SCHOOL OF LAW, NARSEE MONJEE INSTITUTE

OFMANAGEMENT STUDIES, BENGALURU

SYNOPSIS

SUBMITTED TO: - SUBMITTED BY: -

Prof. Moumitha Ma’am Name-B. Parichaya Reddy

Vth year.

Honours in Business Law

BBA,LL. B (Hons.)

SAP ID- 81021219018

 CHAPTER 01

Introduction

The introduction of Goods and Services Tax (GST) in India marks a significant shift in the
country's taxation system. Derived from the Latin word "taxare," meaning to estimate, taxes are
enforced contributions exacted by the government. GST aims to amalgamate various central and
state taxes into a unified system, reducing cascading effects and fostering a common national
market. This reform is expected to streamline tax administration, enhance e-commerce, and
boost competitiveness across industries.

Background India's economy has been one of the world's fastest-growing, fueled by market
reforms, foreign investment, and robust sectors like IT, real estate, and capital markets. With the
rise of multinational enterprises and cross-border trade, there's a pressing need to revamp the tax
system for improved efficiency and equity.

GST Implementation The GST Bill proposes a comprehensive tax on the manufacture, sale,
and consumption of goods and services to replace existing central and state levies. It adopts a
multi-stage, destination-based tax approach, allowing businesses to claim input tax credits. The
system aims to simplify taxation, eliminate double taxation, and create a level playing field for
businesses. It consists of central GST (CGST), state GST (SGST), and integrated GST (IGST)
for interstate transactions.

HSN Code in GST and Rates The Harmonised System of Nomenclature (HSN) assigns codes
to products for GST rate identification. Businesses with turnover exceeding specified thresholds
must mention HSN codes on invoices. GST rates vary based on products, with exemptions for
certain essentials. The implementation of GST initially led to price hikes and protests but
streamlined supply chains by abolishing check-posts.

Key features of GST GST covers all transactions except exempted goods and services, with
separate components for central and state GST. It adopts a two-rate structure, with lower rates
for essential items. The administration of CGST and SGST rests with the respective
governments. Input tax credits can be claimed against taxes paid at each stage, fostering a
seamless tax system.

GST Council The GST Council, comprising union and state representatives, oversees crucial
GST-related decisions. It advises on matters like tax rates, exemptions, and disaster relief funds.
The council operates under Article 279 A of the Constitution and is supported by a dedicated
secretariat.

Goods and Services Tax Network (GSTN) GSTN, a private limited company, provides IT
infrastructure and services for GST implementation. It facilitates registration, tax computation,
settlement of IGST, and data analysis for tax authorities and stakeholders.
 CHAPTER 02

History

1. Historical Evolution of Taxation: Taxation dates back to ancient civilizations, as evidenced

by its imposition in Ancient Egypt around 3000 B.C. Records indicate the Pharaoh's collection of
taxes via biennial tours, highlighting early state intervention in revenue collection. In India,
taxation finds mention in ancient texts like Manu-Smriti, evolving through colonial rule to its
current constitutional framework.

2. Legislative Journey Towards GST: The journey towards implementing GST in India began
in the early 2000s, with committees and task forces formed to study tax reforms. The
Constitution Amendment Bill was introduced in 2014, facing initial opposition but eventually
passing in both houses of Parliament in 2016. The GST rollout commenced on July 1, 2017,
marking a significant shift in India's indirect tax regime.

3. Challenges in the Pre-GST Taxation System: Before GST, India's taxation system faced
numerous limitations, including tax cascading, complexity, and a lack of uniformity in tax rates
across states. Multiple taxes on goods and services led to compliance burdens, hindering
economic efficiency and growth. These challenges underscored the need for comprehensive tax
reform.

4. Issues and Challenges with GST Implementation: Despite aspirations for simplification, the
implementation of GST brought forth several challenges. These include multiple tax slabs,
uncertainty regarding the discontinuation of local taxes, complexities in IT infrastructure, delays
in refunds, and increased tax evasion. Businesses grapple with administrative burdens and
technological complexities, impacting compliance.

