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AMITY LAW SCHOOL

AMITY UNIVERSITY
LUCKNOW

SESSION : 2017-2018

PROJET OF GST IN INDIA

Submitted To : Submitted BY:

PROFESSOR MR. S.K GAUR SWETANK SRIVSTAVA (LLM)

Enrollment no- A8101817073

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ACKNOWLEDGEMENT

The completion of this undertaking could not have been possible without the
participation and assistance of so many people whose name may not all be enumerated .
Their contributions are sincerely appreciated and gratefully acknowledged. However , I
would like to express my deep appreciation and indebtedness particularly to the
following :

Mr .S.K GAUR for his endless support , kind and understanding spirit during our
case presentation .

To all relatives , friends and others who in one way or another shared their support
, either morally , financially and physically , thank you .

Above all , to the GREAT ALMIGHTY , the author of knowledge and wisdom ,
for his countless love .

THANKING YOU .
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INDEX
1. BRIEF INTRODUCTION ABOUT GST
2. REVERSE CHARGES
3. RATINGS
4. GST ON STOCK TRANSFER
5. AREA BASED EXEMPTION
6. FREE OF COST SUPPLY AS SAMPLE/GIFTS/PROMOTIONAL SCHEMES..
7. GST ON ALLOCATION OF COMMON EXPENSES
8. BRANCH OFFICE AND HEAD OFFICE
9. GST ON ADVANCE PAYMENT
10.CONSTITUTIONAL ASPECTS OF GST
11.BENEFIT OF GST TO INDIAN ECONOMY
12.HOW WILL GST IMPACT ON INDIAN ECONOMY
13.INDIAN BRIGHT ECONOMY
14.DRAWBACK OF GST
15.CONCLUSION
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IMAPCT OF GOODS AND SERVICES TAX(GST)

BRIEF ABOUT GST

Taxes on the Indian version of goods and services or GST is taxed based on the
proposed destination by the government, in which the aim of destroying various
indirect taxes such as VAT, Central Consumption Tax, Sales Tax, Service, etc.
Nation However, unlike GST in other countries, Indian GST is nothing but tax. It
is actually the culmination of the three taxes - Central Freight and Tax Service
(CGST), Integrated / Interstate Freight and Tax Services (IGST) and State Tax
Goods and Services (SGST).
CGST and SGST will be hired on supply of goods and services, whereas IGST will
be applicable to interstate supply of goods and services in India. Since this is a tax
based on the destination, hence the manufacturer will be charged at all the stages
till the end user so that the taxes given in the previous steps available in the form of
start-up can be attributed. In short, the tax will be levied only at the extra cost and
the final burden of tax will be borne by the final consumer.

Both the CGST and SGST are planning to collect the same taxable income. While
CGST is likely to replace all major indirect taxes such as consumption tax and
service tax etc., it is expected that SGST VAT, entertainment tax (other than
local corporation tax), tax luxury, purchase, termination and surcharge, lottery
or Taxes on bets etc. are unnecessary However, some items such as consumable
alcohol, tobacco products, motor fuels, crude oil, natural gas and jet fuel will
continue to be charged for excise duty.

GST will eliminate the widespread impact of taxes In some cases, such as VAT
collected by the State Governments (which is collected by the Central
Government), the double taxation becomes clear, this practice of tax on goods
and services tax taxes Will reduce.

The Goods and Services Tax (G.S.T.) is a landmark step taken by the Government
of India to boost the GDP and introduce a more effective tax regime.
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GST is a win-win situation for the entire country. It brings benefits to all the
stakeholders of the industry, government and the consumer. It will lower the cost
of goods and services to give a boost to the economy and make the products and
services globally competitive. By subsuming most of the central and state taxes
into a single tax and by allowing a set-off of prior-stage taxes for the transactions
across the entire value chain, it would mitigate the ill effects of cascading and
improve competitiveness and liquidity of the businesses.

