Basic Features, Opportunities and Benefits of GST Implementation in India

International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 45 – 49
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R.V.S. College of Arts & Science, Karaikal
Basic Features, Opportunities and Benefits of GST
Implementation in India
Dr. A. Xavior Selvakumar 1
, S. Martin Looter 2
, M. Irudhayaraj 2
ABSTRACT: The Goods and Services tax (GST) is an indirect tax. It is levied at every stage of
the production and distribution of products. It is actually changes on the final consumption of
the products. It includes excise duty, custom duty; Services tax and Value add tax (VAT). The
GST is a VAT to be implemented in India. The decision on which is not yet declared by
Government and the framing of rules are under process. Several countries implemented this
tax system followed by France, the first country introduced GST. Goods and service tax is a
new story of VAT which gives a widespread setoff for input tax credit and subsuming many
indirect taxes from state and national level. Presently around 140 countries have adopted the
GST pattern, including India. The GST would be beneficial for the consumers as it reduces the
final burden of taxation. Therefore, the researchers have discussed the possible salient
features, opportunities and benefits of GST implemented.
KEYWORDS: Goods and Services, Value added tax, Input credit
The Indian indirect tax system as enumerated above is complex and multi-layered with
levies both at the Central and State levels. This results in a cascading effect of taxes,
multiplicity of taxes, etc. With a view to reducing the complexities and streamlining various
indirect taxes at the Central and the State levels, an Empowered Committee has been set up to
look into various aspects of integrating the multiple indirect taxes into a common GST. As per
the current discussions, India is proposing to implement a dual GST structure comprising of
the CGST to be levied by the Centre and SGST to be levied by the States. Integrated GST,
which is a combination of CGST and SGST, would be applicable on all inter-State transactions
of goods and services and would be levied by the Central Government. Inter-State stock
transfers would be treated at par with inter-State sales for the levy of GST. The Value Added
Tax (VAT) at the Central and the State level has been considered to be a major step – an
important step forward – in the globe of indirect tax reforms in India. If the VAT is a major
improvement over the pre-existing Central excise duty at the national level and the sales tax
system at the State level.
What is GST?
GST is a tax that we need to pay on supply of goods & services. Any person, who is
providing or supplying goods and services is liable to charge GST.
World over in almost 140 countries there is GST or VAT, which means tax on goods
and services. Under the GST scheme, no distinction is made between goods and services for
levying of tax. In other words, goods and services attract the same rate of tax. GST is a multi-
tier tax where ultimate burden of tax fall on the consumer of goods/ services. It is called as
value added tax because at every stage, tax is being paid on the value addition. Under the GST
scheme, a person who was liable to pay tax on his output, whether for provision of service or
sale of goods, is entitled to get input tax credit (ITC) on the tax paid on its inputs.
1
Assistant Professor and Research Advisor, Department of Commerce, T.B.M.L College, Porayar.
2
Ph.D., Research Scholar, Department of Commerce, T.B.M.L College, Porayar.

ISSN: 2394 – 8906
GST was first introduced during 2007-08 budget session. On 17th
December 2014, the
current Union Cabinet ministry approved the proposal for introduction GST Constitutional
Amendment Bill. On 19th
of December 2014, the bill was presented on GST in Loksabha. The
Bill will be tabled and taken up for discussion during the coming Budget session. The current
central government is very determined to implement GST Constitutional Amendment Bill.
Salient Features of the GST Model
 GST is a broad-based and single unified consumption tax on supply of goods and
services;
 GST would be levied on the value addition at each stage of the supply chain;
 The taxable event for GST would be supply of goods and services and therefore, will
no longer be manufacture or sale of goods;
 Full input credit of the taxes paid in the supply chain would be available. However,
there would be no cross credit available between CGST and SGST;
 GST proposes to subsume the following taxes:
 Central taxes: CENVAT, CST, CVD, SAD, service tax, surcharges, cesses, etc
 State taxes: VAT, entertainment tax, luxury tax, State cesses and surcharges,
entry tax, etc.
 Exports would be zero rated under G
 Basic Customs duty on imports would not be subsumed with GST and hence, the levy
would continue;
 Five specified petroleum products viz crude Petroleum, diesel, petrol, aviation turbine
fuel, and natural gas may be kept out of the ambit of GST;
Opportunities
An end to cascading effects: This will be the major contribution of GST for the
business and commerce. At present, there are different state level and centre level indirect tax
levies that are compulsory one after another on the supply chain till the time of its utilization.
Growth of Revenue in States and Union: It is expected that the introduction of GST
will increase the tax base but lowers down the tax rates and also removes the multiple point
This, will lead to higher amount of revenue to both the states and the union.
Reduces transaction costs and unnecessary wastages: If government works in an
efficient mode, it may be also possible that a single registration and single compliance will
suffice for both SGST and CGST provided government produces effective IT infrastructure
and integration of such infrastructure of states level with the union.
Eliminates the multiplicity of taxation: One of the great advantages that a taxpayer
can expect from GST is elimination of multiplicity of taxation. The reduction in the number of
taxation applicable in a chain of transaction will help to clean up the current mess that is brought
by existing indirect tax laws.
One Point Single Tax: Another feature that GST must hold is it should be ‘one point
single taxation’. This also gives a lot of comforts and confidence to business community that
they would focus on business rather than worrying about other taxation that may crop at later
stage. This will help the business community to decide their supply chain, pricing modalities

