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CONCEPT OF GOODS AND SERVICES TAX (GST) IN INDIA

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
CONCEPT OF GOODS AND SERVICES TAX (GST) IN INDIA
Parveen Kumar
(Assistant Professor, Department of Business Administration, Chaudhary Devi Lal University,
Sirsa, Haryana, India)
Parveenbharat86@gmail.com
Declaration of Author: I hereby declare that the content of this research paper has been truly made by me including the title of the research paper/ research article,
and no serial sequence of any sentence has been copied through internet or any other source except references or some unavoidable essential or technical terms. In
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related to the content of this research paper’s copied or plagiarism content he/she may contact on my above mentioned email I D.

Abstract

The Goods and Services Tax (GST) is a huge thought that simplifies the large tax structure by
supporting and enhancing the economic process of a country. GST is a comprehensive tax levy
on manufacturing, sale and consumption of goods and services at a national level. GST is
especially designed to switch the indirect taxes obligatory on goods and services by the Centre
and States. This paper presents an outline of GST concept, explains its features along with its
timeline of implementation in India. The paper is more centered on comparison between the Past
Tax Structure and Current GST Tax in India.

Keywords: goods and services tax, Value added tax (VAT)

Introduction

GST stands for goods and Services Tax. It country to country. Goods and service tax
is a form of tax obligatory on is imposed to gather revenues for the
sale, manufacturing and usage of goods and government. This tax is paid by
services. Goods and service Tax is applied the consumers of goods and services and
on services and goods at a national level picked up and forwarded to the
with a purpose of achieving government by the business entities. In
overall economic development. GST is India, The seeds of GST
especially designed to switch the indirect in India were 1st sown within the year 2000
taxes obligatory on goods and services by by Atal bihari Vajpayee, who was the then
the Centre and States. Goods and Prime Minister of the nation. The goods and
service Tax are often defined as a form of service tax bill was officially introduced in
value added Tax imposed by 2014. Goods and Services Tax (GST)
on varied goods and services is implemented from one, july2017
by different countries. The tax charged in India. GST is an indirect tax applicable all
on goods and services could differ from over India that replaced multiple taxes

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
levied by the central and state governments. provision of services as well combination
The GST is ruled by a GST Council and its thereof.
Chairman is the minister of finance of India.
Under GST, goods and services are taxed
at the following rates, 0%, 5%, 12% and
Objectives of study
18%.
1. To study of the concept of GST.
Literature Review
2. To Compare the Past Tax Structure and
Current GST Tax
Sehrawat and Dhanda (2015) concluded
Research methodology
that GST will give India a world class tax
system by grabbing different treatment to The research paper is an attempt of research,
manufacturing and service sector. Prajapati based on the secondary data sourced from
(2016) discussed about the challenges in journals, Internet, articles, previous research
implementation of GST like IT sector is not paper which focused on the various aspects
boomed, threshold limit of turnover for of goods and service act. According to the
dealers under GST is another bone of requirements of the objectives of the study
contention between the government and the the design is descriptive type. The accessible
Empowered Committee. Kumar (2014) secondary data is used only for study.
discussed that after implementation of GST
in India many indirect taxes will be finished
and there will be only one tax name as GST
which is expected to encourage unbiased tax Concept of Goods and Service Tax
structure. Gupta (2014) focused on the
GST (Goods and Services Tax) is applicable
relevance of VAT and GST, how GST
on supply of goods and services. It replaced
contributes to the improvement of the tax
the current taxes of excise, VAT and service
structure in India toward a world class
tax. In past times there are different VAT
system. It indicated a significant
laws in different states. Most businesses had
improvement in the comprehensive indirect
to pay and comply with three different taxes
tax reforms in the country. She discussed
– excise, VAT, and service tax. GST brings
about the differences in treatment for the
uniform taxation across the country and
service and manufacturing sector. Garg
allows full tax credit from the procurement
(2014) studied the GST and concludes
of inputs and capital goods which can later
Goods and Service Tax is the most logical
be set off against GST output liability.
steps towards the comprehensive indirect tax
Current GST system makes equal balance to
reform in our country since independence.
the big enterprises as well as SMEs. The
GST is levy able on all supply of goods and

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Airo National Research Journal
Volume XII, ISSN: 2321-3914
November, 2017
Impact Factor 0.75 to 3.19
main objective of GST is thus to simplify
tax hurdles for the entire economy.
Who have to pay GST?
Goods and Services Tax have to pay by all
manufacturers and sellers. It also pays by
service providers such as telecom providers,
consultants, chartered accountants etc.
GST – How It Works In India?
Goods and Services Tax is based on the
grounds of VAT.
Following are some of the module of GST.
Components:
GST basically divided into two components
i.e. namely, Central Goods and Service Tax
and also State Goods and Service
Applicability:
GST also applicable to all the Goods and
Services sold and provided in India, only
UGC Approval Number 63014
except from the list of exempted goods
which fall outside its purview.
Payment:
At central and State level GST pay
separately.
Credit:
The facility of Input Tax Credit at Central
level is available in respect of Central Goods
and Service tax.
Comparison of Past Tax Structure and
GST Tax:
Past Tax Structure:
The past tax structure of India has been
indicated in the Figure 1 below. This shows
the relation between direct tax, income tax,
indirect tax, central excise, VAT, entry,
luxury tax etc.
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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19

