LOVELY PROFESSIONAL UNIVERSITY

PAGWARA,PUNJAB

ASSIGNMENT OF BASIC OF MANAGEMENT

[MEC85D]
ON
GOOD AND SERVICE TAX
GST

Represented by:-Guided by:-

Name :- Rohit Raj Singh M S Ubhi
Reg no.:-11716601
Section:- JE702

April,2020
What is GST

GST is an Indirect Tax which has replaced many Indirect Taxes in

India. The Goods and Service Tax Act was passed in the Parliament on
29th March 2017. The Act came into effect on 1st July 2017; Goods &
Services Tax Law in India is a comprehensive, multi-stage, destination-
based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied
on the supply of goods and services. This law has replaced many
indirect tax laws that previously existed in India.
GST is one indirect tax for the entire Country.
Goods and services are divided into five different tax slabs for collection
of tax - 0%, 5%, 12%, 18% and 28%. However, petroleum
products, alcoholic drinks, and electricity are not taxed under GST and
instead are taxed separately by the individual state governments, as
per the previous tax system.[citation needed] There is a special rate of
0.25% on rough precious and semi-precious stones and 3% on gold.[1] In
addition a cess of 22% or other rates on top of 28% GST applies on few
items like aerated drinks, luxury cars and tobacco products.[2] Pre-
GST, the statutory tax rate for most goods was about 26.5%, Post-GST,
most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation
of the One Hundred and First Amendment of the Constitution of
India by the Indian government. The GST replaced existing multiple
taxes levied by the central and state governments.

The tax came into effect from 1 July 2017 through the implementation
of the One Hundred and First Amendment of the Constitution of
India by the Indian government. The GST replaced existing multiple
taxes levied by the central and state governments.
 Importance of GST in Indian Economy:

GST Regime:
GST is one of the biggest indirect tax reforms in the country.
GST is expected to bring together state economies and improve
overall economic growth of the nation.
GST is a comprehensive indirect tax levy on manufacture, sale
and consumption of goods as well as services at the national
level. It will replace all indirect taxes levied on goods and
services by states and Central.
There are around 160 countries in the world that have GST in
place. GST is a destination based taxed where the tax is
collected by the State where goods are consumed. India is
going to implement the GST from July 1, 2017 and it has
adopted the Dual GST model in which both States and Central
levies tax on Goods or Services or both.
SGST – State GST, collected by the State Govt.
CGST – Central GST, collected by the Central Govt.
IGST – Integrated GST, collected by the Central Govt.

• Reduces tax burden on producers and fosters growth through

more production. The current taxation structure, pumped
with myriad tax clauses, prevents manufacturers from
producing to their optimum capacity and retards growth.
GST will take care of this problem by providing tax credit to
the manufacturers.
• Different tax barriers, such as check posts and toll plazas,
lead to wastage of unpreserved items being transported. This
penalty transforms into major costs due to higher needs of
buffer stock and warehousing costs. A single taxation system
will eliminate this roadblock.

• There will be more transparency in the system as the

customers will know exactly how much taxes they are being
charged and on what base.

• GST will add to the government revenues by extending the

tax base.

• GST will provide credit for the taxes paid by producers in the
goods or services chain. This is expected to encourage
producers to buy raw material from different registered
dealers and is hoped to bring in more vendors and suppliers
under the purview of taxation.

• GST will remove the custom duties applicable on exports.

The nation’s competitiveness in foreign markets will increase
on account of lower costs of transaction.
NEED OF GST IN INDIA:

Introductionn of GST is considered to be a significant step in

the reform of indirect taxation in India. Amalgamating of
various Central and State taxes into a single tax would help
mitigate the double taxation, cascading, multiplicity of taxes,
classification issues, taxable event, and etc., and leading to a
common national market.
VAT rates and regulations differ from state to state. On the
other hand, GST brings in uniform tax system across all the
states. Here, the taxes would be divided between the Central
and State government.
Imposing several taxes on goods and services can lead to high
cost and inefficient tax structure which can subject to shirking
and revenue disclosures. The need for GST in Indian Taxation
System will add value at each stage and will set off the rates
both at state and at central level. Introducing GST, will
increase the efficiency of taxation, improves the economic
growth and it will bring whole nation to one national market.