ISSN: 2394 – 8906
and in the long run helps the consumers being goods competitive as price will no longer be the
function of tax components but function of sheer business intelligence and innovation.
Reduces average tax burdens: Under GST mechanism, the cost of tax that consumers
have to bear will be certain, and GST would reduce the average tax burdens on the consumers.
Reduces the corruption: It is one of the major problems that India is overwhelmed
with. We cannot expect anything substantial unless there exists a political will to root it out.
This will be a step towards corruption free Indian Revenue Service.
How is GST Applied?
GST is a consumption based tax/levy. It is based on the “Destination principle.” GST
is applied on goods and services at the place where final/actual consumption happens.
GST is collected on value-added goods and services at each stage of sale or purchase
in the supply chain. GST paid on the procurement of goods and services can be set off against
that payable on the supply of goods or services. The manufacturer or wholesaler or retailer will
pay the applicable GST rate but will claim back through tax credit mechanism. But being the
last person in the supply chain, the end consumer has to bear this tax and so, in many respects,
GST is like a last-point retail tax. GST is going to be collected at point of Sale.
The GST is an indirect tax which means that the tax is passed on till the last stage
wherein it is the customer of the goods and services who bears the tax. This is the case even
today for all indirect taxes but the difference under the GST is that with streamlining of the
multiple taxes the final cost to the customer will come out to be lower on the elimination of
double charging in the system.
Let us understand the above supply chain of GST with an example:

ISSN: 2394 – 8906
The current tax structure does not allow a business person to take tax credits. There are
lot of chances that double taxation takes place at every step of supply chain. This may set to
change with the implementation of GST. Indian Government is opting for Dual System GST.
This system will have two components which will be known as
 Central Goods and Service Tax (CGST) and
 State Goods and Service Tax (SGST)
The current taxes like Excise duties, service tax, custom duty etc will be merged under
CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be included
in SGST. So, how is GST Levied? GST will be levied on the place of consumption of Goods
and services. It can be levied on:
 Intra-state supply and consumption of goods & services
 Inter-state movement of goods
 Import of Goods & Services
Benefits of GST Implementation
 The tax structure will be made lean and simple
 The entire Indian market will be a unified market which may translate into lower
business costs. It can facilitate seamless movement of goods across states and reduce
the transaction costs of businesses.
 It is good for export oriented businesses. Because it is not applied for goods/services
which are exported out of India.
 In the long run, the lower tax burden could translate into lower prices on goods for
consumers.
 The Suppliers, manufacturers, wholesalers and retailers are able to recover GST
incurred on input costs as tax credits. This reduces the cost of doing business, thus
enabling fair prices for consumers.
 It can bring more transparency and better compliance.
 Number of departments (tax departments) will reduce which in turn may lead to less
corruption
 More business entities will come under the tax system thus widening the tax base. This
may lead to better and more tax revenue collections.
 Companies which are under unorganized sector will come under tax regime.

ISSN: 2394 – 8906
Conclusion
GST is leviable on all supply of goods and provision of services as well combination
thereof. The GST is a further significant improvement in the next logical step towards a
comprehensive indirect tax0 reform in India. It should be noted that around 140 countries have
already introduced GST in some form or another and is fast becoming the preferred form of
indirect tax in Asia Pacific region (Satya and Ehtisham, 2009). The fact that all states have
agreed a uniform system of indirect taxation in principle is a positive step towards its
implementation.
Reference
Empowered Committee of State Finance Ministers (2008), A Model and Roadmap for Goods and
Services Tax in India, New Delhi.
Poddar,Satya and Amaresh Bagchi (2007), “Revenue-neutral rate for GST”, The Economic Times,
November 15, 2007.
Goods and Services Tax (GST) Published in: [1992], Supreme Court Reports 445
Girish Garg, Basic Concepts and Features of Good and Service Tax In India, International Journal of
scientific research and management (IJSRM), Vol. 2, Is. 2, Pp. 542-549, 2014, e-ISSN: 2321-
3418.
Syed Mohd Ali Taqvi, 2013, Challenges and Opportunities of Goods and Service Tax (GST) in India,
Indian Journal of Applied Research, Vol. 3, Is. 5, May 2013, ISSN - 2249-555X
http://www.relakhs.com/gst-goods-services-tax-in-india/
www.indiainbusiness.nic.in

Basic Features, Opportunities and Benefits of GST Implementation in India

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Basic Features, Opportunities and Benefits of GST Implementation in India