APLLICABILITY OF GOODS AND SERVICES TAX

GST is intakes based totally tax/levy. It’s miles based on the vacation spot precept. GST
is carried out on goods and offerings at the area where final or real intake occurs. GST
is gathered on value-added goods and offerings at every degree of sale or purchase in
the deliver chain. GST paid at the procurement of products and services may be prompt
against that payable at the supply of goods or offerings. The manufacturer or wholesaler
or retailer will pay the relevant GST charge but will claim again through tax credit
mechanism. However being the ultimate character in the supply chain, the end customer
has to undergo this tax and so, in many respects, GST is like a final-point retail tax.
GST goes to be amassed at point of sale as defined the below figure:

The GST is an indirect tax which means that that the tax is handed on till the closing
stage wherein it's miles the customer of the products and services who bears the tax.
That is the case even today for all oblique taxes but the difference below the GST is that
with streamlining of the multiple taxes the very last cost to the customer will pop out to
be decrease on the removal of double charging inside the system. The beneath deliver
chain of GST with an instance:
The present day tax shape does no longer allow a commercial enterprise character to
take tax credits. There are lots of chances that double taxation takes region at each step
of supply chain. This may set to alternate with the implementation of GST. GST can be
levied at the place of consumption of products and offerings.
 Intra-state supply and consumption of goods & services
 Inter-state movement of goods
 Import of Goods & Services
What is the mechanism of GST?
Case 1: Sale in one state, resale in the same state:
In this example, goods are moving from Mumbai to Pune. As it is a sale within a state,
CGST and SGST will be levied central and state government respectively.The
collection goes to the Central Government and the State Government as pointed out in
the picture. Then the goods are resold from Pune to Nagpur. This is also a case intra
state transaction, so CGST and SGST will be levied. Sale price is increased so tax
liability will also increase. In the case of resale, the credit of input CGST and input
SGST (INR 8I is claimed as shown; and the remaining taxes go to the respective
governments.
Case 2: Sale in one state, resale in another state:

In this case, goods are moving from Indore to Bhopal. Since it is a sale within a state,
CGST and SGST will be levied. The collection goes to the Central Government and the
State Government as pointed out in the picture. Later the goods are resold from Bhopal
to Lucknow outside the state. Therefore, IGST will be levied. Whole IGST goes to the
central government.
Against IGST, both the input taxes are taken as credit. But we see that SGST never
went to the central government, still the credit is claimed. This is the drawback of GST
system. Since this amounts to a loss to the Central Government, the state government
compensates the central government by transferring the credit to the central
government.
Case 3: Sale outside the state, resale in that state:

In this case, goods are moving from Delhi to Jaipur. Since it is an interstate sale, IGST
will be levied. The collection goes to the Central Government. Later the goods are
resold from Jaipur to Jodhpur which is within the state. Therefore, CGST and SGST
will be levied. Against CGST and SGST, 50% of the IGST that is INR 8 is taken as a
credit. But we see that IGST never went to the state government, still the credit is
claimed against SGST. Since this amounts to a loss to the State Government, the
Central government compensates the State government by transferring the
Credit to the State government.
Advantages, Disadvantages & Loopholes of GST Bill
implementation
7. Advantages of GST Bill implementation
1. GST is a transparent tax and also reduces number of indirect taxes.
2. GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of
doing business will be lower.
3. Benefit people as prices will come down which in turn will help companies as consumption will
increase.
4. There is no doubt that in production and distribution of goods, services are progressively used or
consumed and
vice versa.
5. Distinct taxes for the goods and services, which is the current taxation system, needsseparation of
transaction values into value of goods and services for taxation, leading to the greater problems,
administration, including compliances costs.
6. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be
split equitably between manufacturing and services.
7. GST will be imposed only at the end destination of consumption centered on VAT value and not at
several
points. It will help in removing economic falsifications and bring about increase of a common market.
8. GST will also help to build a clear and fraud free tax administration.
9. Now, a tax is imposed on when a finished product moves out from a factory, which is paid by the
producer, and it is again levied at the retail outlet when sold.

