Content

1. Review of Literature
2. Introduction
3. Need for GST model in India
4. What is GST?
5. Features of GST
6. Opportunities of GST in India
7. How is GST applied?
8. Benefits of GST
9. Composition scheme
10. GSTIN
11. Sin Tax
12. Fat tax
13. Artificial Intelligence & Data Analytics Applications
14. Positive impact of GST
15. Negative impact of GST
16. Impact of GST on common man
17. Impact of GST on corruption
18. Impact of GST on foreign trade
19. Impact of GST on banking Sector
20. Industry wise analysis of GST
21. Impact of GST on IT & Gadget Industry
22. Impact of GST on logistics industry
23. Impact of GST on Independent Financial Advisory
24. Impact of GST on Lottery Businesses
25. E-Way Bill
26. Impact of GST on on E-Commerce
27. Impact of GST on FMCG
28. Impact of GST on IPL
29. Impact of GST on Entertainment Industry
30. GST & Cryptocurrency
31. Comparison between GST in India & GST in other countries
32. Strategies used to evade GST by companies
33. Case Study-1
34. Case study-2
35.
Review of Literature
Benedict, (2011) The author studies the law provisions dealing with financial services under the
Australian GST law with the intention to verify whether the provisions have been construed correctly
in light of the original purpose of the legislation and how the concerns identified may be rectified.

Bikas, (2013) The authors have studied the VAT rate and the EU economy and also the link between
the VAT and macroeconomic indicators and their influence on the VAT rate. The authors conclude
that there is a positive relation between macroeconomic indicators like GDP, per capita income and
consumption, export, import etc and the VAT rate applicable.

Borec, (2013) The authors have discussed how assessees may comply with the VAT laws given that
the GST is a destination based tax. The authors mainly deal with B2C cases where the VAT
compliances would need to be done in the state where the customer is located. The authors have
discussed the difficulties in this compliance especially in the e commerce transactions.

Bovenberg, (1992) The author uses a general equilibrium model to assess different instruments of
indirect taxation in middle income countries. The author has specifically studied Thailand and
concluded giving various methods to increase the effectiveness of indirect taxes.
Brew, (2012) The authors have studied the relation between the mode of collection of VAT revenues
with the target of VAT

collection for the municipality of Tarkwa – Nsuaem in West Ghana. The authors have used
questionnaires and interviews to collect the data and then analysed it using the regression analysis
and established that the method of VAT collection in the said municipality was above average. The
study is important because VAT is one of the primary revenue generators for any Government.

Ciobanasu (2012) The authors trace the correlation between the types of taxes and their role in the
budgeted revenues and the fiscal development of Romania. Indirect tax by its very nature is easier to
govern, is neutral to status of tax payer, and increases revenue but leads to inflation. On the other
hand direct taxes depend on the tax payer and are difficult to govern. Further, indirect tax helps the
government to an extent to direct consumption of the public. The authors conclude that both the
taxes are important for overall growth of the economy.
Cnossen, (1992) VAT is operative in a number of countries and primarily in countries where federal
government is not in existence. The author has studied the various VAT systems existing in the world
and tried to arrive at an appropriate VAT for Central and East Europe countries. The author has laid
down various requirements to ensure that the said VAT is completely effective like it should be
destination based, the input credit mechanism should be seamless, the law should be easy to
understand, cost of conformity should be low etc.

Crossley, (2009) In 2009, the United Kingdom Government decided to reduce the VAT rate by a
marginal amount in order to boost the consumer spending. The authors have studied the said
relation in his paper and concluded that if the VAT rate is reduced, the spending by general
consumers increases resulting in overall buoyancy in the economy.

Emmanuel, (2013) The author has examined the link between VAT, the increase in VAT rates and the
economic growth and tax revenue in Nigeria. For this study the author has set out 2 Null hypothesis
which are post the research accepted. The author concludes that given the strong relation between
the above, the Government and authorities should actively educate the public on the benefits of
VAT so that they accept changes in VAT rates more easily.
Eugen, (2011) The authors have examined the various methods adopted by assessees to evade VAT
especially in intra country transactions in Romania. The authors have also recommended the
documentation and returns which could be relied upon by both the authorities and the assessees to
ensure that there is no tax evasion.

Eva, (2008) The author in his paper has examined the cost of complying with the indirect tax laws in
the Slovak Republic by doing research of small, medium and large businesses through a
questionnaire and concludes that businesses especially the small ones are not able to and do not
make efforts to quantify the cost of compliance which is quite high due to the complex laws.

Fathi, (2012) The authors have explored the connection between the rate of VAT and the evasion of
VAT by the public using varied experimental methods. They conclude that there is no connection
between the two because in many countries where the VAT rate is high the compliance is also high
and where it is low the evasion is high.

Firth, (2012) GST on financial services as always been a subject matter of great debate. There is a
problem in taxing financial services due to their intangible nature, the confusion around the location
of service provider and service recipient and the value of the service. The authors in their paper are
trying to address these issues specially for the country of Canada. In Canada, there is an exemption
for financial services, intermediary services in relation to financial services etc. The authors in their
paper have discussed the existing laws and suggested changes to the existing laws for better
efficiency in taxing financial services.

Grigore, (2012) The authors study the chief features of VAT in the EU member states, the differences
in them and the changes in VAT laws required across EU member states in order to assist intra EU
trade and concludes that certain tax reforms are required to be undertaken by all member EU states
to ensure optimum efficiency of VAT as a fiscal tool.

Halakhandi, (2007) GST was supposed to be introduced in India way back in 2010. It has been getting
postponed due to various reasons major one being getting to a consensus between the various
states and the centre for compensation. The author in the paper has discussed the existing laws in
India for indirect taxes, the VAT laws in various states with their advantages and disadvantages, the
impact of the proposed GST, the compliances under the proposed GST etc. The author has also used
various numerical examples to demonstrate how GST is cost effective.

Herekar, (2012) The Ministry of Finance had set up the Task Force with Mr. V. Kelkar as the chairman
of the Task Force. The main task of the Task Force was to evaluate the impact of the proposed GST
on the Indian economy. The author in the paper has studied the different parts of GST and their
impact on the common man, the business and the economy. The author has concluded based on
secondary data that if GST is introduced in India, it would have a positive impact on the overall
economy.

Huang, (2013) The authors examine the relation between the newly introduced GST in Australia in
2000 and the mortgage costs between 1999 and 2001. The study concludes that given that in
Australia financial services industry is taxed on input taxation basis i.e. the output mortgage service
is not liable to GST and GST paid on input services to provide these mortgage services are also not
allowed. This extra cost of sunk input tax is passed in the form of increased mortgage costs to
customers making housing costly post introduction of GST in Australia.

Ilaboya, (2012) The authors have studied the relation between indirect tax and economic growth
specifically in Nigeria and concluded that the relation is inverse and focus from indirect tax should be
shifted in Nigeria. This is also because the study reveals that there is a direct relation between direct
taxes and economic growth.

Keating, (2010) GST is operative in both Australia and New Zealand with anti evasion/avoidance
provisions under the GST law framed in both the countries. The author compares the said anti
evasion provisions in both countries, examines their effectiveness and also whether tax payers have
successfully evaded the law. The author concludes that if the law interpretations based on the New
Zealand Court decisions are referred to, it implies that assessees will find it difficult to evade the law.

Keho, (2011) The author examines the connection between the tax rates and economic growth using
the ARDL bounds testing approach, for Cote d’Ivoire in the period 1960 to 2006. The author has
concluded that there is a strong link between taxes and economic growth especially direct tax and
growth, and he further concludes that switching from direct to indirect taxes has a positive impact
on the economic growth and general economy.

