View of IMPACT OF CHANGE IN TAX REGIME AND RECENT CHANGES IN GST IN INDIA

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Vol.04,Special Issue 02, 13 Conference (ICOSD) February 2019, Available Online: www.ajeee.co.in/index.php/AJEEE

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IMPACT OF CHANGE IN TAX REGIME AND RECENT CHANGES IN GST IN INDIA Mr. Akash Soni

B.Com, MBA Dr. Chetan Sharma Associate Professor, OKIMR

Abstract - Presently there are around 160 countries that have implemented GST in one or the other form. In India GST has been implemented in year on 1^st July 2017. The main objective of introducing GST in India is to outplace a lot of Indirect and Direct Taxes such as VAT, Service Tax, Luxury Tax, GST aims at eliminating the complications of TAX administration and compliance. GST aims at ensuring a unified tax for the entire nation. The total revenue earned by Central Government and the State Governments after settlement in the month of April, 2018 is Rs 32,493 crore for CGST and Rs. 40,257 for the SGST. India’s monthly goods and services tax (GST) collections crossed Rs 1 lakh crore for the first time in April, 2018 indicating that the indirect tax regime was stabilizing. The economy is widely forecast to grow around 7.4% in the current fiscal, up from 6.6% in Financial Year 2018.Therefore, this paper aims to present the recent changes in GST and its impact in India.

Keywords: Tax Regime, Goods and Service Tax (GST), VAT, CGST, SGST.

1 INTRODUCTION

Goods and Service Tax (GST) is an indirect tax levied in India on sale of goods and services. The tax replaced existing multiple cascading taxes levied by the central and state governments. The tax rates, rules and regulations are governed by the Goods and Services Tax Council (GSTC) which comprises finance ministers of center and states. GST simplified a slew of indirect taxes with a unified tax and is therefore expected to dramatically reshape the country’s 2 trillion dollar economy.

1.1 About GST in India

The Goods and Services Tax is a value added tax levied on most goods and services sold for domestic consumption.

The GST ultimately paid by consumers, but it is remitted to the government by the businesses selling the goods and services.

The GST was launched at midnight on 1 July, 2017 by the ex-president of India and been modified multiple times for easier regime, the latest being on 18^th January 2018, where a panel of federal and state finance ministers decided to revised GST rates on 29 Goods and 53 Services.

1.2 Initiative nation

France was the first country to implement the GST in 1954 after that around 160 country have adopted this tax system in some form or another

.

1.3 Basic Structure of GST in India Consumption of goods or services by the ultimate consumer. In India, Basic structure of GST is DUAL GST- GST to be levied by the centre and the states concurrently.

1.4 Impact of change in tax regime

Taxes and Duties likely to be subsumed in GST CENTRAL TAXES Central excise duty, Add. Excise duty, Service tax, CVD, special additional duty, surcharge, central sales tax.

 State Taxes

Purchase tax, State Cesses, luxury tax, State Excise dty.

Taxes and Duties not likely to be subsumed in GST

 Central Taxes

Basic Custom Duty, Export Duty, taxes on petroleum products, stump

 State Taxes

Taxes on liquors, Road Tax, Property Tax, Stamp Duty, Environment Tax.

 Exempted Items

Exempted items are the items which are not covered in GST Act. GST not levied on the Following items :

Alcohol for drinking, Petrol, Natural gas, ATF.

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2 (These items are treated in other act)

1.5 Rates of GST for Products and Services

(source-www.Taxguru.com/image-gst)

1.6 Effect of GST on Inflation

GST has been imposed for reducing inflation in India and this effect is shown or seen in product price. Because there is reduction in amount that will be charged from customers and this effect is directly appear in economy and ultimately final consumer is happy to give one tax for all.

And also this effect is seen in GDP rate which is increase by imposing GST.

2 PROVISION UNDER GST

 The government has introduced an anti-profiteering law under the GST bill to ensure that the benefits due to a reduction in the rate of tax or from input tax credit is passed on to the consumers.

 As per proposed GST regime, the input of central GST can be utilized only for payment of CGST & the input of state GST can be utilized only for payment of SGST. In short, cross utilization of SGST and vice-a –versa, will not be allowed.