GST will be applicable to all dealers whose aggregate turnover in a financial year
exceeds INR 2.00 Million (INR 1.00 Million in case of eleven special category
states). Separate registration will be required in every state from where a taxable
supply of goods or services is made

Reverse Charge:

If the supplier is not registered under GST and is supplying taxable goods or
services to a recipient who is registered, the GST on such taxable supplies shall be
borne by the recipient on reverse charge basis. Meaning registration seems to be
mandatory for every party; else it is quite possible that owing to extra compliance
issues people might be interested in doing business only with those parties who are
registered under the GST legislation. With few days left with GST coming into
force , this registration parameter might create a big time hassle among small
traders as they might lose some business until they get registered under GST.
Thus, in order to counter this issue, a monetary threshold limit in place will act as a
cushion for such small business houses till the time they come fully under the
ambit of GST.

Ratings:

The government will give an online rating on level, timeliness and efficiency of
compliances. Non-compliance will not just lead to penalties but also blacklisting,
which can affect the future creditability, reputation and can harm the business
growth of a business.
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This online rating is going to be available on the web portal and one can check and
decide business associations on the basis of these ratings

GST on Stock Transfer:

GST is chargeable on stock transfers to depots and stockists. This will further
increase the working capital requirement as the suppliers have to incur cost on
transfer of goods to own godowns and depots without any actual revenue getting
accrued or realized.

The GST paid in such a case can be claimed as input tax credit on sale of goods
from depots or warehouses.

Area Based Exemptions:

Under the current tax laws North East, Uttarakhand and Himachal Pradesh have
certain areas exempted from excise duty and other state taxes. Department of
Industrial Policy and Promotion is working on a scheme where companies will
have to pay tax upfront and can claim refund of the same in the areas stated above.
Taxes paid also can be claimed as set off against any liability. The industry wants
clarity on policy and time for adjustment. It is keen on availing smooth and hassle
free refunds.

Free of Cost Supply as Sample/Gifts/Promotional Schemes:

Free samples and gifts offered with purchases as well as popular buy-one-get-one-
free deals may attract GST.

GST will be entirely based on the concept of a supply, which now includes even
goods and/ or services supplied without consideration by a taxable person in the
course of or furtherance of business. This will impact the sales and marketing cost
of companies which follow such schemes. Buyers will have to pay GST on articles
they receive free.

Presently, for a free sample of goods, excise duty is payable but VAT/ CST is not
payable. However, proportionate input tax credit under VAT is reversible in some
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states. The net impact for businesses will therefore be the difference between the
existing excise and VAT cost, and the GST which will become payable.

Now again, the question that arises is about the goods replaced under a warranty as
these goods are again free of cost. But, generally the vendor is charged the
warranty cost at the time of supply, which is hidden in the final price of the
product.

GST on Allocation of Common Expenses:

Intra-company transactions are proposed to be taxed under GST. Any secondment

of employees, sharing of common expenses between related companies would be
taxed. Though, the receiving entity would be entitled to avail credit of tax charged
by the supplying company, this would result in the requirement of additional
working capital for all such companies.

Branch Office (BO) and Head Office (HO) Transactions:

BO and HO are separate persons for the purposes of GST levy. It becomes
important to determine the place of supply of the transaction in order to determine
GST implications. Should the place of supply be in India, then as per Section 10 of
the Integrated Goods and Service Tax (IGST), the transaction shall be subject to
IGST under reverse charge.

GST will be applicable where overseas BO is supplying to Indian HO, Indian BO

supplying to Indian HO and vice versa.

GST on Advance Payment:

From some peculiar provision under the GST Act, GST on advance payment is
one. In the present situation except service tax no other law requires to pay tax on
advances. Now the taxpayer will have to pay GST on the advancement of goods
and services in GST. After giving advance to the supplier the buyer will not get the
credit of GST. Whenever the supplier supplies goods or services and gives the tax
invoice to the receiver then only the buyer will get the credit of GST. If the rates
cant be ascertained at the time of taking advance, then GST will be charged @
18%. The money will be blocked for during this time until the supply is completed.
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Similarly, the supplier will charge GST on the remaining amount by deducting the
advance from the total amount. Every small or large business will have to pay
attention towards accounting and must be compliant with the law. Accounting
softwares need to be upgraded to charge tax based on receipt invoice.

While GST is yet to come into effect, it will evolve post implementation. Further,
though clarity on various critical issues affecting the industry are still unanswered,
the benefit to the economy cannot surely be undermined.