DIRECT TAX Income Tax

Central Excise

Tax structure
before GST Custom

Service Tax

INDIRECT TAX
(centre / state VAT
taxs) Sales Tax

Others Tax:
Entertainment tax
-Entry Tax
Luxury Tax
Lottery Tax

Figure1: Past Tax Structure of India

GST Tax Structure: GST, Inter State GST, central GST, state
GST, Integrated GST etc.
The figure 2 shows the GST Tax structure
which shows the relation between Intra state

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19

CGST
(Central GST)
Intra State
(Within the State)
SGST
Goods Supplied or (State GST)
Services Provided

Inter State IGST (Integrated GST)

(Outside the State OR &
between two States) Additional Tax*

Figure 2: GST Tax structure

Past Tax System and Rates central and state levels. Table 1 it
summarizes the central tax rates before GST
Before GST India's tax system comprises a in India and Table 2 summarizes the State
multitude of indirect taxes, applied at the tax rates before GST in India.
Table 1: Overview of Central Taxes in India

S.No. CENTRAL TAXES RATE

1. Central Value Added Tax (CENVAT) or Central Excise duty 12.36%

Tax levied on the production of manufacturing goods.

2. Service Tax 15%

Tax levied on provided services.

3. Central Sales Tax (CST) 2%

Tax on cross state trade.

4. Countervailing Duties (CVD) 12.36%

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
Additional import duty on imported goods which are produced in India in
order to „level the playing field' between domestic and foreign producers.
Additional CVDs might be applied to offset the effect of concessions and
subsidies granted by an exporting country to its exporters.

5. Special Additional Duty of Customs (SAD) 4%

Additional import duty to counterbalance the sales or value added tax

payable by local manufacturers.

Table 2: Overview of State Taxes in India

S.No. STATE TAXES Range Rates

1. Value Added Tax (VAT) 10%-14.5%

Tax levied on the production of manufacturing goods.

2. Sales Tax 0%-15%

Additional tax levied on the production of manufacturing goods. It was

replaced in most states by VAT, but not all.

3. Entry Tax 0%-12.5%

Tax on the entry of goods for consumption, use or sale in that state.

4. Luxury Tax 3%-20%

Tax on luxury goods and services that include hotels, resorts, and halls
used for weddings, conferences, etc.

5. Entertainment Tax 15%-50%

Tax on feature films, major commercial shows and private festivals

and foreign producers.

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
GST Rates Structure under New GST structure for common-use goods and
Tax System services are as under:

GST slabs are pegged at 5%, 12%, 18%, and

28%. According to the GST council, the tax
GST Rates Structure

TAX RATES PRODUCTS AND SERVICES

0% Milk, Eggs, butter milk, curd, natural honey, fresh fruits and vegetables, Unpacked
Food grains, unpacked Paneer, Gur, Unbranded Natural Honey, Unbranded Atta,
Unbranded Maida, Besan, Prasad, Salt, Kajal, Education Services, Health Services,
Children's' Drawing or Coloring books, Phool Bhari Jhadoo

5% Sugar, Tea, Edible Oils, Domestic LPG, PDS Kerosene, Cashew Nuts, Milk Food
for Babies, Fabric, Spices, Coal, Life-Saving Drugs, Packed Paneer, Coal, Raisin,
Roasted Coffee Beans, Skimmed Milk Powder, Footwear(<Rs.500),
Apparels(<Rs.1000), Coir Mats, Matting & Floor Covering, Agarbatti, Indian
Sweets, Coffee (except instant)

12% Butter, Ghee, Almonds, Fruit Juice, Packed Coconut Water, Computers, Processed
Food, Mobiles, Preparations of Vegetables and Fruits, Nuts or other parts of Plants
including Pickle, Murabba, Chutney, Jam, Jelly, Umbrella, Services on Non-AC
Restaurants

18% Hair Oil, Toothpaste, Soap, Pasta, Corn Flakes, Soups, Capital Goods, Industrial
Intermediaries, Ice-cream, Toiletries, Computers, Printers, Staplers, Aluminum
Foils, Restaurants serving alcohol

28% Small cars (+1% or 3% cess), High-end motorcycles (+15% cess), Consumer
durables such as AC and Fridge, Luxury & Sin items like BMWs, Cigarettes and
aerated drinks (+15% cess)

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Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19

Impact of GST on pricing of products as compared to past tax structure

Let us take an EXAMPLE to understand this clearly.