2.1 Major challenges faced by economy in implementation of GST

 There was many constraint to implement the GST like- political obstacles, public opposition towards new tax regime and sullen behavior of traders or dealers of goods and services towards government for applying new tax regime.

 There are various definitional issues related to manufacturing, sale, service, valuation etc. arises these needs to be rationalized.

 Existing law has resulted in significant number of issues related to interpretation or various provisions and the category of the products and the nature of services.

 GST compliance procedure is to be carried out through the online portal only. Small and medium businessmen find it difficult as the compliance cost has increased and many of them are not aware of the latest technology;

 The burden of the lower threshold was an issue in previous law;

manufacturers were not necessitated to comply with excise rule if the turnover is 1.5 crore or less. With merging into GST, they have to register in case of turnover crosses the limit of 20 lakhs under GST. This has created the problem for Small Business Holders.

 There are many more disputes; the businessmen are facing due to the type and nature of businesses and divergent industries.

2.2 Benefits of Goods and Services Tax

 Elimination of Multiple Taxes The biggest benefit of GST is an elimination of multiple indirect taxes. All taxes that currently exist will not be in picture. This means current taxes like excise, octroi, sales tax, CENVAT, service tax, turnover tax etc will be applicable and all that will fall under common tax called as GST.

 Saving more Money

For a common man, GST applicability means the elimination od double charging in the system.

This will reduce the price of goods and services & help common man Reduction

in . . .

TAXATION

Reduction in produ ct

PRICE

Reduction in

INFLATIO N

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3 for saving more money.It is expected that price of FMCG products, small cars, cinema tickets, electrical wires etc is expected to reduce.

 Ease of business

GST will bring one country one tax concept. This will prevent unhealthy competition among states. It will be beneficial to do interstate business.

 Easy Tax Filling and Documentation

For a businessman, GST will be a boon. No multiple taxes means compliance and documentation will be easy. Return filling, tax payment, and refund process will easy and hassle free.

 Cascading Effect reduction

GST will be applicable at all stages

from manufacturing to

consumption. GST will provide tax credit benefit at every stage in chain. Today at every stage margin is added and tax is paid on whole amount only. It will reduce cascading effect of tax thereby reducing cost of product.

 More Employment

As GST will reduce cost of product it is expected that demand of product will increase and to meet the demand, supply has to go up. The requirement of more supply will be addressed by only increasing employment.

 Increase in GDP

As demand will grow naturally production will grow and hence it will increase gross domestic product. It is estimated that GDP will grow by 1-2% due to GST.

 Reduction in Tax Evasion

GST is a single tax which will include various taxes, making the system efficient with very little chances of corruption and tax evasion.

 Increase in Revenue

GST will replace all 17 indirect taxes with single tax. Increase in product demand will ultimately increase tax revenue for state and central government.

By – Raviraj Parekh, money excel. Apr.

17, 2018

3 GST COLLECTION FINANCIAL YEAR 2018-19

S.No Year Month Amount collected (in thousand crore’s)

1 2018 April 1,03,458

2 2018 May 94,016

3 2018 June 95,610

4 2018 July 96,500

5 2018 August 93,960

6 2018 September 94,442

7 2018 October 1,00,710

8 2018 November 97,637

9 2018 December 94,700

10 2019 January 1,00,000

11 2019 February ---

12 2019 March ---

4 CONCLUSION

GST is a good tax regime which applied by government of India for levied tax upon destination point (transaction point) for making easier tax planning. Initially there were some obstacles in tax regime which is

now clear after sparing some time. By time there is continuous updates are made to make simplicity in tax regime. Now, in GST law there is many previous tax regime’s features are integrate in GST to provide easy system for making easier payment of

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4 tax. Now GST is reliable tax regime among the traders an dealers or distributors which generate stability in economy. Thus Goods and Services Tax which is predominantly a tax on business transactions is unlikely to have a direct impact on the common man.