Mansor, (2013) GST has always been considered as a tool in the hands of any Government to
increase revenue. The Malaysian Government introduced the said tax in Malaysia in order to reduce
its budget deficit. The authors in the paper have discussed the readiness of the Malaysian economy
in adopting the said newly introduced GST along with the reactions of various sections of the society.

Mansor, (2012) The authors have in the paper studied the link between strategic planning and
decision making process and competence of the tax administration in indirect taxes in Malaysia. For
this the author has compared the planning system in Malaysia with other economies and concluded
that in Malaysia the main problem is around deficiency of resources and will of employees in the tax
department.

Muntean, (2010) The EU consists of 17 states (27 unofficially) in the geographical area of Europe
who have adopted Euro as their common currency. The monetary policy of the EU is administered by
the European Central Bank. VAT is adopted by the individual states at different rates. There is trade
between the member states and of each individual state with non EU states. The author has studied
the various systems/measures adopted by the European Commission to reduce the evasion of VAT
applicable on imports/exports on goods and services transacted within the EU and/or from outside
EU states.

New Zealand Government, (2012) The author has traced the GST and import duties applicable on the
various imports into New Zealand. The paper discusses not only the goods on which duty is payable
but also whether further GST is payable on the same goods. The paper also discusses the
applicability of the taxes on the goods ordered and delivered through internet. The paper also
discusses various exemptions available like personal effects to the import taxation.
Newton, (2011) VAT is applied on financial services transactions in the EU region. The authors in
their paper have discussed the applicability of VAT on financial services transactions, and the cost of
VAT to financial services industry. The authors have first discussed the proposal to introduce
Financial Transactions Tax and Financial Activities Tax by IMF in the EU region and then compared
the same with the cost of VAT to the financial services industry.

Pena, (2010) In 2001, in Mexico, it was proposed to introduce a flat 15% VAT rate on certain items
like food etc. which are items of basic consumption, instead of subsidising the masses. The author
using the General Equilibrium Model studies the impact of the proposed introduction of flat VAT rate
and concludes that it is better to introduce such flat rate on basic items which will generate revenue,
and a part of this revenue can be used for the betterment of masses than subsidising the masses.

Brief Introduction
Goods and Services Tax (GST) is the new indirect tax law which has subsumed most of the previous
indirect taxes. It is applicable for manufacturers, traders and service providers alike. The preceding
indirect taxation system was complicated for any layman to follow. There were confusing rates, tax
on tax effect, and complex compliance procedures. After a 17 year journey, GST came into effect
from 1st July 2017.

Indirect Taxes Replaced:

(i) Taxes levied and collected by the Centre:
Central Excise duty
Additional Duties of Customs (known as CVD)
Special Additional Duty of Customs (SAD)
Service Tax
(ii) Taxes levied and collected by the State:
State VAT
Central Sales Tax
Entertainment and Amusement Tax (except when charged by the local bodies)
Taxes on lotteries, betting and gambling.

GST Council
GST Council is the governing body of GST having 33 members.It is chaired by the Union Finance
Minister. GST Council is an apex member committee to modify, reconcile or to procure any law or
act or regulation based on the context of goods and services tax in India. The council is headed by
the union finance minister Arun Jaitley assisted with the finance minister of all the states of India.
The GST council is responsible for any revision or enactment of rule or any rate changes of the goods
and services in India.

Goods & Service Tax Network(GSTN)

The GSTN software is developed by Infosys Technologies and the Information Technology network
that provides the computing resources is maintained by the NIC. "Goods and Services Tax" Network
(GSTN) is a nonprofit organisation formed for creating a sophisticated network, accessible to
stakeholders, government and taxpayers to access information from a single source (portal).The
GSTN's authorised capital is ₹10 crore (US$1.4 million) in which initially the Central Government held
24.5 percent of shares while the state government held 24.5 percent. The remaining 51 percent
were held by non-Government financial institutions, HDFC and HDFC Bank hold 20%, ICICI Bank
holds 10%, NSE Strategic Investment holds 10% and LIC Housing Finance holds 11%.
However, later it was made a wholly owned government company having equal shares of state and
central government.

Need for GST Model in India

Following are the supporting reasons to adopt GST:
Present system allows for multiplicity of taxes, the introduction of GST is likely to rationalize it.

Many areas of Services which are untaxed. After the introduction of GST they will also get covered.

GST will help to avoid distortions caused by present complex tax structure and will help in
development of a common national market.

Existing taxes i.e. Excise, VAT, CST, Entry Tax have the cascading effects of taxes. Therefore, we end
up in paying tax on tax. GST will replace existing taxes.

GST will lead to credit availability on interstate purchases and reduction in compliance
requirements.

Introducing GST will do more than simply redistribute the tax burden from one sector or Group in
the economy to another.

Achieves, uniformity of taxes across the territory, regardless of place of manufacture or distribution.
Provides, greater certainty and transparency of taxes.
Ensure tax compliance across the country
GST will avoid double taxation to some extent.
The implementation of GST would ensure that India provides a tax regime that is almost similar to
the rest of world. It will also improve the International cost competitiveness of native Goods and
Services.

GST will provide unbiased tax structure that is neutral to business processes and geographical
locations.

If the Goods and Service Tax is implemented in the true spirit, it will have many positives for the
stakeholders and will lead to a better tax environment.
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.
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.

Features Of GST
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 Of GST
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 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:

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 unorganised sector will come under tax regime.

Composition Scheme
Registration is mandatory for manufacturers, traders and service providers. The normal registered
tax payers have to file 3 monthly returns and issue GST compliant invoices to claim Input Tax credit.
The Council felt that the small and medium enterprises would not be technologically equipped. So,
the government introduced Composition scheme under GST. It is an extension to the previous
scheme under the VAT law.

Any business which has a turnover less than ₹1.5 crore can opt for this scheme. But, if the turnover
crosses this limit, the business becomes ineligible for the composition scheme. They would have to
get registration under the regular scheme.
Eligibility for Composition Scheme:
Assessees dealing in supply of goods can opt for this scheme.
Service providers, except Restaurant owners, cannot register under the composition scheme.
Businesses having only intra state supply of goods are eligible.
Dealers who collect Tax at source u/s 56.
gst registration

Benefits:

No need to maintain detailed records like a normal taxpayer.

Compounding dealers have to file only a quarterly return under GSTR-4 and an annual return in
Form GSTR-9A. Normal taxpayers have to file three monthly returns.
Taxpayers under the composite scheme will pay tax at concessional rates :
1% for manufacturers and traders,
5% for restaurants.
Disadvantages:

Composition scheme dealers cannot claim Input Tax Credit of GST paid to their supplier.
Since the dealer is not allowed to charge tax from his buyer, he has to pay out of his own pocket.
This increases the burden on assessee to pay the tax.
Any taxes payable under Reverse Charge Mechanism are not covered under the scheme. So, a
compounding dealer has to pay taxes under RCM as a normal tax payer.
Invoicing under Composition Scheme:

A dealer registered under the Composition Scheme is not allowed to claim Input Tax Credit. Hence,
he cannot issue a tax invoice. A buyer purchasing from composition dealer will not be able to claim
tax credit either.

Transition from Normal scheme to Composition Scheme:

The taxpayer will have to pay an amount equal to the input tax credit in respect of inputs held in
stock. The compounding dealer will pay this on the day immediately before the date of such switch
over.

