GST: A NEW PARADIGM IN THE INDIRECT TAX STRUCTURE IN INDIA
*Chanderprabha
Research scholar, department of commerce, M.D. University, Rohtak.
Abstract:
This paper is a conceptual study on the rollout of GST in India. The main purpose of the study is to find out how the rollout of GST will affect the indirect tax structure of Indian economy. How various goods and services will be accounted after such rollout? However the term GST means goods and services tax, one of the biggest indirect tax structure designed to accelerate the economic growth and development of the country.
Key-words: goods and services tax (GST), indirect taxes, Indian economy, and tax reform.
Introduction:
The rollout of GST from July 1st, 2017 is supposed to change whole indirect tax scenario in India. The rollout of GST is being reckoned as one of the biggest tax reform since 1947. Before its rollout, in India indirect tax system was in the vague. There were umpteen of taxes imposed by both union and states government separately. But now GST has subsumed these indirect taxes under an umbrella and has created a smooth and seamless single national market in India. It is assumed by various eminent economists and experts that GST will certainly contribute in the growth and development of Indian economy in an effective and efficient manner. However the rollout will prove a new effective paradigm in the governance of Indian economy further. If we go back in time, then we will evident that GST was first introduced by France in 1954. But nowadays it is being followed by approx one hundred and forty countries. Most of the countries followed unified GST system while few countries such as Canada, Brazil follow a dual GST system in which tax is being imposed by both union and state government. India has also adopted a dual system of GST including CGST and SGST.
Literature review:
Here in this section we will talk about the past literature regarding GST.
Dr. Shaik et. al., (2015) in their paper “DOES GOODS AND SERVICES TAX (GST) LEADS TO INDIAN
ECONOMIC DEVELOPMENT” concluded that GST is considered to be a major improvement over the pre-existing central excise duty at the national level and the sales tax system at the state level. GST is not simply VAT plus service tax but a major improvement over the previous system of VAT and disjointed services tax- a justified step forward. A single rate would help maintain simplicity and transparency by treating all goods and services as equal without giving special treatment to some ‘special’ goods and services. Overall, GST would usher in the possibility of a collective gain of industry, trade, agriculture and common consumers as well as for the central government and the state government. Although we have to prepare for this intellectually and physically. [1]
Lourdunathan and Xavier (2017) in their paper “A STUDY ON IMPLEMENTATION OF GOODS AND SERVICES TAX (GST) IN INDIA: PROSPECTUS AND CHALLENGES” investigated that GST will prove in one nation and one tax market in India. The widen base and improved tax compliance under GST will benefit both central and states government in terms of increased resources and revenue collections. However ‘GSTNET’ will result in reduced corruption and tax evasion. There is an urgent need to aware the public which can be done by conducting seminar, work-shops and training programme. [3]
Kaur (2016) in her work “GOODS AND SERVICES TAX (GST) and ITS IMPACT” found that GST heralds a big change in the tax structure of India. There will be both increase and decrease in the prices of goods and services. A threat of inflation is looming on the implementation of GST. Overall GST will be a big change. [4]
Mujalde and Vani (2017) in their paper “GOODS AND SERVICES TAX (GST) AND ITS OUTCOME IN INDIA” concluded that moving to GST regime will be fruitful for the Indian economy in a multiple ways. GST can be used as an effective tool for the fiscal policy management if implemented successfully due to its nationwide same tax rate system. Certainly it will help in the development of a common national market. [5]
Thowseaf & Millath (2016) in their paper “A STUDY ON GST IMPLEMENTATION AND ITS IMPACT ON INDIAN INDUSTRIAL SECTORS AND EXPORT” suggested that GST with it’s widen tax base will remove unhealthy competition among states and will vanish the cascading effects of taxes. The average tax burden on companies will fall which will decrease the costs of Indian goods and services in the international market which in turn boost Indian industrial standard and exports. The transparent tax system will help the Indian people regain their wealth lost within country.[6]
Objective of the study:
1. To decipher the meaning of GST, advantages and disadvantages. 2. To get acquaint with the GST framework.
Research Methodology:
The present study is conceptual and descriptive in nature with a detailed review of literature, official websites, research papers, articles and journals were also required during the study.
Concept of GST:
The acronym ‘GST’ stands for goods and services tax. GST is an indirect and consumption based tax. Indirect tax means a tax which is paid by the producer or intermediary supplier but the burden can be shifted on the consumer. Consumption based tax means a type of tax which is levied at the place of final consumption rather than at the place of production of goods and services. It was introduced on 1st July 2017 and is applicable throughout the India. GST has replaced multiple cascading taxes levied by the central and state governments.
The reform process of India’s indirect tax regime was started in 1986 by Sh.Vishwanath Pratap Singh with the introduction of Modified Value Added Tax (MODVAT).