8. Disadvantages of GST Bill implementation

1. Certain Economist says that GST in India would impact adversely on the real estate market. It would
add up to 8
percent to the cost of new homes and reduce demand by about 12 percent.
2. Certain Specialists says that CGST(Central GSTI, SGST (State GSTI are nothing but new names for
Central Excise/Service Tax, VAT and CST. Therefore, there is
no major drop in the number of tax layers.
3. Some retail products currently have only four percent tax on them. After GST, garments and clothes
could become more lavish.
4. The aviation industry would be affected. Service taxes on airfares presently range from six to nine
percent. With
GST, this rate will surpass fifteen percent and effectively double the tax rate.
5. Adoption and migration to the new GST system would involve teething troubles and learning for the
entire ecosystem.

7.Loopholes of GST bill:

Tobacco and alcohol products are kept away from the GST
Tax on the tobacco and alcohol products is a major source of revenue for the Government. But
in the recently passed GST bill, these products are not included. It means now various states
will charge tax on these goods according to their will. However if tobacco products are included
in GST bill, it would be chargeable at 40% app. Entertainment tax-not included in GST It means
if you are planning to see a movie in multiplex or PVR, The ticket price would not be reduced.
Not good for real estate business
According to various experts, Due to GST the cost of new homes will increase by 8%. In India,
Real estate business is already in depression. With this change, the situation will become more
worse.
Need of a strong IT system
With the GST bill, India would have a unique indirect tax structure and it would be easy to
administer it. But it is a big challenge for the Government of India to construct a strong IT
system for GST bill. New Goods and Services tax identification number will be provided to all
dealers. GST number is a 15 digit number, which would be based on the state code and pan
card.

THE SOCIAL & ECONOMICAL IMPACT OF GST ON INDIAN ECONOMY

the 2006 budget speech in April, 2010. In Lok Sabha, the 115th Constitution
Amendment Bill was introduced to levy GST on all goods and services in 2011. Further,
122th Constitution Amendment was passed in the Lok Sabha in 2014. Rajya Sabha has
also passed the GST the on August 3, 2016. The GST has been approved by the
President of India in September 2016. GST council was established on Sept 22nd, 2016.
Finally, the GST was launched in the India. While comparing the GST, all around the
world, it has been found that India has highest GST rates all over .

GST around the World

Additionally, the above GST Chart depicts that, Australia has the lowest GST rates, that
is, 10%. However, the countries like Brazil, Canada, France, and United Kingdom have
the Goods and Service Tax rates of about 25%, 15%, 20%, 20%, respectively, which is
comparatively much lower than the GST rates of Indian economy.
IMPACT OF GST OVER SOCIAL CONDITIONS

GST is an indirect tax reform, which has removed the inter-state commercial barriers
and the double effects of taxes over the manufacturing and supply of goods & services
in India. This may further reduce the competitions among the states. This unified tax
structure has been implemented for entire nation. It may further help in the progress of
Indian economy through better investment, high export, and employment generation.
Further, GST being consumption based tax has been intended to ensure better
administration of indirect tax structure in India. Through proper implementation of
GST, the competitive position of India may also enhance at global level. For effective
implementation and administration of indirect taxes, GST has been divided into 5 slabs,
i.e. 0%, 5%, 12%, 18% & 28%. The details of various product and services included in
the different slabs of GST are as depicted below.
The above table depict that, with the implementation of GST, the tax slabs of various
consumable items have been modified. Therefore, GST can be considered as a paradigm
shift in the economic policy of the India. The products of basic necessities were placed
in 0% GST slab. Further, goods and services required for maintaining the healthy social
life were kept in 5% slab. Furthermore, the more luxurious products and services have
been placed in the higher taxation slabs of GST i.e. 12%, 18% and 28%. A significant
difference has also been observed in the old taxes and new GST rates, implemented on
goods and services in India. In a detailed study over 55 product or services, it has been
found that the taxes on the basic commodities have been reduced to 0% in many cases.
Further, the taxes have also been reduced in a large number of cases. However, the
enhancement in taxes has been found in maximum number of cases of goods and
services. A detailed report pertaining to the comparison of old rates and new GST rates
in respect of 55 products and services, frequently used in day today life is as appended
below.
IMPACT OF GST OVER VARIOUS SECTOR OF INDIAN ECONOMY-
Indian economy is classified in three sectors — Agriculture and allied, Industry and
Services. Agriculture sector includes Agriculture (Agriculture proper & Livestock,
Forestry & Logging, Fishing and related activities. Industry includes 'Mining &
quarrying', Manufacturing (Registered & Unregistered, Electricity, Gas, Water supply,
and Construction. Services sector includes 'Trade, hotels, transport, communication and
services related to broadcasting', 'Financial, real estate & professional services', 'Public
Administration, defense and other services'. Further, every global, international and
nation developments have significantly influenced on the Indian economy.
Subsequently, the Indian economy has also been influenced due to the implementation
of GST. The impact of GST implementation has also been felt in different segments of
Indian economy. The details are as appended below:-