Penalties:
If the composite dealer is misusing the benefits of the scheme, he will have to pay all the taxes he
would have paid under the normal scheme. He will also be liable to pay a penalty equial to the
amount of tax payable.

While opting for composition scheme, remember that the scheme is applicable on all business
verticals with the same PAN.

For example, Mr. K has three business verticals registered separately. So, the composition scheme
will be available to all three verticals.

One should read the terms and conditions before opting for the composition scheme.
GSTIN

The earlier taxes such as CST, VAT and Service tax are merged under one tax law governed by single
authority. Now, instead of many identification numbers, there is a single registration number –
GSTIN.

The GSTIN stands for Goods and Services Tax Identification Number (not a code a normal Joe can’t
crack). The GSTIN is a state-wise PAN-based 15-digit alpha-numeric identification number. Earlier,
any dealer registering under the VAT law had a personal TIN. The Commercial tax department of the
respective state issued this. Similarly, the CBEC issued a Service Tax registration number to a service
provider. Now a single tax authority will assign a Pan-India GSTIN to the taxpayers.

Procedure to get GSTIN:

Under provisions of section 25(9),government will assign GSTIN registered taxpayers. The taxpayers
have to submit an application electronically in Form REG-26. Taxpayers have to sign or verify this
through EVC (Electronic Verification Code). They can do this either directly or through a Facilitation
Center notified by the Board or Commissioner. The rule 1 on the common portal specifies the
procedure for this.

After submitting or filling the form, the concerned officer may assign a Unique Identity Number to
the assessee. He will also issue Form REG-06 within three working days from the date of submission
of application.

Here is a complete break-down of the GST Identification Number:

First two digits represent the state code. The Indian Census 2011 makes it mandatory for every state
to have a unique two digit code.
The next 10 digits are from the PAN number of the taxpayer.
The number of registration within a state determines the 13th digit.
The 14th digit is Z by default.
The last digit is for the check code.
Businesses have to display their GST Identification Number in a visible manner. They can get the
number by registering under GST.

Sin Tax
The Government is set to introduce a Sin Tax on alcohol and tobacco products to avert their
consumption.
Reason for Sin Tax
For those who are wondering what sin tax is, allow me to enlighten you. Sin tax is a globally
prevalent practice in which products like alcohol and tobacco have higher tax rates as compared to
other essential goods. Sin tax is an excise tax on products and services considered to be bad for
health or society. Some examples include alcohol, tobacco and gambling. ‘Sin Tax’ serves two for
one. It is an effort to discourage people from using harmful products like cigarettes or bidis or
services like gambling (because there’s nothing as precious as money). It also becomes one of the
most common measures to shore up tax revenues. The logic is quite simple. Also, taxpayers
generally don’t oppose such a tax as they are indirect in nature and affect only their end users.

Earlier, the VAT on cigarettes was 25% in Maharashtra and 65% in Rajasthan. Bidis had a very low
Central and State taxes. Many prominent ministers wanted to increase the tax on cigarettes, bidis
and alcohol.

GST Sin TaxIn the 13th GST Council Meeting at the Capital, they capped the sin tax at 15%. These
proceeds are to compensate states that have faced a reduction in revenue since GST
implementation. The final tax incidence is not lower than the previous tax rates. The cess is
chargeable on tobacco, luxury cars, pan masala and aerated drinks.
The council also decided to cap the cess rate on tobacco products (Sin Tax) as follows:

cigarettes of up to 65 mm (both filter & non-filter): Rs. 485 per 1,000 sticks

cigarettes longer than 65 mm & non-filter cigarettes: Rs. 792 per 1,000 sticks

filter cigarettes: Rs. 621 per 1,000 sticks

cigars and king-sized cigarettes: 36%

Fat Tax
A study reveals that the number of obese people in India has doubled in the last decade. Another
study by the World Health Organization (WHO) found that about 22% children in India were obese.
India stands as the third most obese country in the world. It is not a feat we can take pride in. There
are discussions to impose a Fat Tax to discourage the consumption of junk food. Junk food is one of
the major reasons of obesity. The term ‘junk food’ is not defined under the Food Safety and
Standard Act. But, it generally refers to packaged food with low nutritional value. It includes eatables
with excessive amounts of sugar, salt or saturated fats.
If you’re of the opinion that the government cannot put this appalling thought into action, you’re in
for a shock. In June 2016 the Kerala government imposed a 14.5% tax on junk food served in
branded restaurants. Even in USA, the states of California and Philadelphia levy tax on sugary
beverages. Mexico and Hungary also have the same practice in place.

Why is Fat Tax needed?

The intake of junk food on a regular basis has increased by folds’.
It is the courtesy of breathtakingly delicious advertisements that adorn every possible screen. Vivid
and photo-shopped posters of scrumptious burgers, mouth-watering pizzas with four diverse types
of cheese, and freshly prepared french fries with peri-peri are strategically placed to garner most
attraction – right from the billboards at major traffic signals to the flat LCDs and plasma. These
methods work like a charm.
Don’t try to appease yourself by thinking that Fat tax is barely a proposition. I would like to inform
you that a similar recommendations to make Aadhar a money bill were adopted in 2016. So, there
are strong chances that a Fat tax could be a reality under GST.
Don’t jump to the conclusion that this is another money-making scheme of the government.
The third most obese country in the world is also home to 203 million people who are underweight.
Ironical, huh? So, the group of bureaucrats has suggested to divert extra revenue towards the health
budget. A Fat tax would ensure that there is a control in the gobbling up of food items high in sugar,
salts or saturated fats. At least this will discourage the folks who love their money. If people still
consume fatty food they’ll have to pay up. The government can use this money for the betterment
of the underweight population. Sounds like a win-win?

The government has also levied an additional cess (Sin tax) on demerit goods to deter people from
consuming those.The team has also suggested restricting endorsements and advertisements.
Another recommendation is to increase public spending on health to 1.5% of the GDP. Currently it is
a meagre 1.16% of the gross domestic product. So far, there are no comments on the progress of
this suggestion of introducing a Fat tax. But you never know, our PM could be in the mood for
another surgical strike.

Artificial Intelligence & Data Analytics Applications

“The theory and development of computer systems able to perform tasks normally requiring human
intelligence, such as visual perception, speech recognition, decision-making and translation between
languages.”

As evident, AI is a very broad term comprising a variety of components.

AI encompasses not only cognitive and machine learning but also robotic learning. Robotic learning
is when programmers teach machines to perform and imitate steps a human would take to perform
a task. It was a Eureka moment when the geniuses realized that they can implement machine
learning to perform dangerous or repetitive tasks.

On a daily basis, businesses can use AI for automatic invoice scanning and processing (although this
could lead to loss of job for some).

In the tax world, the possibilities of Artificial Intelligence application are endless.

artificial intelligence, data analytics, AI, AI on tax, artificial intelligence in tax, artificial intelligence in
accounting
Do the chances of an audit increase when the company headquarters are set up to a new
jurisdiction? Does changing the business’s legal structure invite scrutiny? What if you could calculate
the probability of audit based on potential sales and expenses for the coming year? Do the possible
outcomes of a local or national election impact your business’s tax risk?

AI systems designed for this specific purpose can analyze internal tax data. It can compare the data
with an extensive set of data (structured or unstructured) and build a probabilistic model out of it. AI
would make this type of analysis possible—even commonplace.

