A STUDY OF GST AND ITS IMPACT ON ECONOMY
Asst Prof. LK Singh Abeda Inamdar Sr College Pune
Abstract
If Constitution (122nd) Amendment Bill, 21! for "oods and Ser#i$es %a& ("S%) in the Lo' Sabha is assed, the "o#ernment of India seems $ommitted to rela$e all the indire$t ta&es le#ied on goods and ser#i$es b the Centre and States and imlement "S% b 21*. +ith "S%, it is anti$iated that the ta& base ill be $omrehensi#e, as #irtuall all goods and ser#i$es ill be ta&able, ith minimum e&emtions."S% is a $omrehensi#e ta& le# on manufa$ture, sale and $onsumtion of goods and ser#i$es at a national le#el. "S% is a art o f roosed ta& reforms in India ha#ing an e&tensi#e base that instigate the ali$abilit of an effi$ient and harmoni-ed $onsumtion ta& sstem. "S% has been $ommonl a$$eted b orld and more than 1! $ountries ha#e a$'noledged the same. "enerall the "S% ranges beteen 1/0 2/ in most of the $ountries. "S% ill be a game $hanging reform for Indian e$onom b de#eloing a $ommon Indian mar'et and redu$ing the $as$ading effe$t of ta& on the $ost of o f goods and ser#i$es. It ill ima$t the %a& Stru$ture, %a& In$iden$e, %a& Comutation, %a& Pament, Comlian$e, Credit tili-ation and eorting leading to a $omlete o#erhaul of the $urrent indire$t ta& sstem."S% ill ha#e a far rea$hing ima$t on almost all the ase$ts of the business oerations in the $ountr, for instan$e, ri$ing of rodu$ts and ser#i$es3 sul $hain otimi-ation3 I%, a$$ounting and ta& $omlian$e sstems. Ke +ords4 +ords4 "S%, in$iden$e of %a&, Indire$t %a&, %a&, sul $hain 5 ta& $omlian$e 1. Introduction
"S% is a #alue added ta&, le#ied at all oints in the sul $hain ith $redit alloed for an ta& aid on inuts a$6uired for use in ma'ing the sul. It ould al to both goods and ser#i$es in a $omrehensi#e manner ith e&emtions restri$ted to a minimum. In 'eeing ith the federal stru$ture of India, it is roosed that "S% be le#ied $on$urrentl b the Centre (C"S%) and the States (S"S%). It is e&e$ted that the base and other essential design features ould be $ommon beteen C"S% and S"S%, a$ross S"S%s S"S%s for the indi#idual States. Both C"S% and S"S% ould be le#ied on the basis of the destination rin$ile. %hus, e&orts ould be -ero0
rated, and imorts ould attra$t the ta& in the same manner as domesti$ goods and ser#i$es. Inter0 State sulies ithin India ould attra$t an Integrated "S% (aggregate of C"S% and the S"S% of the destination State).In addition to the I"S%, in rese$t of sul of goods, an additional ta& of u to 1/ has been roosed to be le#ied b the Centre. %he re#enue from this ta& is to be assigned to the origin states. %his ta& is roosed to be le#ied for initial to ears or su$h longer eriod as re$ommended b the "S% Coun$il. S% ould be one of the most signifi$ant fis$al reforms of indeendent India. "S% is e&e$ted to result in ma7or rationali-ation and simlifi$ation of the $onsumtion ta& stru$ture at both Centre and State le#els. It is e&e$ted to rela$e all indire$t ta&es, thus a#oiding multile laers of ta&ation that $urrentl e&ist in India. 8eending on the final "S% base and rate, there ill be a signifi$ant redistribution of ta& a$ross different goods and ser#i$es. "oods $urrentl sub7e$t to both Centre and State ta&es should e&erien$e a net redu$tion in ta&, ith ositi#e ima$t on $onsumer demand. Besides simlifing the $urrent sstem and loering the $osts of doing business, "S% ill $all for a fundamental redesign of sul $hains. It ill affe$t ho the $o manies oerate their businesses, resenting signifi$ant oortunities for long0term re#enue and margin imro#ement. 9or instan$e, under the $urrent ta& stru$ture, sul $hains are in#ariabl designed to minimi-e the burden of the Central Sales %a&, ith distribution $entres lo$ated in indi#idual States here the $onsumers are lo$ated. %he are sub0otimal from a strategi$ and e$onomi$ erse$ti#e. %he elimination of the $entral sales ta& ill ro#ide an o ortunit to otimi-e sul $hains, enabling $omanies to re0e#aluate e&isting ro$urement atterns, and distribution and arehousing arrangements. "S% is also e&e$ted to result in a redu$tion in in#entor $osts. 8ealers ould be able to $laim a $redit for the ta& aid on their in#entories, leading to imro#ed $ash flos. A su$$essful imlementation of "S% is signifi$antl deendent on I% $aabilit : not 7ust at the ta& administration le#el but also at the ta&aer le#el. ;fforts ill be re6uired to $hang e e&isting I% sstems for "S% enablement hi$h $ould be $omle&, $hallenging and length tas' for the I% deartment.