Agriculture
Agriculture, being the primary sector of Indian economy provides employment to large
proportion of Indian workforce. Further, Agricultural sector has been contributing
largely to the GDP of Indian economy. However, the contribution of agriculture sector
to the Indian GDP has reduced to 3245.21 INR Billion in the third quarter of 2017, as of
3897.32 INR Billion in the second quarter of 2017 . With the implementation of GST,
the prices of various agricultural inputs have also increased due to enhancement in GST
rates. Further, Central Statistics Office (CSOI has forecast about the negative impact of
GST on agriculture and farm sector .

Manufacturing sector
According to RBI, the manufacturing sector of India had felt the adverse impact due to
implementation of GST. RBI has also forecasted for unfavorable conditions regarding
revival of Investment activity in manufacturing section due to implementation of GST.
Further, a downfall has also been observed in the industrial production in India .

Real Estate
One of the most significant sectors of economy had an adverse impact due to GST. With
the implementation of GST, buyers will be paying 12% GST, which will be 3.5% more
as compared to earlier taxes (4.5 percent Service Tax and around 4 percent of VATI.
Further, the costs of Land, material and building have also been increased due to GST .

Textile industry & handicraft

With the implementation of GST, India‘s apparel export has reduced 39% in value
terms in October 2017. Further, GST has given a boost to textile import. Additionally,
handicrafts industry has been badly hit due to implementation of GST. Earlier,
handicraft was exempted from tax in more than 15 Indian states. However, 8 Indian
states were imposing 5% VAT on handicraft items. At present, Handicraft has been
bought within the GST tax slab of 12% and 18% .

Aviation sector and Banking Sector

Due to implementation of GST, the aviation industry may experience the yearly hit of
Rs. 5,700 crores, reported by domestic airlines to Finance Minister. Further, GST has
also severely influenced the Indian Banking Sector.
Pharmaceutical Industry
Earlier the medicines were taxed at about 13%, but fortunately only 12% GST has been
introduced on medicines including ayurvedic. It may result in cost reduction for
consumers. However, prices on diagnostics tests are expected to rise in present times
due to GST [44].

Textiles Industry:-The textiles industry has been adversely affected by the

implementation of the GST. The Government put the textiles under 5% bracket, but
still, there are hidden taxes that makes the tax liability to 13%. The government
promised that it would lower the prices of raw material for textile and apparel Industry
but it didn’t happen. So it became hard for small traders to do business in such
environment. Textile industry contributes around 10% of total annual exports but with
the implementation of GST exports from the industry is also suffering. There is a lot of
chaos and confusion among the traders. Business has been declined due to delay in
refunds, the procedure for claiming input tax credit, paperwork for small manufacturers
etc. There is a shortage of working capital because GST is based on first pay –refund
later mechanism.

Telecom Industry:-Under the GST regime, the rate of the supply of telecom services
and products is 18%. The previous tax rate was 15%. Due to increase in tax rate, the
debt burden of the telecom operators has increased. Telecom sector is the second largest
diesel consuming sector after railways. With the petroleum products out of the purview
of GST, it is very difficult for the operators to set of input liabilities. So it is must for
the GST Council to consider all these facts and to solve these issues as soon as possible
so that it may not further affect this sector adversely.

Transportation Industry:-transportation industry is the backbone of an Economy.

With the implementation of GST, the railway tickets for passengers and railway
transport of goods has seen a slight increase in their prices. But now they can claim
Input Tax Credit if their purpose of transportation is related to business. In case of Road
Transport, the government has exempted all the road transport services of goods except
the services of Goods Transport Agencies ( GTAI and Courier agencies.

FMCG Industry:-FMCG sector is positively impacted by the implementation of GST.

GST has increased the input tax credit on capital goods and input services. There is also
a reduction in logistics cost for this sector as the check posts have been abolished.
Service sector
India‘s services sector covers a wide variety of activities such as trade, hotel and
restaurants, transport, storage and communication, financing, insurance, real estate,
business services, community, social and personal services, and services associated with
construction. GST have a mixed impact on service sector. It is beneficial in some aspect
but at the same time it is creating hurdle in ease of doing business. It is beneficial in
items like seamless flow of credit, avoidance of double taxation but has increased a lot
of compliance burden. Due to reduction of new work orders, and low activity, the
service sector has felt the down turn harshly, after the implementation of GST. In July
2017, the output of service sector has been reported at lowest level in comparison to
past four years, immediately after the implementation of GST.