Your legal team would spend hours to go through a 500-page contract to identify possible legal
problems or taxation risks. An AI tool can do the same in a matter of seconds. A human fraud analyst
works based on experience and intuition and knows what to look for. On the other hand, an AI
model can work based on historical frauds and identify patterns by constantly scanning through
sales and purchase registers to pick errors.

Major accounting firms have begun applying machine learning and AI to automate book-keeping.
Integrating AI for monotonous tasks like data entry and reconciliations removes room for error. The
accuracy and speed AI promises could therefore lead to accountants shutting shop.

Artificial Intelligence and Data analytics can be taught to perform any and every function under the
sun.

During the Industrial Revolution, machines were invented to undertake activities considered
dangerous for humans. Similarly, through automation of advanced technology, AI can take over
repetitive human tasks, helping us become smarter, safer society.

Data analytics is an extremely helpful tool in social and financial profiling of taxpayers.

Based on data analytics, system establishes relationships between different entities or people. The
data analytics system analyzes different sets of data such as addresses, phone calls, travel trends, I-T
returns and now, social media interactions too.

Post Demonetization (which was a trigger of sorts) the government now wishes to analyze both
structured and unstructured data. For this purpose, Indian tax officials are advocating Project
Insight.

Project Insight is a data analytics platform where algorithms will match residents’ spending patterns
(shown on social media) with their declared income. As per a report by NDTV, the government
planned to launch the second phase of Project Insight by December 2017.

Expected to go live around May 2018, Project Insight’s analytics enable authorities to predict future
defaults and flag risks. Data mining, collection, collation and processing of available information aids
the taxmen to monitor high value transactions.

Employing the same logic, the CBEC and GSTN have found inconsistencies between the amount of
IGST and Compensation cess paid by importers at customs ports and input tax credit of the same
claimed in GSTR-3B.

Positive Impact of GST :

Listed below are some impacts of the implementation of the GST that will benefit the Indian
economy :

Removal of Cascading effect of taxes/ Tax on Tax/ Double Taxation

This effect of taxes stacking upon one another for services providers. This had been a major issue for
all businesses as they were aggrieved with paying taxes twice. Under the previous tax regime, the
transfer of goods came under the service contract. This meant that every invoice had the value of
goods as well as services. Both of these attracted a rate of 70% each giving a total rate of 140%.
Under GST, the taxes are unified under the supply of services and the taxation system is unified.
Increase in Competitiveness
Under the old taxation system, taxes used to constitute about 25-30% of the retail price of the goods
and services. The implementation of GST, prices have gone down since the burden of paying tax has
fallen onto the end consumer of the goods and services. Therefore, there is a scope for businesses to
produce more at lesser effective costs, leading to a rise in competition.

Simplification of Tax Structure

The tax calculation under the system of GST has become much more simplified. This replaces the
multiple stages of taxation under the old tax regime. This saves a lot of resources for calculation of
taxes. It has also united the taxation laws under various state governments.

Clarity for Software Industry

The software an IT giants of the country have some clarity for the payment of taxes. Under the old
system of taxation, there was some dispute on as to whether they need to apply for VAT or Service
Charge on their products. GST clearly distinguishes between products and services and the way
taxation is applied to them.

Economic Union
The GST impact on the transportation of goods and services from state to another has been a very
welcoming change. Goods can be easily transported from one place to another under the new
regime. This encourages businesses to have a PAN India presence. The movement of goods across
state borders can be done easily via the procedure of generation of the e-way bill.

Inputs held in Stock

The service providers will be able to access the CENVAT credit of input that is held in the stocks. The
provision is best applicable when users migrate from taxation form to the other such as from exempt
category to a taxable category.

Increase in exports
The cost of production in the domestic markets has dropped due to the implementation of the
Goods and Services Tax. this leads to a positive influence in increasing competitiveness in the
international markets leading to excessive exports.

Repairs and Maintenance

Service Providers dealing with delivery of repairs and Maintenance services will enjoy the benefits of
both the credit of input and credit of input services with the accordance with the GST system. Under
the old regime, the repair service providers could only benefit from the credit of input services
which, was a very limiting compensation for the service providers.

Reduction of Input Costs

Since the abolishing of the multiple levels of taxation and the introduction of a single tax on value
addition, the cost of inputs will decrease. The taxation on inputs such as VAT, Excise duty is no
longer valid and no longer a headache of services providers.
Negative impact of GST
The newly implemented tax regime is not entirely perfect and there are some inherent flaws with
the system of the Goods and Services Tax. Some of these are listed below

Lack of a Centralised Registration

The previous taxation system allowed the taxpayers to register from all over the country via a
central authority. However, with the implementation of GST, taxpayers have to register GST from
their state and pay the Central Tax.

Taxation for Free Services

Even if a particular provide any service(s) for free they are still eligible to be taxed for it. Supplies
made without consideration will now be taxable.

Taxation for Free Services

Even if a particular provide any service(s) for free they are still eligible to be taxed for it. Supplies
made without consideration will now be taxable.

Service Costs to Consumer

The rates of taxation to the end consumer will increase. The GST is destination based tax which
means the burden of the tax falls on to the end consumer

Lack of centralised System of Accounting

Businesses in every state have to maintain their personalised accounting records since there is no
centralised registration of business. Every state is financially accountable to that state for taxation.
Accounts will be separate
for central and state taxation for each business

Return Filing
As a business owner, you have to file GST returns listing detailing all the business transactions such
as purchases sales etc periodically. The decentralised registration is the cause of filing for so many
returns as you have to file the returns for every state your business expands into. A business owner
has to file close to 37 returns in a financial year. This procedure could be very burdensome.

Public Education
As the new taxation system is put in place, taxpayers and businesses have to be educated on the
inner workings of the taxation system. The GST tax regime has changed the system completely and
hence taxpayers and the general public have to be informed on how this will impact day to day
business activities. This will take up a lot of resources and money.

Impact of GST on Common Man

In India, the maximum population is of the middle class and lower middle class where people either
belong to service class or they depend on agriculture for their living. In this scenario, the most
important question is what is the impact of GST on a common man or a middle-class family. For the
general public, the actual impact of any economy is when the prices of their necessity become
affected. For public in large when prices become low for the day to day goods and services which are
consumed, the economy is good otherwise if the inflation rate is higher, then the public gets
unsatisfied with the changes done by the government.
Lets take some everyday examples –

Household expenses
In GST, the food items are under zero to 5 percent tax rate which will not directly impact on the food
prices.
All the packaged FMCG products like Pharma items, toothpaste, soap, packaged junk food, shampoo
etc along with electronic products like cooler and TV are supposed to become cheaper.
Cosmetic services like salon and beauty services are known to become expensive with an increased
3% GST rate upon them along with no benefit on input tax credit on such services.
Daily household items cost have enhanced due to the implementation of Goods and Services Tax
(GST) regime. Nearly 54 percent people of the country are complaining that the new indirect tax
regime implementation has enhanced the daily household expenses, as this influencing the common
people in the country

Real Estate
If a customer buys under-construction property for INR 1 crore, there will be different cases.
Previously, it was around 5.5 percent VAT and service tax applicable, But under the GST, 12% tax
rate applicable to the real estate makes it slightly expensive.
Well, there will be no changes in the ready to move Apartments with a completion certificate, As
they have been kept out of the GST structure.

Taxi Services
If a customer takes a taxi service in which the ride costs 100 rupees, then there will be a substantial
change in the tax as previously there was around 6% of service tax while in the GST it is now levied at
5% which will be a marginal saving for the customer.

Banking and Insurance services

These financial Services are now expensive as there has been 3% extra GST tax rate applicable to
them.