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Seeds u e$onomi$ union of India Better $omlian$e and re#enue buoan$ ela$ing the $as$ading effe$t
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final $onsumers B merging all le#ies on goods and ser#i$es into one, "S% a$6uires a #er simle and
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transarent $hara$ter niformit in ta& regime ith onl one or to ta& rates a$ross the sul $hain as against
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multile ta& stru$ture as of resent In$reased ta& $olle$tions due to ide $o#erage of goods and ser#i$es Imro#ement in $ost $ometiti#eness of goods and ser#i$es in the international mar'et Points to be re#ieed %a&ation of inter0state ser#i$es and their method of ta&ation 8iffi$ulties in defining Pla$e of sul, la$e of deli#er oad Permit and Che$' osts Sto$' %ransfer Integration of $ertain Central and State ta&es (>arious Cess, ;le$tri$it dut et$.) Constitutional amendment authori-ing state to $olle$t and retain ta& on ser#i$e "rou ?ealth Insuran$e Consulting ser#i$es ?oe#er most of the B2B ser#i$es not a roblem be$ause of a#ailabilit of $redit 8isutes e#en ith regard to $lassifi$ation of goods @urisdi$tional Issues ith regard to registration and SC Assessments
2. Objcti!s o" t# stud$
1. %o stud salient features of "S% 2. %o stud #arious ad#antages of "S% . %o stud ima$t of "S% on Indian e$onom %. &sarc# Mt#odo'o($
%his aer is based on se$ondar data $olle$ted from #arious ebsites and boo's ). Sa'int Faturs o" GST
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%he oer to ma'e las in rese$t of sulies in the $ourse of inter0State trade or $ommer$e ill be #ested onl in the nion go#ernment. States ill ha#e the right to le# "S% on intra0 State transa$tions in$luding on ser#i$es.
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Centre ill le# I"S% on inter0State sul of goods and ser#i$es. Imort of goods ill be sub7e$t to basi$ $ustoms dut and I"S%.
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"S% defined as any tax on supply of goods and services other than on alcohol for human consumption.
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Central ta&es li'e, Central ;&$ise dut, Additional ;&$ise dut, Ser#i$e ta&, Additional Custom dut and Se$ial Additional dut and State le#el ta&es li'e, >A% or sales ta&, Central Sales ta&, ;ntertainment ta&, ;ntr ta&, Pur$hase ta&, Lu&ur ta& and D$troi ill subsume in "S%.
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Petroleum and etroleum rodu$ts i.e. $rude, high seed diesel, motor sirit, a#iation turbine fuel and natural gas shall be sub7e$t to the "S% on a date to be notified b the "S% Coun$il.
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1/ origin based additional ta& to be le#ied on inter0State sul of goods ill be non0 $reditable in "S% $hain. %he re#enue from this ta& is to be assigned to the Drigin State. %his ta& is roosed to be le#ied for initial to ears or su$h eriod as re$ommended b the "S% Coun$il.
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Pro#ision for remo#ing imosition of entr ta& D$troi a$ross India.
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;ntertainment ta&, imosed b States on mo#ie, theatre, et$ ill be subsumed in "S%, but ta&es on entertainment at an$haat, muni$ialit or distri$t le#el to $ontinue.
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"S% ma be le#ied on the sale of nesaers and ad#ertisements and this ould gi#e the go#ernmentEs a$$ess to substantial in$remental re#enues.
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Stam duties, ti$all imosed on legal agreements b the state, ill $ontinue to be le#ied b the States.