Petroleum Industry
The petroleum industry may experience a boost in its sales, as on various petroleum
products, the GST has been reduced to a large extent in comparison to the old taxes.
Presently, the Petroleum products like peat; all ores & concentrates; kerosene PDS; tar,
coal & ignite; and petroleum coke & petroleum bitumen are having GST 14.5%,
13.5%,12%, 7%, and 9.5% less as compared to the old tax rates, respectively .
POSITIVE IMPACT OF GST ON INDIAN ECONOMY

(1) Common Man Friendly

A common man should get following benefits of GST:
 GST Act provides that the common items of consumption of the common man
remain tax-free. Thus, no tax is levied on items like milk, curd, fresh fruits,
vegetables and the like. This should give a big relief to the common man
 Only a moderate tax of 5% is levied on items like tea, coffee and medicines
which
is another set of items being commonly used by most people of the country.
Briefly, the essentials of life of a common man are either tax-free or moderately
taxed.
(2) Advantages for Trade and Industry
In this context, we may note the following observations:

 Procedure for filling GST returns has been simplified. Facility for the filing
e-returns will definitely save a lot of time of the traders and the industrialists.
 There shall be an uninterrupted flow of ‘input credits. So that, the incidence of
taxation does not cascade. The traders and the industrialists can claim ‘input
credit’ themselves while filing GST returns.
 A cut in taxation would enhance competitive power of the traders and the
industrialists in the international goods market.
 Tax-exemption on many commonly used items would offer a more favourable
market environment to the to the small traders who deal in these items.
(3) Benefits to the economy
Following points highlights the benefits of GST to the economy:

 GST is expected to create one unified market for most goods and services in
the country. It means that for every producer in the economy the size of the
market will expand
 If the prices of the goods and services tend to fall in the domestic economy,
exports will rise, leading to higher earnings of the foreign exchange.
 A unified market is expected to lead to Balanced Regional Growth
With the growth of market size, GST is expected to raise the level of
economic activity in the economy. Implying faster GDP growth. It would also
mean faster generation of the opportunities of employment.
 GST is expected to improve tax compliance. Because:
a. Input credits will be available to only those who buy their inputs from
GST-compliant firms.
b. There is to be a digital record and monitoring of value of value addition
at
stages of production activity
Higher degree of tax compliance would mean:
a. Higher tax-GDP ratio, and
b. Gradual elimination of the ‘shadow economy’ or the black money
Economy
NEGATIVE IMPACT OF GST ON INDIAN ECONOMY

 Due to compulsion of tax compliance, small and marginal producers of the

shadow economy may find it difficult to continue their business operation
 If the small and the marginal producers are eliminated, production activity will
decline, still harder will be the impact on employment because it is production
activity in the shadow economy which generates most employment opportunities
in the country
 The government proposes to set up ‘Anti-profiteering Authority’ to monitor that
the benefits of lower taxation is actually passed on to the consumers. This
authority shall have the right to cancel registration of such business establishments
which are found to be exploiting the consumers by charging higher price. The
business community has expressed their serious resentment over this issue. They are
fearing that the Anti-profiteering Authority will mean the return of ‘Inspector
Raj’ leading in corruption.
 It is feared that the operating cost of small and marginal producers will rise
owing
to the maintenance of records at all levels of sale and purchase of goods and
services
 There is a definite possibility that post-GST, the prices of some goods and
services will rise. This might contribute to inflationary spiral in the country.
Inflationary spiral is also feared owing to the fact that post-GST nearly 75% goods
and services will bear the incidence of taxation
 According to P. Chidambaram, small, medium and microscale entrepreneurs are
not GST-prepared. Even when GST is a tax-reform, its introduction should have
wait till these entrepreneurs fully understand the pros and cons of this tax. These
entrepreneurs, according to Chidambaram, are still not clear as to who is levying
GST-state or the centre.
 Petroleum and Electricity are out of the ambit of GST, even when these products
constitute nearly 35-40% of the economy. This is a serious demerit or deficiency
of GST.
 ROLE OF MICRO SMALL MEDIUM ENTERPRISES’S ON
INDIAN ECONOMY

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in the Indian
economy, contributing significantly to employment generation, industrial production,
and exports. In India, MSMEs are defined based on their investment in plant and
machinery or equipment, and their annual turnover.