Hotels
If in case, a customer books a hotel with a tariff of INR 8000, then the gross and indirect tax rate i.e.
service tax, the luxury tax is around 19 to 25% according to the luxury tax rate of the state. Thus, the
tax will be calculated around INR 1520 to INR 2000.
While in the case of GST, there is 28% GST applicable on all the accommodations with tariff about
INR 7500, which will take the tax calculation at INR 2100. Overall the tax ratio is slightly expensive
for the expensive hotels.

Air Travels
In case, a customer books flight tickets Indian in a domestic economy class of INR 1000, then the tax
rate is varied in both the cases.
Previously there was around 6% of service tax applicable in domestic economy class, while in the
GST, the economic class is taxable at 5%, which will result in slight savings.
While talking about the business class, the tax rate in GST has been increased from 9% to 12%,
resulting in an expensive business class tax case.

Restaurant
If in case, a customer orders a meal for INR 1000, then there will be substantial savings on the
restaurant bill.
In the earlier tax scheme, there was VAT at the rate of 12.5% and service tax @ 6% totalling at
around 18.5%.
While under the GST, an air conditioned restaurant will be charged at 18% GST, making it up to
minimal cost reduction in the restaurant Bill.

For a middle-class family, the main issues are “Roti, Kapda, and Makaan“. Initially, the country is
troubling with the new tax regime due to the four slab rate structure under GST. For the long term,
the country will be benefited with the new Goods and Service Tax (GST) Regime.

Impact of GST on Corruption

Corruption in a tax department is directly proportion to the tax evasion.If businessman can’t evade
taxes, they would also not bribe the tax officials for corrupt practices.The Goods and Services Tax
(GST) is an attempt by the Government to tax all activities relating to supply of goods and services.
The corruption is likely to be reduced for the following reasons.

1: Reduced Net Taxes

The taxpayers shall be eligible to take credit of the taxes on all the inputs across India, which would
reduce his net tax liability.Let me explain this with an example.
Suppose you manufacture an item of Rs 100 using the inputs of Rs 80 purchased from different tax
payers. Let the rate of GST be 20%.In the present regime you pay taxes of 20% of Rs 100 i.e. Rs 20; if
you are purchasing all your inputs without bills.If only a few inputs, around 50% of your inputs suffer
tax, you get credit of the taxes on the inputs used by you. This is calculated to be 50% of Rs 80 i.e. on
Rs 40 @20% viz. Rs 8. Hence your tax liability is Rs 20- Rs 8 = Rs 12.In the GST regime all goods and
services would be taxed. Hence, you would get credit @20% on Rs 80 i.e. Rs 16 and your net tax
liability would be Rs 4 only.Hence, your net liability reduced from Rs 20 without bills to Rs 12 with
50% bills to Rs 4 in GST regime; even though the tax rates remained the same.Thus, the net tax rate
to an honest taxpayer is just 4% of Rs 100 in the GST regime with the GST rate at 20%.

Hence, there would be less incentive for you to evade taxes now when the effective GST rate is just
4%. It is so because, if you are caught by tax authorities, you have to pay Rs 20 as GST (without
credit) plus Rs 20 as penalty. Most taxpayers would therefore avoid evasion in GST regime.

2: Reduced Interface
All the returns of the taxpayers shall be filed online in the GST regime. They would also get all their
refunds, orders etc. online. This will reduce the interface between the assessees and officers, which
would reduce corruption.
3: Greater Transparency
The GST Network (GSTN) is designed to capture all transaction details up to invoice level. Hence, you
can’t escape the inputs or services used in providing the goods or services. The paper
documentations are to be eliminated completely. Your data would be visible to state as well as
central government officers. It would be difficult to hide anything.

4: Dual Control
GST will be monitored jointly by Central and state government officials. It would be difficult to
manage some officers and do evasions. The chances of getting caught would be double in the GST
regime.

Hence, the GST regime is likely to improve tax compliance and reduce corruption.

Impact of GST On Foreign Trade

Introduction of GST is likely to benefit the foreign trade. Destination based taxation is a fundamental
principal of sound GST. Importers would be taxed at the same rate as products produced and
consumed with the jurisdiction. Exporters of goods and services shall continue to be zero rated and
will be eligible to claim refund of input tax credit. Hence, both Import substituting industries and
Export oriented industries would become internationally more competitive. These will give an
impetus to export whereas imports will be expected to register a downfall.
Under the proposed GST, imports shall be fully taxed in India, irrespective of whether the imported
goods and services are produced in India or not, thereby, providing a level playing field to domestic
producers particularly in the import-substitution industry. This will boost the ‘Make in India’
initiative of the government.

Impact of GST on Banking Sector

The banking sector is one of the largest services sectors in India. The implementation of the Goods &
Services Tax (GST) will likely prove to be a challenge for the sector on two counts - First, due to the
higher GST rates compared to the current service tax rate and second, due to the vast geographical
reach of most banks.

With the GST coming close on the heels of demonetisation, the banking sector needs to ensure that
they are ready for this new tax regime.
There are 4 critical implications of GST on the banking sector to help banks plan their GST
implementation strategy.

1. Substantial Increase in Compliance:

GsT is a parallel tax regime where the States and the Centre, tax the payer in one go. Hence, banks
may need to obtain State-wise registration in every State where they have a branch. In case a bank
has multiple branches in one State, only one registration is required for all the branches in that
State.However, most banks have a multi-state presence. State-wise registration will therefore lead
to a substantial increase in compliance levels, especially because most banks have obtained a
‘ centralised’ registration under service tax. So, currently, a bank may be filing only two returns on
an annual basis as a service tax assessee, but with GST, the bank might be required to file as many as
61 returns per year for every State they are present in (five returns per month plus one annual
return).

2. Determining Place of Supply Could be Critical

GST is a ‘ place of supply’ based tax regime. Hence, for every transaction in GST, the bank will need
to determine the place of consumption where GST will be paid. With bank branches conducting
several transactions, both within and outside States, determining the place of supply will not be very
easy.The Model GST Law casts the onus of determining whether a transaction is ‘ intra-state’ or
‘ inter-state’ on the assessee. So, banks will need to decide whether the payment is against Central
GST (CGST) and State GST (SGST) or Integrated GST (IGST), based on the type of
transaction.Moreover, inter-state supplies of goods or services (or both) between two branches of
the same bank, located in two States, will also attract IGST. The GST charged will be available as
credit to the receiving branch; however, tracking such transactions could prove to be a cumbersome
task.Services being intangible in nature, proxy rules/ provisions are prescribed in the GST framework
to help the assessee determine the place of consumption. Though, typically, the place of
consumption for banking services (as per revised draft IGST Act) is the location of the recipient of
services on the records of the supplier. But there is ample scope for wrong determination for a pan-
India bank as there could be a dispute on who the service recipient is.Further, in cases where there
is a dispute over the place of supply of services, the taxpayer may get entangled in legal disputes.
Currently, the GST legislation provides that if an assessee wrongly pays, say CGST and SGST (on a
belief that the transaction is intra-state), instead of IGST, then they will have to pay the correct taxes
(i.e. IGST) again and claim a refund for wrongfully paid taxes.
Ideally, instead of putting the onus on the taxpayer to determine whether the transaction is intra-
state or inter-state, the GST law should provide for a simpler redressal mechanism.