5. Roadmap for Overcoming GST Challenges: Overcoming challenges with GST requires
concerted efforts to streamline processes, enhance compliance mechanisms, and address
stakeholder concerns. Continuous reform and improvement are essential for realising GST's
transformative potential. Simplifying tax structures, promoting transparency, and ensuring
equitable distribution of tax burdens are crucial for GST's success.
 CHAPTER 3

Current Framework

1. Concept of Goods and Service Tax (GST): GST, or Goods and Services Tax, marks a
significant overhaul in India's tax regime by replacing existing taxes like excise, VAT, and
service tax. It aims to establish uniform taxation across states, streamlining compliance for
businesses. This comprehensive reform allows for full tax credits on inputs and capital goods,
benefiting both large enterprises and SMEs. GST, a destination-based tax system, encompasses
all transactions involving the supply of goods and services, except for alcoholic beverages for
human consumption.

2. Transition from the Pre-GST Taxation Framework: India's pre-GST tax landscape
consisted of various taxes like excise duty, customs duty, and VAT, leading to compliance
complexities and tax cascading. With GST, these disparate taxes are subsumed under a unified
framework, simplifying compliance and reducing the taxpayer's burden. GST's multi-tier tax
structure, with slabs ranging from 5% to 28%, aims to rationalise tax rates and ensure
transparency in tax administration.

3. Launch and Implementation of GST: The Goods and Services Tax was launched on July 1,
2017, through a historic midnight session of Parliament. Despite its significance, the launch
faced opposition from some quarters, criticising its potential impact on middle- and lower-
income groups. The GST Council finalised a five-rate tax structure, covering essential items,
mass consumption goods, standard-rated items at 12% and 18%, and luxury goods at 28%, with
additional cess on demerit goods.

4. Structure of GST: The GST Council has structured GST into five tax slabs of 0%, 5%, 12%,
18%, and 28%, applicable to various categories of goods and services. Approximately 7% of
items are exempted from GST, while others fall under different tax slabs based on their nature
and usage. Essential items like fresh produce and basic necessities attract lower or zero GST
rates, while luxury items and services incur higher taxes. This tiered approach aims to balance
tax revenue generation with consumer affordability.

5. Impact and Future Outlook: GST's implementation represents a monumental shift in India's
tax landscape, with both benefits and challenges. While it simplifies compliance and fosters a
unified market, challenges such as technological readiness, compliance burdens, and transitional
issues persist. Continuous monitoring and reforms are essential to address these challenges and
optimise GST's potential for fostering economic growth and development.
 CHAPTER 04

Impact on Economy

1. Positive Impacts:

 Elimination of Cascading Effect: GST eliminates the cascading effect of taxes,

reducing production and distribution costs, thus accelerating GDP growth.
 Reduced Production Cost: With full input tax credit, production costs are expected to
decrease by 15% to 20%, benefiting consumers with lower product prices.
 Increase in Tax Revenue: Widening the tax base and improving compliance is projected
to increase the tax-to-GDP ratio by 2%, generating additional revenue for governments.
 Sustainable Economic Growth: Removing tax distortions fosters sustainable growth
based on the country's competitive strength, attracting more productive investments.
 Optimisation and Comparative Cost Advantage: Eliminating inter-state taxes leads to
optimisation of facilities and comparative cost advantages for industries.
 Positive Effects on Export and BOP: Exporters benefit from full tax credits, enabling
competitive pricing and boosting exports, positively impacting the Balance of Payment.
 Uniform Pricing and Reduced Inequalities: Standardising tax rates across the country
promotes market equality, reducing inequalities driven by differential tax rates.
 Reduced Chance for Tax Evasion: Comprehensive tax coverage reduces opportunities
for tax evasion, promoting fair tax compliance across sectors.
 Centralised Warehousing: Eliminating the Central Sales Tax facilitates centralised
warehousing, reducing costs for manufacturers.
 Simplified Tax Structure: GST simplifies tax compliance by replacing multiple taxes
with a single tax regime, reducing administrative burdens.
 Ease in Starting a New Business: Centralised and standardised GST registration
procedures improve the ease of starting a new business in India.
 Increase in GDP and Standard of Living: Lower prices due to GST are expected to
boost consumption, leading to increased GDP growth and improved living standards.
 Formalisation of Manufacturing: Strict input credit matching requirements formalise
manufacturing processes, promoting transparency and accountability.
2. Sector-Wise Impact:

 E-commerce: While benefiting from logistical savings, the TCS mechanism poses
administrative challenges.
 Pharma: Expected to benefit from a simplified tax framework, but concerns arise
regarding pricing.
 Telecommunication: A reduction in logistics costs and a simplified tax structure benefit
the sector.
 Textile: Neutral to slightly negative impact expected due to changes in tax structure,
offset by cost savings.
 Real Estate: Expected reduction in under-construction property costs, but impact
depends on prevailing tax rates.
 Agriculture is expected to benefit from reduced transportation costs and a unified
national market.
 FMCG: A reduction in logistics costs is expected to benefit the sector, especially in the
soap and hair oil segments.
 Freelancers: GST simplifies tax filing and brings transparency to freelancing income.
 Automobiles: Expected reduction in tax burden, particularly in the SUV segment.
 Startups: GST facilitates ease of doing business, simplifies compliance, and promotes
the free flow of goods and services.

3. Effects on Consumer Goods and Services:

 Food products are exempt from GST, ensuring affordability for consumers.
 Footwear and Garments: Tax rates vary based on price points, impacting consumer
affordability.
 Transportation: Lower tax rates benefit cab rides and air travel, with minimal impact on
train fares.
 Entertainment and Hospitality: increased tax rates on amusement parks and movies;
varying rates for hotels and restaurants.
 Property and Asset Acquisitions: Under-construction property costs decrease, while car
purchases may become slightly less expensive.
  Financial Products and Services: Increased tax rates on insurance premiums and
banking services are affecting consumers' financial transactions.
 Effect on Startups: GST simplifies compliance and fosters ease of doing business,
benefiting the startup ecosystem.

4. Expected Economic Benefits:

 Elimination of Tax Cascading: GST eliminates tax on tax, leading to increased demand
and consumption.
 Streamlined Tax System: Reduced compliance and simplified tax policy enhance
business efficiency.
 Lower Production Costs: Reduced manufacturing taxes lead to lower product prices and
increased production.
 Boost to the Economy: Increased GDP growth and long-term economic benefits are
anticipated due to GST implementation.

Overall, GST's impact on the Indian economy is expected to be transformative, fostering growth,
efficiency, and transparency across sectors while addressing challenges and ensuring equitable
outcomes for businesses and consumers alike.
 CHAPTER 5

Challenges, opportunities, benefits, prospects, advantages, disadvantages &

Suggestions

Challenges

Tax Threshold:

 The threshold limit for turnover above which GST is levied needs careful consideration.
 Setting a low threshold may burden small-scale traders and service providers
unnecessarily.
 High allocation of resources for minimal revenue from low threshold collections may
prove costly.
 Higher tax thresholds may shrink the tax base and affect less developed states with low
thresholds.

Nature of Taxes:

 While GST includes various taxes like excise duty, service tax, and state VATs, some
state and union taxes remain excluded.
 Inclusion of diverse taxes complicates the GST structure and implementation.

Number of Enactments of Statutes:

 Implementation involves both Central GST and State GST laws, with differing tax rates
for goods and services.
 Variation in rates based on state needs, location, and resources adds complexity.

Rates of Taxation:

 Tax rates should align with states' revenue requirements.

 Flexibility in determining rates based on state needs is crucial.
Tax Management and Infrastructure:

 Success of GST depends on simplifying tax procedures and ensuring high compliance.
 Effective IT infrastructure, including GSTN, is essential but faces challenges in India's IT
connectivity.
 Shortage of skilled manpower poses additional challenges.

