BY:

1.Aditi Chaturvedi
2.Apoorv Srivasthava
3.Deepak Grandhe

 GST is levied only on the value added at every stage of production

Ensures no cascading effect of taxes on inputs used in manufacturing of
goods
Example:
If tax of 15% is levied on Rs.2 lakhs at the first stage, the tax out flow would be
Rs 30,000.At the next stage when the same goods are sold for Rs 2.5 lakhs the
tax would have been Rs 37,500 but since there is a set off Rs.30,000 available,
the actual tax at that stage will be Rs 7,500.

Difference between current system and GST

Why is it considered a better system?

Currently, there are multiple indirect taxes- Central taxes such as excise
duty, service taxes and countervailing duty, and state taxes, such as VAT,
entertainment tax and luxury tax. This results in high tax rates.
Accordingly, GST seeks to eliminate multiplicity of taxes, rates,
exemptions and such exceptions to achieve uniformity of taxes across
the country.
Further, it would provide greater certainty and transparency of taxes.

GST model that India plans to adopt

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.

 Most Countries have Unified GST system. However, India has opted for
Dual GST system prevalent in Brazil and Canada. Under this model,
both Center and State have the right to levy and collect taxes on
goods and services where as in unified GST model a single tax is

applied through out the country .

Impact of GST on different sectors

Manufacturing and Retail
Positive Impact:

Increased fungibility of credit on goods and services

Full credit of tax on interstate sale will reduce cost of procurement/production

No retention on stock transfer of goods will also reduce cost procurement

Credit of import duties will make imports cheaper for retailers

Negative impact:
Negative working capital impact
Increase in initial cost of purchases including Imports due to an increase in tax rate
Job work transactions, currently not taxed, are likely to be taxed and will effect
production outlay

Entertainment and Hospitality

Eliminates multiplicity of taxes Entertainment tax, luxury Tax, VAT, service Tax
By allowing credit between goods and services , GST will prevent cascading of
taxes, resulting in increased profits for companies in this sector

Simplifies levy and valuation on composite transactions. Thus, will reduce litigation
challenges and related costs faced by companies in this sector

IT and Telecom
End to classification disputes on software, SIM cards, franchise fees, AMCs, etc
Simplifies levy and valuation on composite transactions by eliminating multiplicity
of taxes- VAT, service tax, entry tax

Service Sector
Better credits across goods and services
No segregation between manufacture, services,trading for utilization of credits.

Banking and Financial Services

Cost of banking and insurance will increase with rise in tax rate from 12.36%
to more than 20%.
Better credits across goods and services
Increase in credit pool due to availability of GST credits on purchase of goods
Interest on loans expected to be taxed under GST

Key benefits of implementing GST

GST will simplify Indias tax structure, broaden the tax base, and
create a common market across states. This will lead to increased
compliance and will support Indias GDP growth.

It will be beneficial for India Inc. as the average tax burden on

companies will fall due to

transparent set-off mechanism and

elimination of cascading taxes leading to reduced production costs

and increased export competitiveness.

 Implementation of GST may lead to fall in costs in many cases

making several products competitive leading to benefits for the
manufacturers and also making some of them competitive on the
world stage. Over a period of time the consumer will reap the
benefits of the process through lower costs.