What happen in present scenario? Our present taxation

system is very complex and very confusing, corruption chance
is there, which leads to distrust of government, there are
hidden tax for exports, whereas no charge applicable on
Importing of Goods/Services from one state to another.

Just to overcome these issues, Rajya Sabha

introduced GST bill, which will bring transparency to taxation
and consumer will get to know how much tax amount they are
paying to government for sale/ purchase/ manufacturing.

Types Of Goods and Service Tax in India.

1. CGST(Central Gods and Service Tax)

2. SGST ( State GST (SGST)

3. IGST (Integrated Goods and Service tax)

Central Goods and Services Tax (CGST)

Under GST, CGST is a tax levied on Intra State supplies of both goods
and services by the Central Government and will be governed by the
CGST Act. SGST will also be levied on the same Intra State supply but
will be governed by the State Government.
This implies that both the Central and the State governments will
agree on combining their levies with an appropriate proportion for
revenue sharing between them. However, it is clearly mentioned in
Section 8 of the GST Act that the taxes be levied on all Intra-State
supplies of goods and/or services but the rate of tax shall not be
exceeding 14%, each.

State Goods and Services Tax (SGST)

Under GST, SGST is a tax levied on Intra State supplies of
both goods and services by the State Government and will be
governed by the SGST Act. As explained above, CGST will also
be levied on the same Intra State supply but will be governed
by the Central Government.
Note: Any tax liability obtained under SGST can be set off
against SGST or IGST input tax credit only.

Integrated Goods and Services Tax (IGST)

Under GST, IGST is a tax levied on all Inter-State supplies of
goods and/or services and will be governed by the IGST Act.
IGST will be applicable on any supply of goods and/or services
in both cases of import into India and export from India.
Note: Under IGST,

• Exports would be zero-rated.

• Tax will be shared between the Central and State
Government.

Why the split into SGST, CGST, and IGST

India is a federal country where both the Centre and the

States have been assigned the powers to levy and collect taxes.
Both the Governments have distinct responsibilities to
perform, as per the Constitution, for which they need to raise
tax revenue.
The Centre and States are simultaneously levying GST.
The three types tax structure is implemented to help taxpayers
take the credit against each other, thus ensuring “One Nation,
One Tax”.
Salient features of GST

The salient features of GST are as under:

• (i)GST is applicable on ‘supply’ of goods or services as

against the present concept on the manufacture of goods or
on sale of goods or on provision of services.
• (ii) GST is based on the principle of destination-based
consumption taxation as against the present principle of
origin-based taxation.
• (iii) It is a dual GST with the Centre and the States
simultaneously levying tax on a common base. GST to be
levied by the Centre would be called Central GST(CGST)
and that to be levied by the States would be called State
GST (SGST).
• (iv) An Integrated GST (IGST) would be levied an inter-
state supply (including stock transfers) of goods or services.
This shall be levied and collected by the Government of
India and such tax shall be apportioned between the Union
and the States in the manner as may be provided by
Parliament by Law on the recommendation of the GST
Council.
• (v) Import of goods or services would be treated as inter-
state supplies and would be subject to IGST in addition to
the applicable customs duties.
• (vi) CGST, SGST & IGST would be levied at rates to be
mutually agreed upon by the Centre and the States. The
rates would be notified on the recommendation of the GST
Council. In a recent meeting, the GST Council has decided
 that GST would be levied at four rates viz. 5%, 12%, 16%
and 28%. The schedule or list of items that would fall under
each of these slabs has been worked out. In addition to these
rates, a cess would be imposed on “demerit” goods to raise
resources for providing compensation to States as States
may lose revenue owing to the implementation of GST.
• (vii) GST would apply on all goods and services except
Alcohol for human consumption.
• (viii) GST on five specified petroleum products (Crude,
Petrol, Diesel, ATF & Natural Gas) would by applicable
from a date to be recommended by the GSTC.
• (ix) Tobacco and tobacco products would be subject to GST.
In addition, the Centre would have the power to levy
Central Excise duty on these products.
• (x) A common threshold exemption would apply to both
CGST and SGST. Tax payers with an annual turnover not
exceeding Rs.20 lakh (Rs.10 Lakh for special category
States) would be exempt from GST. For small taxpayers
with an aggregate turnover in a financial year upto 50
lakhs, a composition scheme is available. Under the scheme
a taxpayer shall pay tax as a percentage of his turnover in a
State during the year without benefit of Input Tax Credit.
This scheme will be optional.
• (xi) The list of exempted goods and services would be kept to
a minimum and it would be harmonized for the Centre and
the States as well as across States as far as possible.
Advantages Of GST
GST benefits in India will assist the Government as well as
the consumers in the long run in creating a win-win situation
for both. Some of the advantages of GST in India are enlisted
as follows:
• Mitigation of Cascading effect :Under the GST
administration, the final tax would be paid by the consumer
for the goods and services purchased.
• Abolition of Multiple Layers of Taxation :One of the
advantages of GST is that it integrated different tax lines such
as Central Excise, Service Tax, Sales Tax, Luxury Tax, Special
Additional Duty of Customs, etc.
• Resourceful Administration by Government :Previously, the
management of indirect taxes was a complicated task for the
Government.
• Enhanced Productivity of Logistics: the restriction on inter
statement movement of goods has reduced.
• Creation of a Common National Market: GST gave a boost to
India’s tax to Gross Domestic Product ratio that aids in
promoting economic efficiency and sustainable long – term
growth.
• Ease of Doing Business: with the implementation of GST,
the difficulties in indirect tax compliance have been reduced.
• Regulation of the Unorganized Sector under GST: it has
created provisions to bring unregulated and unorganised
sectors such as the textile and construction industries to name
a few under regulation with continuous accountability.
• Reduction of Litigation: GST aids in reducing litigation as it
establishes clarity towards the jurisdiction of taxation between
the Central and State Governments.GST provides a smooth
assessment of tax.
• Tackling Corruption and Tax Leakages: with the GST online
network portal, the taxpayer can directly register, file returns
and make payments of the taxes without having to interact
with tax authorities.