However, in case businesses persistent to face working capital problems due to input credit blocks arising out of the input tax credit matching mechanism, as they may be prompted to upsurge prices, which would ultimately be borne by the end consumer. Such a practice may, however, be checked by the anti-profiteering mechanism applicable under the Goods and Services Tax law. The government on the whole is trying to reduce the burden of compliance for businesses by relaxing the return filing requirements. Also, the provisions of TCS on e-commerce and registration for online sellers have also been relaxed for the time being. Change is definitely never easy. The government is taking remedial measures to smoothen the road to GST. It is important to take a leaf from global economies that have implemented GST before us, and who overcame the teething troubles to experience the advantages of having a unified tax system and easy input credits.

As GST has been implemented in the Indian economy most of the current challenges of this move will be a story of the past. India has become a single market where goods can move freely and there will lesser compliances to deal with for businesses.

5 SUGGESTION

With the implementation of GST, India took a step towards unified common national market. It aims to bring in increased efficiency and compliance and also boost government’s ‘ease of doing business’

initiative. However, being a new, evolving law, there are certain improvements required. Few areas that need consideration are as given below:

 Rates should be rationalized and reduced to make India competitive and in interest of compliance and economic growth. The highest rate should be kept at 18% and there should be only few items that fall in 28% slab. Daily use items such as soaps, crèmes, movie tickets,

electrical goods should not be taxed at 28%

 The matching concept of input credits requires large volume of data of the supplier to be matched with that of the receiver. This process should be simplified, wherein only broad main criteria may require matching like the invoice value and the tax amount and matching of specific, precise wide variety of data should not be required like invoice number and date.

 In case IGST is paid instead of CGST and SGST, and vice-versa, the recourse available is only refund. Assessees should be allowed to self-adjust in such cases.

 Composition scheme should also be provided to small scale service providers.

 Anti-profiteering provisions need reconsideration as these may unnecessarily cause hardships to businesses. System should be made to ensure that this is not misused so as to cause difficulties

BIBLIOGRAPHY

 List of Books

 Problems a Businessman May Face in GST After Implementation Available at https://blog.saginfotech.com/problems-a- businessman-may-face-in-gst-after- implementation

 Dewan P.N. CHOPRA & CO. NOVEMBER 9,2017

 Promod Kumar Rai, The challenges of tax collection in developing economy (with special reference to india), The university of Geogia law Athens,2004

 Damaina, R., The Impact of Goods And Service Tax on Product Market Competition, Australian economic review, 33(4), December 2000 pp 330-36.

 Luigi Alberto Franzoni, Tax Evasion and compliance, University of Bologna, Italy 1999.

 Abhishek A rastogi, Guide to Goods and Service Tax, Taxman’s Publications (P) Ltd., New Delhi 2010.

 List of Journals and Magazines

 Sudhirhalakandi C.A., Goods and Services Tax- An Introduction study The Chartered Accountant, april 2007.

 Poddar, Satya And Amaresh Bgchi, Revenue- neutral rate of GST, The Economic Times, November 15,2007.

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 Working paper no. 103, moving towards Goods and Service Tax in India: Impact on India’s growth and International trade, national council of Applied Economic Research, Report submitted to 13^th finance commission of india, December 2009.

 Luigi Alberto Franzoni, Tax Evasion and Compliance, University of Bologna, Italy 1999.

 Dr. Parthasarathi Shome, Tax Policy and Tax Administration for The Tenth Plan, Indian Council for Research on International Economic Relations (ICRIER ), May 2001.

 Satya Poddar, Working Paper No.1, GST Reforms and Intergovernmental Considerations in India, Department of Economic Affairs Ministry of Finance, March 2009.

 Websites

 http://poliecon.com/2011/09/24/is-vat- stabilizing

 http://www.nipfp.org.in/newweb/sites/default/fil es/wp04_nipfp_021.pdf

 http://economics.ca/cgi/jab?journal=cpp&view=v 16n4/CPPv16n4p359.pdf

 http://www.laowee.com/index.php/2010/08/tax- rates-vat-rates-around-the-world/

 http://indiabudget.nic.in

 http://gst.puducherry.gov.in.

 www.tnvat.gov.in

 www.Taxguru.com/Goods and Services Tax by- Ratchanya M.

 www.quora .com posted by Aaditya Pandey.

 www.quora.com posted by Abhilash July 6, 2017.

Sr.Client Partner at AIDAIO.

 www.economictimes.com posted on May 2, 2018.