CONSTITUTIONAL ASPECTS OF GST

There are several articles in the constitution of India which define the financial
relations between Union and States. Since GST bills involve a huge interest of the
state governments, such a historical tax reform cannot take place without making
suitable changes into the constitution. For this purpose, 101st amendment of the
constitution was passed. This act received the assent of the President of India on
8th September, 2016. The important changes made in constitution (new articles /
amended articles) via this law are as follows:

Article 246 (A)

This is a new article inserted in the constitution. It says that (1) Notwithstanding
anything contained in articles 246 and 254, Parliament, and, subject to clause (2),
the Legislature of every State, have power to make laws with respect to goods and
services tax imposed by the Union or by such State. (2) Parliament has exclusive
power to make laws with respect to goods and services tax where the supply of
goods, or of services, or both takes place in the course of inter-State trade or
commerce
Notable Points from Article 246A
For your examinations, you must the below points clearly from this article:
Both Union and States in India now have concurrent powers to make law
with respect to goods & services
The intra-state trade now comes under the jurisdiction of both centre and
state; while inter-state trade and commerce is exclusively under central
government jurisdiction
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Article 269A
This is a new article which reads as follows:
269A. (1) Goods and services tax on supplies in the course of inter-State trade
or commerce shall be levied and collected by the Government of India and
such tax shall be apportioned between the Union and the States in the manner
as may be provided by Parliament by law on the recommendations of the
Goods and Services Tax Council.
Explanation.For the purposes of this clause, supply of goods, or of services, or
both in the course of import into the territory of India shall be deemed to be supply
of goods, or of services, or both in the course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form part of the
Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been used for
payment of the tax levied by a State under article 246A, such amount shall not
form part of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a State under article 246A has been
used for payment of the tax levied under clause (1), such amount shall not form
part of the Consolidated Fund of the State.
(5) Parliament may, by law, formulate the principles for determining the place of
supply, and when a supply of goods, or of services, or both takes place in the
course of inter-State trade or commerce.
Notable Points from Article 269A
This article says that in case of the inter-state trade, the tax will be levied and
collected by the Government of India and shared between the Union and
States as per recommendation of the GST Council.
The article also makes it clear that the proceeds such collected will not be
credited to the consolidated fund of India or state but respective share shall be
assigned to that state or centre. The reason for the same is that under GST,
where centre collects the tax, it assigns states share to state, while where
state collects tax, it assigns centres share to centre. If that proceed is
deposited in Consolidated Fund of India or state, then, every time there will
be a need to pass an appropriation tax. Thus, under GST, the apportionment
of the tax revenue will take place outside the Consolidated Funds.
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Article 279-A:
This article provides for constitution of a GST council by president within sixty
days from this act coming into force. The GST council will constitute the
following members:
Union Finance Minister as chairman of the council
Union Minister of State in charge of Revenue or Finance
One nominated member from each state who is in charge of finance or taxation
The GST council will be empowered to take decisions on the following:
The taxes, cesses and surcharges levied by the Union, the States and the local
bodies which may be subsumed in the goods and services tax;
The goods and services that may be subjected to, or exempted from, the goods
and services tax;
Model Goods and Services Tax Laws, principles of levy, apportionment of
Integrated Goods and Services Tax and the principles that govern the place of
supply;
The threshold limit of turnover below which goods and services may be
exempted from goods and services tax;
The rates including floor rates with bands of goods and services tax;
Any special rate or rates for a specified period, to raise additional resources
during any natural calamity or disaster;
Special provision with respect to the States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura, Himachal Pradesh and Uttarakhand; and
Any other matter relating to the goods and services tax, as the Council may
decide.
All decisions taken at the GST council will be taken based on voting. Process of
voting is clearly articulated in detail in the constitutional amendment bill.
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Changes in the 7th Schedule

This amendment has made following changes in 7th schedule of the constitution:

Union List:

The entry 84 of Union List earlier comprised the duties on tobacco, alcoholic
liquors, opium, Indian hemp, narcotic drugs and narcotics, medical and toilet
preparations. After this amendment, it will comprise of Petroleum crude, high
speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel,
tobacco and tobacco products. Thus, these are now out of ambit of GST and
subject to Union jurisdiction.
Entry 92 (newspapers and on advertisements published therein) has been
deleted thus, they are now under GST.
Entry 92-C (Service Tax) has been now deleted from union list.

