppliers under the purview of taxation and reduce
the ambiguity of the existing unorganised sector. According to the National
Council of Applied Economic Research study conducted in 2009, the GST
could provide gains in Indias GDP in a range of 0.9 to 1.7 per cent over the
years starting from its implementation, assuming the revenue-neutral rate to
be anywhere in the range of 6.2 and 9.4 per cent. The revenue neutral rate is
the net difference in the overall collection of centre and states (the idea is
that if implemented, GST could lead to tax revenue losses in some states. In
such a situation, the central government would be compensating them for
the same for the next 5 years). Additionally, GST is also expected to exclude
state excise on alcohol and tobacco from its purview. This implies that a large
revenue source still rests with the state government to generate cash flows
from.

27 February 2016
3