3. Taxability of ‘ Interest’
In the current tax regime, the service tax legislation does not tax ‘ interest’ . But with GST, the term
‘ service’ is defined in a wide manner to cover ‘ anything other than goods’ which may cover
interest as well.
Governments across the world do not levy GST on interest given the fact that there is always a
debate on whether interest is the time value of money or a consideration for lending money. The
GST Law in India too should clarify if interest is outside the ambit of GST. If ‘ interest’ is not
expected to attract GST, it will have implications on input tax credits claimed by banks.

4. Paying GST at Applicable Rate

WithGST, services are expected to attract 18% GST. This rate is higher by 3% from the current service
tax rate of 15%. This may make banking services such as issue of cheque books and demand drafts
more expensive, particularly for retail customers.Another point to note is that these days banks also
deal in commodities such as gold / silver where a concessional GST rate is expected to be applicable.
Therefore banks need to be careful in paying GST with the appropriate applicable rate on different
products.

Banks have always been a huge pillar of the Indian economy and taxpayers are literally banking on
them for GST payments / financial needs. Given this, the GST Council must provide clarity on GST for
the banking sector and shed light on several open ended issues that are plaguing them currently.

Industry analysis of GST

1.Impact of GST on Manufacturers, Distributor, and Retailers
GST is a boost competitiveness and performance in India’s manufacturing sector. Declining exports
and high infrastructure spending are just some of the concerns of this sector. Multiple indirect taxes
had also increased the administrative costs for manufacturers and distributors and with GST in place,
the compliance burden has eased and this sector will grow more strongly.
But due to GST business which was not under the tax bracket previously will now have to register.
This will lead to lesser tax evasion.

2. Impact of GST on Service Providers

As of March 2014, there were 12, 76,861 service tax assessees in the country out of which only the
top 50 paid more than 50% of the tax collected nationwide. Most of the tax burden is borne by
domains such as IT services, telecommunication services, the Insurance industry, business support
services, Banking and Financial services, etc. These pan-India businesses already work in a unified
market and will see compliance burden becoming lesser. But they will have to separately register
every place of business in each state.

3. Sector-wise Impact Analysis

Logistics
In a vast country like India, the logistics sector forms the backbone of the economy. We can fairly
assume that a well organised and mature logistics industry has the potential to leapfrog the “Make
In India” initiative of the Government of India to its desired position.

E-commerce
The e-commerce sector in India has been growing by leaps and bounds. In many ways, GST will help
the e-com sector’s continued growth but the long-term effects will be particularly interesting
because the GST law specifically proposes a Tax Collection at Source (TCS) mechanism, which e-com
companies are not too happy with. The current rate of TCS is at 1%.

Pharmaceutical
On the whole, GST is benefiting the pharmaceutical a and healthcare industries. It will create a level
playing field for generic drug makers, boost medical tourism and simplify the tax structure. If there is
any concern whatsoever, then it relates to the pricing structure (as per latest news). The pharma
sector is hoping for a tax respite as it will make affordable healthcare easier to access by all.

Telecommunications
In the telecom sector, prices will come down after GST. Manufacturers will save on costs through
efficient management of inventory and by consolidating their warehouses. Handset manufacturers
will find it easier to sell their equipment as GST has negated the need to set up state-specific
entities, and transfer stocks. The will also save up on logistics costs.

Textile
The Indian textile industry provides employment to a large number of skilled and unskilled workers
in the country. It contributes about 10% of the total annual export, and this value is likely to increase
under GST. GST would affect the cotton value chain of the textile industry which is chosen by most
small medium enterprises as it previously attracted zero central excise duty (under optional route).

Real Estate
The real estate sector is one of the most pivotal sectors of the Indian economy, playing an important
role in employment generation in India. The impact of GST on the real estate sector cannot be fully
assessed as it largely depends on the tax rates. However, the sector will see substantial benefits
from GST implementation, as it has brought to the industry much-required transparency and
accountability.

Agriculture
The agricultural sector is the largest contributing sector the overall Indian GDP. It covers around 16%
of Indian GDP. One of the major issues faced by the agricultural sector is the transportation of agri-
products across state lines all over India. GST will resolve the issue of transportation.

FMCG
The FMCG sector is experiencing significant savings in logistics and distribution costs as the GST has
eliminated the need for multiple sales depots.

Freelancers
Freelancing in India is still a nascent industry and the rules and regulations for this chaotic industry
are still up in the air. But with GST, it will become much easier for freelancers to file their taxes as
they can easily do it online. They are taxed as service providers, and the new tax structure has
brought about coherence and accountability in this sector.

Automobiles
The automobile industry in India is a vast business producing a large number of cars annually, fueled
mostly by the huge population of the country. Under the previous tax system, there were several
taxes applicable to this sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration
duty which will be subsumed by GST.

Startups
With increased limits for registration, a DIY compliance model, tax credit on purchases, and a free
flow of goods and services, the GST regime truly augurs well for the Indian startup scene. Previously,
many Indian states had different VAT laws which were confusing for companies that have a pan-
India presence, especially the e-com sector. All of this has changed under GST.

Impact on IT and Gadgets industry

In the wake of technological advancement, the IT and gadgets industry is booming. It accounts for
approximately 66 per cent of the $123-129 billion dollar market. This colossal business employs
around 11 million people in India alone. To put that into perspective, the Indian army consists of a
total 4.6 million.

Impact of GST on Gadgets

Registration –
GST sought to unify the bazillion taxes which existed previously. There is a more unified and
streamlined system now. Traders naturally undertook some steps in order to transition into GST.
Previously traders from every part of the country were registered under the CST Department. They
now have to register under GST.

Smartphones, tablets and accessories-

Thanks to GST, Gadgets are now more affordable. There has been a decrease in the overall 1.5%
decrease in the tax since smartphones are now placed in the 12% tax slab as a pose to the
preceeding 13.5%. However expect in-house smartphones to get a bit more expensive since GsT is
levied on the products made under the Make In India initiative.

Gaming Consoles and Gadgets

We all love our games and gadgets. We also want them to be as affordable and accessible as
possible. The good news is that under GST, there will be a slight decrease of 0.5% in the tax rate. So
as a consumer, your gadgets and game prices won’t incur a drastic overhaul as in the case of some
other products.

Gaming consoles like the Playstation, controllers, games, fitness trackers as well as Virtual reality
headsets like the Google Daydream or Samsung Gear VR are under the 28% tax bracket. The
previous tax rate was 28.5% (hence the 0.5% decrease). There is a GST of 18% on hard-drives,
memory cards and other utility gadgets.

TV, Laptops, Desktops, Cameras

There are two tax rates for the above mentioned electronics – 18 and 28%. The 18% bracket is more
towards computer hardware of the IT Industry. It includes laptops, notebooks, netbooks and
desktops. The 28% includes other electronic items such as televisions, computers and other
accessories. DSLRs, digital and video cameras and recorders also fall into this category.

Impact of GST on Logistics Industry

In the pre-GST era, a Central Sales Tax (CST) was levied on the inter-state movement of goods. To
avoid this levy, manufacturers and traders of the logistics industry set up their warehouses in the
states they supplied to. Now, with the abolishing of CST, the freight transportation times has
reduced by 10-12%.

GST Council plans to introduce the E-way Bill mechanism for smoother logistics. They are addressing
the initial hiccups and are attempting to resolve the same.

GST has brought about the following modifications in the logistics industry:
Simplification:
E-way Bill Registration, GST Impact on Logistics IndustryIn the logistics industry, transporters would
have to follow a myriad number of taxes. This increased paperwork and made the process costly.
Since the arrival of GST, taxes like Octroi duty, entry tax and CST have been eliminated. This reduces
the paperwork for traders who make inter-state supplies almost daily. Also, there were instances
where trucks were stuck at state borders because of issues with state specific documents. GST has
unified the entire Indian market, thereby eliminating extra paperwork.