Past Tax System

Product sold from Kurukshetra to Ambala (Price =Rs.2000)

VAT@10%= Rs.200

Product sold from Ambala to Amritsar (Cost =Rs.2200,Profit = 1000, selling price=3200)

CST@10%= Rs.320

Total Cost of product = 3520

GST System

Product sold from Kurukshetra to Ambala (Price =Rs.2000)

CGST@5%= Rs.100 and SGST@5%=Rs.100

Product sold from Ambala to Amritsar (Cost =Rs.2200,Profit = 1000, selling price=3200)

IGST@10%=320-CGST-SGST=120

Total Cost of product = 3320

Past Indirect Tax Structure vs. GST Tax:  Past tax structure had
different tax for transactions
1. One Tax for both Good and Service related to Goods and
services separately.

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Airo National Research Journal
Volume XII, ISSN: 2321-3914
November, 2017
Impact Factor 0.75 to 3.19
 Under GST- there is one tax
for both Good and Service.
2. Broad scheme
 Past tax structure had various
laws like Central excise Act,
Service Tax, Central state
laws, State VAT laws from.
 Current tax structure have
one law i.e. GST. Under GST
there will be CGST, IGST,
and SGST.
3. Registration Number
 In Past tax structure
registration number are
called as TIN
 In GST Registration number
are called GSTIN
4. Tax burden
 In past scenarios- tax burdens
was very high.
 Under GST- Tax burdens are
less
5. Tax rates
Case 1: Manufacturer to Wholesaler
UGC Approval Number 63014
 In Past tax structure different
tax rates levied across
products and across states.
Different tax rates across
states leads to economic
distortions
 Current GST system has one
CGST rate and a uniform rate
of SGST across all states and
IGST for interstate.
6. Inter-State Transactions
 In Past tax structure all
interstate transactions for
goods are covered under
CST while all interstate
transactions for services are
comes under Service tax.
 Under GST all the interstate
transactions for both goods
and services will be charged
under IGST
An illustration of supply chain
(Manufacturer, Wholesaler, Retailer
and Customer)
The impact with and without GST with
relevance of saving of customer on one
item:
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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
Particulars Without GST With GST

Cost of Production 100 100

Add:- Manufacturer Profit Margin 100 100

Manufacturer Price 200 200

Add:- Excise Duty (12%) 24 –

Total 224 200

Add:- VAT@12.5% 28 –

Add:- CGST@12.5 – 25

Add:- SGST@12.5% – 25

Invoice Value 252 250

Case 2: Wholesaler to Retailer:-

Particulars Without GST With GST

Cost of Goods to Wholesaler 224 200

Add:- Profit Margin @ 10% 22.4 20

Total 246.4 220

Add:- VAT@12.5% 30.8 –

Add:- CGST@12.5 – 27.5

Add:- SGST@12.5% – 27.5

Invoice Value 277.2 275

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Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
Case 3: Retailer to Consumer:-

Particulars Without GST With GST

Cost of Goods to Retailers 246.4 220

Add:- Profit Margin @ 10% 24.64 22

Total Value 271.04 242

Add:- VAT@12.5% 33.88 –

Add:- CGST@12.5 – 30.25

Add:- SGST@12.5% – 30.25

Total Price of item that reaches to customer 304.92 302.5

Cost Saving (in Rs) – 2.42

It is concluded that on one item, customer save Rs 2.42, on applying GST

Conclusion Economy”, International Research

Taxation plays a significant role in the
development of the economy. It can be
concluded from the above discussion that
GST will bring One Nation and One Tax
market. The GST System is basically
structured to simplify past Indirect Tax
system in India. Many Indirect Taxes like
Sales Tax, VAT etc., finished because there
is one tax system i.e. GST. Current GST
system is easy as compare to past tax system
in India. Current GST system simplifies tax
hurdles for the entire economy.
References
[1] Gupta, N. (2014), “Goods and
Services Tax: its impact on Indian
Journal of Commerce Arts and
Science, Vol. 5, Issue 3
[2] Garg G., 2014 Basic Concepts and
Features of Good and Service Tax in
India, International Journal of
Scientific Research and Management
Vol. 2, Issue 2, Pp 542-549
[3] Kumar, N. (2014), “Goods and
service tax in India- A way forward”,
Global Journals of multidisciplinary
studies, vol.3, issue 6
[4] Prajapti, H. (2016), “Challenges and
Implementation of GST (Goods and
Service Tax) in India” Paripax –
Indian journal of research, Vol. 5,
Issue 7

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 Airo National Research Journal

Volume XII, ISSN: 2321-3914

November, 2017 UGC Approval Number 63014
Impact Factor 0.75 to 3.19
[5] Sehrawat, M. and Dhanda, U. [6] http://www.gstindia.com
(2015), “GST in India – A key tax
reform” International journal of [7] http://www.gstseva.com
research Granthalya, Vol. 3, Issue
[8] http://economictimes.indiatimes.com
12, Page No.133-141.
[9] http:// www.taxguru.in

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