Wall Street Firm Observations:

 Goldman Sachs predicts muted growth impact and increased consumer price inflation
under the current GST model.
 Loopholes in the model may hinder desired outcomes.


 Complexity persists despite the aim of "one country, one tax" due to multiple taxes and
rates.
 Implementing a single tax rate across India is hindered by constitutional provisions
granting taxing powers to both the union and states.
 IT infrastructure challenges with GSTN.
 Shortage of skilled professionals.
 Impact on sectors like insurance, telecommunications, and small traders.
 Exclusion of petroleum products from GST adds complexity.
 Confusion and increased operational costs for small traders.

Opportunities

End to Cascading Effects:

 GST eliminates cascading effects of taxes in the supply chain, reducing production costs.

Growth of Revenue:

 GST is expected to expand the tax base, increase revenue, and streamline taxation.
Reduction of Transaction Costs:

 Effective IT infrastructure can simplify compliance, reducing transaction costs.

Elimination of Multiplicity of Taxation:

 GST streamlines taxation, reducing complexity and compliance burdens.

One Point Single Tax:

 GST's single tax point simplifies taxation and boosts business confidence.

Reduction in Average Tax Burdens:

 GST ensures certain tax costs for consumers, reducing overall tax burdens.

Reduction in Corruption:

 Simplified taxation can contribute to a corruption-free tax system.

Benefits of GST:

 Comprehensive input credit setoff and removal of CST.

 Uniform tax rates, better compliance, and reduced tax burdens.
 Increased competitiveness, lower prices, and better revenue collection.
 Export benefits, transparency, and reduced inflation.
 Harmonization of laws, simplified procedures, and technological advancements.

Prospects and Advantages of GST in India:

1. Simplification of the tax system: GST replaces multiple taxes with a single tax, making
taxation simpler and reducing disputes.
2. Boost to manufacturing and exports: GST reduces the tax burden on companies, making
them more competitive both nationally and internationally.
 3. Increased tax base: GST brings more businesses, including unorganised ones, under the
tax system, widening the tax base and potentially increasing tax revenue.
4. Removal of economic distortions: GST taxes goods and services at the final destination,
removing economic distortions and fostering the development of a common national
market.
5. Centralised registration: Starting a new enterprise becomes easier with centralised GST
registration, benefiting small and medium-sized enterprises (SMEs).
6. Transparency and consumer faith: GST introduces transparency in taxation, allowing
consumers to know exactly how much tax they are paying, thereby increasing faith in the
tax structure.

Disadvantages and Challenges of GST in India:

1. Dual control by the central and state governments may increase compliance costs for
businesses.
2. Implementation challenges: Transitioning to the GST system may pose challenges such
as complexities in filing returns and adapting to new tax rates.
3. Impact on certain sectors: Sectors like telecom, real estate, and construction may face
inflationary pressures due to GST.
4. Potential for price increases: Essential goods and services that were previously exempted
from taxation may see price increases under GST.
5. Dual control and compliance issues: Businesses may face challenges with multiple
registrations and compliance requirements, especially for service providers operating in
multiple states.

Suggestions for improvement:

1. Simplification of processes: Filing returns and compliance procedures should be

simplified to reduce the burden on businesses.
2. Training and awareness: Intensive training programs and workshops should be conducted
to educate the workforce and businesses about GST.
 3. Rationalization of tax rates: GST rates should be rationalized and unified to reduce
complexities and promote economic development.
4. Addressing regional imbalances: Measures should be taken to prevent regional
imbalances in resource allocation and responsibilities among governments.

Conclusion: Overall, while GST offers significant benefits such as simplification of the tax
system, increased transparency, and competitiveness, it also poses challenges in implementation
and may have adverse effects on certain sectors. Addressing these challenges through
simplification of processes, rationalisation of tax rates, and compliance issues will be crucial for
the successful implementation of GST and its long-term benefits for the Indian economy.