State List

Under State list, entry 52 (entry tax for sale in state) has been deleted.
In Entry 54, Taxes on the sale or purchase of goods other than newspapers,
subject to the provisions of Entry 92-A of List I.; has been now replaced by
Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly
known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for
human consumption, but not including sale in the course of inter-State trade or
commerce or sale in the course of international trade or commerce of such
goods.
Entry 55 (advertisement taxes) have been deleted.
Entry 62 (Taxes on luxuries, including taxes on entertainments, amusements,
betting and gambling) has been replaced by these taxes only to be levied by
local governments (panchayats, municipality, regional council or district
council.
Other Important amendments in existing articles
The residuary power of legislation of Parliament under article 248 is now
subject to article 246A.
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Article 249 has been changed so that if 2/3rd majority resolution is passed by
Rajya Sabha, the Parliament will have powers to make necessary laws with
respect to GST in national interest.
Article 250 has been amended so that parliament will have powers to make laws
related to GST during emergency period.
Article 268 has been amended so that excise duty on medicinal and toilet
preparation will be omitted from the state list and will be subsumed in GST.
Article 268A has been repealed so now service tax is subsumed in GST.
Article 269 would empower the parliament to make GST related laws for inter-
state trade / commerce.
Further, the amendment also provided that Parliament shall, by law, on the
recommendation of the Goods and Services Tax Council, provide for
compensation to the States for loss of revenue arising on account of
implementation of the goods and services tax for a period of five years. This
resulted into the Compensation Cess Bill.

BENEFIT OF GST TO INDIAN ECONOMY

Removal of bundled indirect taxes such as VAT, CST, Service tax,
CAD, SAD, and Excise.
Less tax compliance and a simplified tax policy compared to current tax
structure.
Removal of cascading effect of taxes i.e. removes tax on tax.
Reduction of manufacturing costs due to lower burden of taxes on the
manufacturing sector. Hence prices of consumer goods will be likely to
come down.
Lower the burden on the common man i.e. public will have to shed less
money to buy the same products that were costly earlier.
Increased demand and consumption of goods.
Increased demand will lead to increase supply. Hence, this will
ultimately lead to rise in the production of goods.
Control of black money circulation as the system normally followed by
traders and shopkeepers will be put to a mandatory check.
Boost to the Indian economy in the long run.
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HOW WILL GST IMPACT ON INDIAN ECONOMY

Reduces tax burden on producers and fosters growth through more
production. The current taxation structure, pumped with myriad tax
clauses, prevents manufacturers from producing to their optimum
capacity and retards growth. GST will take care of this problem by
providing tax credit to the manufacturers.
Different tax barriers, such as check posts and toll plazas, lead to
wastage of unpreserved items being transported. This penalty
transforms into major costs due to higher needs of buffer stock and
warehousing costs. A single taxation system will eliminate this
roadblock.
There will be more transparency in the system as the customers will
know exactly how much taxes they are being charged and on what base.
GST will add to the government revenues by extending the tax base.
GST will provide credit for the taxes paid by producers in the goods or
services chain. This is expected to encourage producers to buy raw
material from different registered dealers and is hoped to bring in more
vendors and suppliers under the purview of taxation.
GST will remove the custom duties applicable on exports. The nations
competitiveness in foreign markets will increase on account of lower
costs of transaction
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INDIAN BRIGHT ECONOMY

The introduction of the Goods and Services Tax will be a very noteworthy step in
the field of indirect tax reforms in India. By merging a large number of Central
and State taxes into a single tax, GST is expected to significantly ease double
taxation and make taxation overall easy for the industries. For the end
customer, the most beneficial will be in terms of reduction in the overall tax
burden on goods and services. Introduction of GST will also make Indian
products competitive in the domestic and international markets. Last but not least,
the GST, because of its transparent character, will be easier to administer. Once
implemented, the proposed taxation system holds great promise in terms of
sustaining growth for the Indian economy.