The GST was launched at midnight on 30 June 2017 by the Prime Minister of India, Sh. Narender Modi. The launch was marked by a historic midnight 30June-1July, 2017 session of both the houses of Parliament convened at the central hall of the Parliament. The session was attended by high-profile guests of both business and entertainment industry. [7]
A Glance at the rates of commodities under GST:
0% 5% 12% 18% 28%
Live animal Natural honey Live horses Dry fruits Paints & varnishes,
artist student signboard, painter colors
Coffee, tea Frozen goods Mixture of fruits Tiles Basic goods(flour) Good other than
seeds (soya bean)
Meat & edibles namkeen, juice etc.
Sugar
confectionary
Freezers,
refrigerators, A.C.
Skimmed milk
powder, milk foods for babies, cream, curd.
Ayurvaedic, Unani & Homoeopathic
Kitchenware, tableware,
household article, preserving jars sewing machine.
Car, motor
vehicles, crane, concrete mixer etc.
Solar water
heater, hand
pumps, renewable energy devices
Fertilizers Irrigation, power, industrial plants.
Table: 1
Table 1, shows various rates decided under GST on number of goods. Here you will witness few good’s rate only. In addition to above Gold will be charged at 3% while loose stones at 0.25%.
Things kept outside the purview of GST are:
Crude petroleum Petrol
Natural gas High speed diesel Aviation turbine fuel
Human consumption alcohol
Advantages of GST:
1. It will result in one tax one nation economy in India.
2. It will be a `consumption based tax instead of manufacturing. 3. There will be uniform GST registration, payment and input tax credit. 4. It will abolish the cascading effect of indirect taxes on single transaction. 5. It will subsume all indirect taxes at both the level (central, state).
6. It will contribute in the reduction of tax evasion as well as in corruption.
7. It will certainly contribute in higher productivity, revenue collection and GDP rate. 8. It will contribute in the increased tax compliance etc.
9. Increased job opportunities. 10. Widen tax base under GST.
11. It will bring transparency in the tax structure of India.
Disadvantages:
1. Reckoning the examples of Malaysia and Canada which have implemented GST before India, there are chances of inflation in the initial years of implementation as the Indian economy and her people adjust to GST.
2. Some commodities are cheap while some are dear under GST.
3. Due to uniform tax structure, sectors which could evade excise duties earlier will now have to pay higher taxes.[9]
Legislative framework under GST:
There is CGST, SGST, UTGST and IGST. Where CGST means central goods and services tax, SGST means state goods and services tax, UTGST means union territories goods and services tax and IGST means integrated goods and services tax. CGST and SGST are being applicable on transaction within state. IGST is applicable on transactions between states.
There is single legislation – CGST Act, 2017 - for levying CGST. Union territories without state legislatures will be governed by UGST Act, 2017 for levying UTGST. States and Union territories with their own legislatures (Delhi, Puducherry ) have to enact their own GST legislation for levying SGST. [8]
Conclusion:
At the base of conclusion I would like to say that goods and services tax is a major reform in the field of indirect taxes in India. It will certainly eliminate the unnecessary part of intermediaries from the manufactures to ultimate consumers of the goods and services. A number of goods and services rates have been decided by the GST Council. Though some commodities are cheaper before than GST while some are dearer.
References:
1. Dr. Shaik, S., Dr. Sameera, S.A. & Mr. Firoz, Sk.C. (2015) “Does Goods and Services Tax (GST) Leads to Indian Economic Development?” IOSR Journal of Business and Management, vol.17, issue12, PP. 01-05.
2. Sehrawat, M. & Dhanda, U. (2015) “GST IN INDIA: A KEY TAX REFORM”, International Journal of Research- Granthaalayah, vol.3, issue12, pp.133-141.
3. Lourdunathan, F. & Xavier, P. (2017) “A study on implementation of goods and services tax (GST) in India: prospectus and challenges”, International Journal of Applied Research, vol.3, issue1, pp. 626-629.
4. Kaur, J. (2016) “GOODS AND SERVICES TAX (GST) and its IMPACT”, International Journal of Applied Research, vol.2, issue8, pp.385-387.
5. Mujalde, S. & Vani, A. (2017) “Goods and Service Tax (GST) and its Outcome in India”, Journal of Madhya Pradesh Economic Association, vol.27, issue1.
6. Thowseaf, S. & Millath, A. (2016) “A Study on GST Implementation and its Impact on Indian Industrial Sectors and Export”, International Journal of Management Research and Social Science, vol.3, issue2, pp.27-30.
7. https://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
8. https://gst.caknowledge.in/gst-definition-objective-framework-action-plan-scope/
9. https://www.quora.com/What-are-the-positive-and-negative-impact-of-GST-in-India
10. Kothari, C.R. (1992), “Research Methodology: Methods and Techniques”, New Delhi, Wiley Eastern Ltd.