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Administration of "S% ill be the resonsibilit of the "S% Coun$il, hi$h ill be the ae& oli$ ma'ing bod for "S%. Fembers of "S% Coun$il $omrised of the Central and State ministers in $harge of the finan$e ortfolios
). Ad!anta(s o" GST
"S% has been en#isaged as a more effi$ient ta& sstem, neutral in its ali$ation and distributionall attra$ti#e. %he ad#antages of "S% are4 •
+ider ta& base, ne$essar for loering the ta& rates and eliminating $lassifi$ation disutes
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;limination of multili$it of ta&es and their $as$ading effe$ts
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ationali-ation of ta& stru$ture and simlifi$ation of $omlian$e ro$edures
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?armoni-ation of $enter and State ta& administrations, hi$h ould redu$e duli$ation and $omlian$e $osts Automation of $omlian$e ro$edures to redu$e errors and in$rease effi$ien$
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Dstination *rinci*'
%he "S% stru$ture ould follo the destination rin$ile. A$$ordingl, imorts ould be sub7e$t to "S%, hile e&orts ould be -ero0rated. In the $ase of inter0State transa$tions ithin India, the State ta& ould al in the State of destination as oosed to that of origin. Ta+s to b subsu,d
"S% ould rela$e most indire$t ta&es $urrentl in la$e su$h as4
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Cntra' Ta+s
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Stat Ta+s
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Central ;&$ise 8ut
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>alue Added %a&
additional e&$ise duties, e&$ise dut
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D$troi and ;ntr %a&
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Pur$hase %a&
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Lu&ur %a&
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%a&es on lotter, betting 5 gambling
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State $esses and sur$harges
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;ntertainment ta& (other than the ta&
under the Fedi$inal and %oilet Prearations (;&$ise 8uties) A$t, 1G= •
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Ser#i$e ta& Additional Customs 8ut (C>8) Se$ial Additional 8ut of Customs (SA8)
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and $olle$ted b the States) •
le#ied b the lo$al bodies)
Central Sales %a& ( le#ied b the Centre •
Central sur$harges and $esses ( relating
Central Sales %a& ( le#ied b the Centre and $olle$ted b the States)
to sul of goods and ser#i$es) -. I,*act o" GST
%here ill be a ositi#e ima$t on the e$onom due to the folloing4 (i)
edu$tion in business $osts4 (a)
Se$ial s$hemes to alle#iate $ash flo roblems
(b)
Credit offset me$hanism
($)
Can $laim the inut ta& due based on the in#oi$e rodu$ed
(ii) Lead to more $ometiti#e ri$ing (iii Fa'es our e&ort more $ometiti#e as e&orts are to be -ero0rated ) (i#) In$rease in "ross 8omesti$ Produ$t (#) edu$e shado e$onom a$ti#ities (#i) It is a tool to manage the e$onom eg tourist refund s$heme is roosed as a means to boost the tourism industr and tourism sending in the $ountr, e&orts are -ero0rated to ma'e our goods more $ometiti#e globall. %here might not be a redu$tion in $onsumtion due to4 (i)
Pri$es of $ertain goods and ser#i$es might be loer
(ii) Change in $onsumtion attern. "S% or's on the affordabilit $on$et. Consumers ha#e to de$ide on hi$h goods or ser#i$es to bu and "S% is onl in$urred hen the goods or ser#i$es are $onsumed. %he ma di#ert more of their e&enses toards essential goods and ser#i$es rather than on lu&ur goods (iii A lot of basi$ ne$essities are not sub7e$t to "S% ) (i#) "S% is a rela$ement ta& (#) Inut ta& $redit me$hanism should redu$e business $ost.
.Conc'usion
In the light of the emiri$al $on$lusions de#eloed in this aer, it seems aroriate to $on$lude b briefl noting the oli$ imli$ations of the results.
In the first la$e, the ma$roe$onomi$ ima$t of a $hange to the introdu$tion of the "S% is signifi$ant in terms of groth effe$ts, ri$e effe$ts, $urrent a$$ount effe$ts and the effe$t on the budget balan$e. Se$ondl, in a highl de#eloed oen e$onom ith a high and groing ser#i$e se$tor, a $hange in the ta& mi& from in$ome to $onsumtion0based ta&es is li'el to ro#ide a fruitful sour$e of re#enue. %hirdl, the aggregate $onsumer ri$e ima$t of the introdu$tion of the "S% in India on the ma$ro0 e$onom as both limited and temorar. 9inall, desite falling outside the limited fo$us of this short note, e should re$ord that some ima$t has also o$$urred in the administrati#e $omonent of the $omlian$e $ost of the "S% as ell as a li'el in$rease in ta& re#enue from the Hunderground or Hbla$' e$onom. %he s$oe to loer fis$al defi$it in fis$al 21 is limited gi#en large roll0o#er of subsidies from last fis$al and little ossibilities of imlementation of "S% ithin this ear. Beond that, hoe#er, imlementation of "S% $ould fa$ilitate a mu$h needed $orre$tion in fis$al defi$it. In the base $ase, it is belie#ed that artial "S% : one that e&$ludes etroleum goods is most li'el. ;#en ith this, fis$al defi$it $ould $orre$t to ./ of "8P b fis$al 21J. Dn the donside, a $omlete failure to imlement "S% ould result in the fis$al defi$it being higher at around !0!.2/ in fis$al 21*021J &"rncs
1. Benial, >rishti (21, 8e$ 2), ears of ait before 8%C, "S% are roll out, Business Standard .etrie#ed from htt4.business0standard.$om 2. $ommission, %. f. (2G). eort Df %he %as' 9or$e Dn "oods 5 Ser#i$es %a&. e 8elhi. . "o#ind, S. P. (211). "oods and Ser#i$es %a&4+ill %he Proosed Indire$t %a& eform Change Business and %a& 8nami$s In India @S La re#ie , ! (!). !. @oshi, Suhasini (21, Aug 1), "oods and Ser#i$es %a& :A Ste 9orard, %he ;$onomi$s %imes. etrie#ed 9romhtt4arti$les.e$onomi$times.indiatimes.$om. . Finisters, %. ;. (2G). 9irst 8is$ussion Paer Dn "oods and Ser#i$es %a& In India. e 8elhi. *. Purohit, F. C., 5 Purohit, >. K. (21). "oods and Ser#i$e %a& in India. 8elhi4 9oundation for Publi$ ;$onomi$s and Poli$ esear$h.
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