DRAWBACK OF GST

India has adopted dual GST instead of national GST. It has made the entire
structure of GST fairly complicated in India. The centre will have to coordinate
with 29 states and 7 union territories to implement such tax regime. Such regime is
likely to create economic as well as political issues. The states are likely to lose the
say in determining rates once GST is implemented. The sharing of revenues
between the states and the centre is still a matter of contention with no consensus
arrived regarding revenue neutral rate.

Chief Economic Advisor Arvind Subramanian on 4 December 2015 suggested

GST rates of 12% for concessional goods, 17-18% for standard goods and 40%
for luxury goods which is much higher than the present maximum service tax rate
of 14%. Such initiative is likely to push inflation.

The proposed GST structure is likely to succeed only if the country has a strong
IT network. It is a well-known fact that India is still in the budding state as far as
internet connectivity is concerned. Moreover, the proposed regime seems to
ignore the emerging sector of e-commerce. E-commerce does not leave signs of
the transaction outside the internet and has anonymity associated with it. As a
result, it becomes almost impossible to track the business transaction taking place
through internet which can be business to business, business to customer or
customer to customer. Again, there appears to be no clarity as to whether a
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product should be considered a service or a product under the concept of E-

commerce. New techniques can be developed to track such transactions but until
such technologies become readily accessible, generation of tax revenue from this
sector would continue to be uncertain and much below the expectation. Again E-
commerce has been insulated against taxation under custom duty moratorium on
electronic transmissions by the WTO Bali Ministerial Conference held in 2014
[4].

Communication is considered to be necessity and one cannot do without

communication. In modern times, communication has assumed the dimension of
telecommunication.

The proposed GST regime appears to be unfavorable for telecommunication

sector as well

One of the major drawbacks of the GST regime could be the direct spike in the
service tax rate from 14% to 20-22% (GST: Impact on the Telecommunications
Sector in India). The proposed GST appears to be silent on whether
telecommunication can be considered under the category of goods or services.
The entire issue of telecommunication sector assumes a serious proportion when
Indias rural teledensity is not even 50% [5].

The proposed GST regime intends to keep petroleum products, electricity, real
estate and liquor for human consumption out of the purview of GST

It is a well-known fact that petroleum products have been a major contributor to

inflation in India. Inflation in India depends on how the government intends to
include petroleum products under GST in future.

Electricity is essential for the growth and development of India. If electricity is

included under standard or luxury goods in future then it would badly affect the
development of India. It is said that GST would impact negatively on the real
estate market. It would add up to 8% to the cost of new homes and reduce
demand by about 12%.

The proposed GST regime would be capable of being levied on sale of

newspapers and advertisements therein
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This would give the governments the access to substantial incremental revenues
since this industry has historically been tax free in its entirety [6]. It sounds
ridiculous but the provision of GST is likely to make the supervision of
operations by its Board/senior managers across the companys offices in different
parts of the country a taxable service by allowing each state to raise a GST
demand on the company.

Again there appears to be lack of consensus over fixing the revenue rate as well
as threshold limit. One thing is for sure, services in India are going to be steeply
costly if GST is fixed above the present service tax rate of 14% which in turn will
spiral up inflation in India. Asian countries which implemented GST all had
witnessed retail inflation in the year of implementationve implemented GST. The
government of India should study the GST regime set up by various countries and
also their fallouts before implementing it. At the same time, the government
should make an attempt to insulate the vast poor population of India against the
likely inflation due to implementation of GST. No doubt, GST will simplify
existing indirect tax system and will help to remove inefficiencies created by the
existing current heterogeneous taxation system only if there is a clear consensus
over issues of threshold limit, revenue rate, and inclusion of petroleum products,
electricity, liquor and real estate. Until the consensus is reached, the government
should resist from implementing such regime.

Conclusion

The proposed GST regime is a half-hearted attempt to rationalize indirect tax

structure. More than 150 countries have implemented GST. The government of
India should study the GST regime set up by various countries and also their
fallouts before implementing it. At the same time, the government should make an
attempt to insulate the vast poor population of India against the likely inflation due
to implementation of GST. No doubt, GST will simplify existing indirect tax
system and will help to remove inefficiencies created by the existing current
heterogeneous taxation system only if there is a clear consensus over issues of
threshold limit, revenue rate, and inclusion of petroleum products, electricit, liquor
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and real estate. Until the consensus is reached, the government should resist from
implementing such regime.