Here are some key contributions of MSMEs to the Indian economy:

1. Employment generation: MSMEs are the largest employer after agriculture,

providing employment to over 110 million people in India. They have the
potential to create more employment opportunities, especially in rural areas.
2. Industrial production: MSMEs account for a significant share of industrial
production in India, contributing around 30% to the GDP. They play a critical
role in the supply chain of larger industries by providing them with essential
goods and services.
3. Export promotion: MSMEs are an essential source of exports for India,
contributing around 40% of the total exports. They play a significant role in
promoting India's trade and commerce by exporting a diverse range of products.
4. Inclusive growth: MSMEs provide opportunities for inclusive growth by
promoting entrepreneurship and providing a platform for marginalized sections
of society. They also play a critical role in promoting women's entrepreneurship.
5. Regional development: MSMEs are primarily located in rural and semi-urban
areas, contributing to the development of these regions. They provide
opportunities for rural entrepreneurship, which can lead to a more equitable
distribution of economic growth.

In summary, MSMEs play a critical role in the Indian economy by providing

employment, contributing to industrial production, promoting exports,
facilitating inclusive growth, and promoting regional development. The
government of India has taken various measures to support and promote the
growth of MSMEs, including financial assistance, technological support, and
policy reforms.
 GST PROS & CONS FOR MSME’S

Goods Services Tax pros for MSMEs

 GST need to remove time consuming border tax approaches and toll check
posts. This can lessen logistics costs and encourage the supply of products
across borders.
 Comparatively, the float of input tax credits in the course of the supply chain
should be
seamless, concern as it is to the periodical compliance through the provider in filling of
returns, payment of tax, and many others.
 GST will permit flexibility within the switch of goods between states. The
present
cascading effect of VAT/Excise that􀇯s calculated on non-covetable Excise & CST
would be
removed. As a consequence, MSMEs that takes the brunt of the Excise and CST burden
on
interstate income as a result of loss of infrastructure to open branches in specific states
ought to gain from cost savings and advantage a much favoured competitive part.
 GST will assist carry transparency to the tax collection system, so evading taxes
can be
tougher. This will assist create a stage playing field for organized and unorganized
sectors
by means of curtailing the scope of various tax evasion practices.

Good Services Tax cons for MSMEs

 SME & MSMEs ought to adapt to a digital compliance device, registering and
filing returns
on line. This can to begin with purpose teething issues and decorate the compliance fee.
 Interstate stock transfer or self-supplies will be subject to GST regime, will
impact the
working capital requirement, increase the interest cost and ultimately impact on pricing
policies.
 Aligning IT structures with new strategies could be another venture, alongside
knowledge
nitty-gritties of GST regulation.
IMPACT OF GST ON SMALL & MEDIUM ENTERPRISES

All of the compliance approaches under GST — Registration, Payments, Refunds and
Returns will now be done through online portals only and for this reason SMEs need no
longer
fear about interacting with department officers for carrying out those compliances,
which might
be considered as a headache in the modern tax regime. The compliance procedure with
the
positives and negatives provided a high level impact analysis of GST on small and
medium
businesses in India are listed below:
 No doubt that GST is aimed to growth the taxpayer base, majorly SMEs into its scope
and
will positioned a burden of compliance and associated costs to them. But ultimately,
GST will flip these SMEs extra competitive with a stage gambling field among massive
firms and them.
Furthermore, those Indian SMEs might be able to compete with foreign competition
coming from cheap cost centres together with China, Philippines and Bangladesh.

.12 GST Revenue Collections: GST REVENUE COLLECTION

MONTH 2020-21 2021-22

PRIL 32172 139708

MAY 62151 97821

UNE 90917 92800

ULY 87422 116393

UGUST 86449 112020

EPTEMBER 95480 117010

CTOBER 105155 130127

OVEMBER 104963 131526

ECEMBER 115174 129780

ANUARY 119875 140986

EBRUARY 113143 133026

MARCH 123902 142095

Analysis: When we compare the collection of GST, between financial year 2020-21 &
2021-22 we can easily notice that the collection of GST is growing day by day. May be
some months are there showing collection of GST is lesser than the previous month, but
this chart overall displays the fact that GST collection is going to be higher as we reach
coming years.