Disadvantages of GST :

• IT Infrastructure: since GST is an IT-driven law, it cannot be

sure whether all the states in India are currently equipped
with infrastructure and workforce availability to embrace this
law. Only a few states have implemented this E- Governance
model. Even today some states use the manual VAT returns
system.
• Higher Tax Burden of SME’s: earlier the small and medium
enterprises had to pay excise duty only on a turnover that
exceeded Rs. 1.5 crore every financial year. However, under
the GST administration, businesses whose turnover exceeds
Rs 40 lacs are liable to pay GST.
• Increase Burden of Compliance: The GST administration
states that companies are required to register in all the states
they operate in. This increases the burden on the business for
excessive paperwork and compliance.
• Petroleum Products don’t fall under the GST Slab: petrol and
petroleum products have not been included in the scope of GST
until now. States levy their taxes on this sector. Tax credit for
inputs will not be available to these industries or those related
industries.
• Coaching of Tax Officers: there is inadequate training that is
provided to the Government officers for practical usage and
implementation of such systems since the GST administration
heavily banks on information technology.

IMPACT OF GST

Impact of GST on Economic Growth and Inflation

One of the long-term objectives of introducing GST is that it will

reduce the extent of hidden and embedded taxes in the system
and thereby create opportunities for investment in order to
capitalise on the altered tax regime. The change to GST as a
predominant indirect tax was expected to increase gross domestic
product (GDP) and reduce inflation. International experience
shows that GDP growth falls after introduction of GST but it
recovers after two—three quarters and, conversely, inflation rises
in the initial quarters before it declines (The Treasury, Australian
Government 2003). While it is barely four quarters since the
introduction of GST in India and hence the evidence of the
reversal of the initial trends might not be visible yet, it would be
interesting to identify the trends so far.

Impact on Overall Growth

Year-to-year growth rate of gross value added (GVA) at basic
prices (2011–12 series, at constant prices) shows
that growth rate was falling since Q4 of 2015–16 and it was 5.6
per cent at Q1 of 2017–18. The introduction of GST on 1 July
2017 lifts the growth rate of GVA as evident in Figure C.1.
However, the average growth rate during 2017–18 (6.4 per cent)
is lower than that achieved in 2015–16 (8.1 per cent) and 2016–
17 (7.1 per cent). In drawing conclusions about the impact of GST
on GVA from these numbers, it should be borne in mind that
seven months prior to the introduction of GST, the economy
received a shock in the form of withdrawal of high denomination
notes.