Reduced Transit Times:

The potholes and unproductive transit hours and regulatory hassles often reduced the efficiency of
logistics service providers. On the midnight of 30th June, the government scrapped toll nakas on
various state borders. E-way bill will further increase efficiency by bringing down transportation
costs and time. E-waybill guidelines state that inspectors can stop transport vehicle for inspection
only once (except if there’s any hint of malpractice of any sort). If an inspector stops a vehicle for
more than 30 minutes, the driver can upload details on the GSTN. Transporters and Logistics Service
Providers will no longer have to grease inspectors’ palms.

Warehouse Consolidation:
Like we mentioned earlier, companies maintained warehouses in each state to avoid paying CST. GST
now allows for centralization and warehouse consolidations without increasing the costs. There is no
longer a necessity for a company to have warehouses in each state. A demand for larger warehouses
in strategic locations will increase. Correspondingly there will be a decrease in demand for smaller
warehouses. This would give rise to mergers and acquisitions. Combining warehouses would mean
lesser stocking points and lower variation in demands. And because the introduction of e-waybill
would reduce the transit time, the logistics industry will opt for the hub and spoke model.

A logistics company would have to divert some part of their funds to set up ERP accounting systems
and inventory management systems to become GST compliant. However, these are short term costs
and the other factors will contribute in cost reduction.

Impact of GST on Independent Financial Advisors

Mutual Fund investments are subject to market risk. Please read the offer document carefully before
investing.” After the countless times that we’ve seen and heard these words on our television
screens, we remember them by heart. This warning is partly the reason to avail the services of
Financial Advisors. The other reason is the simple fact that these advisors know better about what
we should, do with our money.

GST on Mutual Fund Services

Like banking and insurance services, mutual fund services will also see marginal increase in charges.
There is an increase in tax from the earlier 15% Service Tax to 18% GST. The turnover threshold for
small mutual fund distributors is irrelevant. Both registered and unregistered agents will have to pay
18% on their income. Therefore, seeking advice from an investment advisor or an investment
planner will become slightly more expensive.
You could consult your mutual fund distributor, but there’s a reason the investment experts exist.
Broker-Dealer Advisors and Independent Advisors operate differently. The impact of Goods and
Services Tax also differs.

Independent Financial Advisors:

As compared to Broker-Dealer Advisors, Independent Advisors follow much stricter fiduciary

standards. The Securities and Exchange Commission (SEC) or the state will oversee the operations of
an independent investment advisor. So one can say that it is mandatory to get registration under
GST irrespective of turnover.

Registration:
All financial advisors whose annual income, or commission, or fee may rise above 20 lakh have to
obtain a registration. However, this does not mean that unregistered agents and distributors don’t
have to pay GST. Such unregistered advisors and agents will pay GST under Reverse Charge
mechanism. Companies can deduct the GST liability from the gross commission and pay the net
amount.

If the distributor opts for voluntary registration, the company will pay the gross commission. The
distributor has to comply with the taxes. The benefit of such a voluntary registration includes the
capability to avail input tax credit. Financial Advisors who provide services in more than one state
have to get separate registration in different states.

Although the taxpayers have to register on the government’s online portal, the comfort ends there.
There are almost 83 fields to be filled while uploading documents in specific formats and sizes. There
are many GST registration services that provide assistance. GST Edge has devised a simpler form that
quickens the registration process.

Reverse Charge Mechanism (RCM):

If a registered agent or distributor engages in trading of goods and/or services with an unregistered
distributor/agent, the registered person will pay the GST applicable. Consequently, there will be an
obligation for registered dealers to undertake transaction with other registered dealers. This will
curb corrupt practices.

The implementation of reverse charge mechanism has been deferred until March 2018. This move
aims to benefit small businesses and reduce compliance costs. The distributors who have already
registered under GST can cancel it to avail the benefits of RCM – provided they earn less than Rs. 20
lakh. Mutual Fund Distributors who have voluntarily registered for GST will have to wait for a year to
cancel it. The distributors that earn less than Rs. 20 lakh are exempt from paying GST. Clarification is
awaited on whether these distributors get any refund of the GST paid so far under RCM.

Compliance:
GST Consulting, GST impact on Financial AdvisorsEvery person registered under the Goods and
Services Tax was required to file three parts of a monthly return. In GSTR-1, or the sales return, a
registered person has to furnish details of sales made and income. Whereas in GSTR-2, service
providers have to mention details of purchases made in the previous month. The third return, GSTR-
3, is auto populated on the basis of the first and second return. The third return is for the
computation of the net monthly GST liability. This return filing procedure remains the same, even for
Independent Financial Advisors.
GST compliant sales and purchase invoices are required to file GST Returns. Fields like SAC, GSTIN of
service provider & customer, Shipping Address, etc should be mentioned to make GST compliant
invoice. Compliance is necessary to be able to claim credit on taxes paid on input. Services providers
have to upload a summary of these invoices on the Government portal. Creating physical invoices
and then uploading them on the portal is time consuming. There is also a room for errors. It is better
to install an invoicing software with printing configuration. GST Edge goes one step further with a
cloud based invoicing software.

Impact Of GST on Lottery Industry

The government recently shot down requests to lower the GST on Lottery businesses. Today, we will
discuss about how the lottery business suffers due to GST implemenation.

In this day and age, if one was to say that he/she isn’t familiar with Kaun banega Crorepati (KBC),
he/she would be on the receiving end of death stares. But for those who live under a rock, I shall fill
you in. KBC is the Indian version of the United Kingdom game show ‘Who Wants to Be a Millionare?’
Our game show is currently in its 9th season and Amitabh Bacchhan is the host.

It is one of the sensible things on Indian television right now, really (most other T.V series are
appalling). Mr. Bacchhan can engage not only the contestant on the hot seat but also the people
glued to their T.V screens. And you get to learn! It’s genius, if you ask me. The only dampener is the
tax the contestants have to pay on winning.

When someone wins on an Online/T.V game show, the winner shall pay Direct Tax at the flat rate of
30% on the income so generated. After adding cess, the tax rate will amount to 30.9%. No Indirect
tax is charged on winnings from a game show, whether played online or on T.V.

Online skill games fall within the category of ‘all other services not specified elsewhere’.

Impact of GST on Lottery Businesses

(Jaldi kijiye deviyo aur sajjano, keval 1 minute reh gaya hain)

The 28% GST on face value of lottery has adversely impacted the online lottery business. GST on
Lottery is significantly higher than the minimal or zero tax levied by the states that have lotteries.
The tax on online skills game was 15% earlier. With the Input Credit Mechanism now available, the
18% GST isn’t an extreme hike.

Lottery is a well-regulated industry. It provides direct employment to over 10 lakh people. Higher tax
slabs would force lottery companies out of business. It will also spawn a large number of
underground, illegal lottery schemes. The online lottery business generates employment for a large
number of people in the state. It provides livelihood to economically weaker sections like widows,
differently abled, handicapped and uneducated people. At a protest held against the 28% tax, the
protesters demanded that GST on Lottery should be levied only on margin money i.e. the price of
the lottery ticket minus payouts.

