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1
LEENA
1
Assistant Professor, University of Delhi
2
SAMEENA
2
University of Delhi
Abstract
The implementation of Goods & Service Tax is a historic move in India. It has replaced the
earlier Indirect tax regime and subsumed all the central and state level taxes. GST is a unified
destination based tax that intends to overcome all the limitations of earlier tax regime with the
involvement of both Centre and state using Dual GST model. It is implemented with the object of
creating a common national market. This paper seeks to study the contribution made by the GST
and evaluate its impact on various sectors of Indian economy.
Keywords: GST, Economy, Infrastructure
Introduction
Introduction of GST is a significant reform in the history of indirect taxation in India. It has
replaced many Indirect Taxes. The Goods and Service Tax Act came into effect on 1st July 2017.
Merger of various central and state taxes into a single tax has drastic impact on the economy. It
would help to overcome many shortcomings of earlier indirect tax system, thereby leading to a
uniform, consistent and transparent indirect tax structure. Goods and Service tax has replaced the
earlier indirect tax regime and subsumed all the central taxes i.e. excise duty, basic custom duty,
countervailing duty, special additional duty etc. and state taxes namely state VAT, luxury tax,
entertainment tax etc. A single common "Goods and Services Tax (GST)" was proposed and
pushed in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his
economic advisory panel, consisting of three former RBI governors IG Patel, Bimal Jalan and C
Rangarajan. The discussions continued for long and several steps were taken and finally came
into effect on 01st July 2017. Goods & Services Tax Law in India is a comprehensive, multi-
stage, destination-based tax that is levied on every value addition.
Multistage: There are multiple change-of-hands an item goes through along its supply chain: from
manufacture to final sale to the consumer. Goods and Services Tax will be levied on each of these
stages, which makes it a multi-stage tax.
Value Addition: GST is levied on every value addition till the goods reach to the end consumer.
Destination Based: Goods & Service Tax (GST) is levied at the point of consumption not at the
place of production. In case of interstate sale, tax revenue will go in hands of the state
Government where goods are consumed.
Research Methodology
The study is based upon secondary data collected through various sources like websites,
newspapers, articles and magazines. Here, we consider GST as a factor introduced into an
economic system and its impact is being studied based upon latest news and views.
Tax structure before GST
Prior to the implementation of GST, tax structure was based upon distribution of powers between
Centre and State. The Centre had the power to levy tax on manufacture of goods and states had
the power to charge tax on sale of goods. The Centre used to levy Central Sales Tax - collected
by the states, Service tax on all services, in addition, additional duties of custom of goods. These
duties i.e. Countervailing Duty and Special Additional Duty were levied in addition to the Basic
Customs Duty which used to compensate excise duties, state VAT, sales tax and other such taxes.
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The implementation of GST empowered the Centre and states to levy and collect GST.
Features of GST Regime
GST is applicable on the “supply” of services or goods as against the earlier model of taxation on
manufacture, sale of goods, or service provision. GST is a destination-based tax structure unlike
the origin-based structure that existed previously.
There are 3 taxes applicable under GST: CGST, SGST & IGST.
• CGST: Collected by the Central Government on an intra-state sale.
• SGST: Collected by the State Government on an intra-state sale.
• IGST: Collected by the Central Government for inter-state sale.
CGST, IGST and SGST/UTGST are levied at the rates fixed states and Centre. Businesses with
annual turnover upto Rs.20 lakh are exempt from GST. For special category states, the ceiling is
Rs.10 lakh. Benefit of compounding is available to small-scale taxpayers with annual turnover of
Rs.50 lakh or below. The choice of threshold exemption and the compounding scheme are
optional. Input tax credit of CGST can be set off against CGST on output and SGST against
SGST on output except for the payment of IGST in case of interstate sales.
Benefits of GST Implementation
• Common national market that boosts foreign investment.
• No cascading effect of taxation.
• Consistency and uniformity in laws, rates of taxation and procedures across states.
• Internationally competitive goods and thereby increased exports
• Simpler tax regime and transparent procedures.
• Input tax credit process is accurate, transparent and electronic.
• Reduced tax evasion due to electronic and transparent system.
• All interactions to the department through a common GSTN website.
GST in various sectors of Indian Economy
GST has brought uniformity in tax system across all the states. However, its impact on every
industry is not favorable. Apart from being favorable or adverse, quantum of effect is also a
significant factor while evaluating contribution of GST in the Indian economy. Here we have
evaluated the impact of GST in certain sectors of the economy.
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