In the Council meetings held since the protest, there has been no discussion regarding reduction of
GST on Lottery and other gaming activities

E-Way Bill Implementation

In the pre-GST era, traders could not supply goods without getting waybills from VAT authorities.
These waybills were physical documents that allowed movement of goods. Obtaining these waybills
was a cumbersome process and caused restricted movement of goods. The weapon of choice to iron
out these pre-GST transportation woes is the E-Way Bill Implementation

Even while GST was under development, it was hailed as the biggest tax reform that would turn
India into a common market. Its purpose was to remove discrepancies in inter-state movement of
goods.

Reasons for bumpy E-way Bill implementation:

Check posts dismantled:

Dismantling check posts was a major achievement. Until state governments realized that the
corruption and tax evasion had increased. The state government inspectors now have mobile vans.
`instead of speeding up the goods movement, dismantling of check posts has slowed it down.

Validity:

The validity depends on the distance and the date and time of generation of e-way bill. For up to 100
km, an e-way bill will be valid for 1 day, and so on. If there is a change in the destination or the
system fails, the validity may expire. In either situation, transporters would have to generate a fresh
e-way bill. The transporter might not be equipped to generate the bills. Also, there are possibilities
of the portal crashing if too many people are using it at once.

Let’s understand this point with an example.

E-way Bill Registration, E-way Bill Implementation
A trader will have to generate two separate bills to transport a refrigerator costing more than Rs.
50,000. First from the factory to the dealer and second, to the customer’s house. One more bill in
case of change of the mode of transportation. If the customer cancels the order, he will send it back
and the trader will have to generate another bill.

Further, intra-state movement of goods will also require e-way bill. This increases the paperwork for
dealers who have more than one client.

Reconciliation:
As explained in the 3rd point above, the documentation increases depending on the situation.
Generating so many bills would add the burden on the GSTN which is already struggling. Invoice
matching adds another layer of complexity to the whole process.

Increased Cost:
Tracking the transport vehicle and mapping the soft-copy of the e-way bill would require installation
of a radio frequency identification device in the transporter’s vehicle. This will be an additional cost.
The transporter would have to train the drivers to operate the E-way bill portal to upload any
information while in transit. The transporter will have to bear the training costs. It could be a
recurring cost for the transporter considering the labor turnover ratio.

IT Network:
One of the biggest challenges is the reliability (or lack thereof) of the IT Network. The consignor,
consignee or the transporter would have to log in to generate the bill. The first challenge crops up
here – in some cases, it takes multiple attempts to log in. The portal maybe unable to handle the
heavy traffic and crash leading to delay in the supply of goods.

Kerala had its own e-way bill system. According to statistics, approximately 1, 20, 000 bills were
generated every day. This figure is with respect to one state. It is a commendable and mammoth
effort that the GST Council is taking to implement the GST before the decided date. However, a two
week trial period seems like a short time.

This time, the NIC is creating the E-way bill portal.

Impact of GST on E-commerce

“When a small craftsman in a village in India brings a smile to a customer looking at his phone on a
metro ride in New York, we know we are creating something that has fundamentally changed our
lives. I see technology as a means to empower and as a tool that bridges the distance between hope
and opportunity. Social media is reducing social barriers. It connects people on the strength of
human values, not identities.” It has been approximately two years since Narendra Modi’s speech
about Digital India. In this speech NaMo has captured the essence of E-Commerce. The E-Commerce
Industry has grown with leaps and bounds in the last 18 years with advancement in technology as
well as internet.

This growth in the E-Commerce Industry has led to the concept of online marketplaces. An online
marketplace is much like the market places our mothers would drag our fathers to. Except that these
market places are on the internet and intangible.

Lakhs of sellers are present on these e-commerce websites conducting millions of transactions every
other second. GST implementation affects every party included in the trade of E-Commerce – right
from the seller to the E-Commerce Operators.

Mandatory Registration:
The GST law’s provisions state that the businesses involved in E-Commerce activities have to get
registered in every state they are supplying to – irrespective of their turnover. Since the nature of
the E-Commerce business is such that the seller expects orders from every state, the operators have
to register in EVERY STATE.

You can complete your GST Registration online with expert assistance within 24 hours.

If, for some reason, an E-commerce operator does not have an office in a particular state, his
representative will be liable to pay the tax on behalf of the operator. In case the operator doesn’t
have an establishment as well as a representative, the E-Commerce Operator should appoint a
person for the purpose of paying its taxes.

As per this notification dated 15th November 2017, e-commerce sellers need not register if total
sales is less than Rs. 20 lakhs.

Don’t worry; the ecstatic shouts of satisfied customers will soon drown your sighs.

Tax Collection at Source:

Every e-commerce operator should collect tax @ 2% on the net value of taxable supplies made
through their platform, where the consideration is collected by the operator. Here, the net value of
taxable supplies will be equal to the value of taxable supplies made by all registered taxable persons
minus the value of taxable supplies returned to the suppliers.

It is also the responsibility of the E-Commerce platform to file the monthly and annual returns. As a
result, this increases the burden on accounting.

E-Commerce Tax:
E-Commerce Tax is the tax on goods bought into the state by E-Commerce marketplaces. This tax
has been shown the door because of the nature of GST (it is a destination based tax, after all). So,
this implies that the government of the state in which the delivery is being made is the beneficial
party. Now I’m sure none of the state governments would oppose to that, would they?

Composition Scheme:
The motive behind the Composition scheme is to reduce compliance related burdens for small and
medium businesses. Although they don’t get to claim input credit, compounding dealers have to pay
taxes at a lower rate. The Government of India has explicitly denied entry to E-Commerce businesses
under this scheme, no matter how teeny tiny their business.

Return Filing:
E-Commerce Operator:
GSTR-8:GST Return Filing, E-Commerce Industry, GST Impact on E-Commerce
Due Date: 10th of a month
GST ITC-1:
Due Date: 21st of a month.
Supplier:
GSTR-1: Sales ReturnDue Date: 10th of next month
GSTR-1A: Supplier will get details of outward supplies as added, corrected or deleted by the
recipient in Form GSTR-2 on the 17th of next month.
GSTR-2A:
Due Date: 11th of a month
GSTR-2: Purchase Return
Due date: 15th of next month
GST ITC-1:
Due Date: 21st of a month.

Impact of GST on Fast Moving Consumer Goods

Fast Moving Consumer Goods (FMCG) refer to products that sell quickly, in higher volumes, and
have a short shelf life. They are generally cheap. FMCG include non-durable items like soft drinks,
toiletries, over the counter. In the GST regime, one of the biggest change is the seamless flow of
credit. The FMCG industry is one of the major benefiters of GST. Here is the impact of GST on FMCG
Industry.

GST Impact on FMCG Industry

Reduced Logistics Cost:

Reduced Logistics Cost under GST, GST Impact on FMCG, FMCG Industry
It was anticipated that the logistics cost which is currently 2-7% would drop by 1.5%. Cost reduction
would also come in the terms of transportation and storage of goods. The government dismantled
check posts and toll nakas on the borders of many states on the midnight of 30th June. GST also
replaced the different laws in different states, following which the paper work has also reduced.
Lesser check points and minimal paperwork has already reduced transit time. Also, the lead time of
truck routes has improved by 25-27%.
The proposed e-way bill will ensure that there are lesser delays at check points.

Warehousing:
Warehouses under GST, GST Impact on FMCG, FMCG Industry
Most companies consolidated their warehouses due to increased compliance burden. Before GST
implementation, companies rented warehouses in different states because of the different tax rates.
But now, companies have to get registration and pay tax in the state where their warehouse is
located. Now, companies have to re-evaluate the supply chain so as to maximize gains under GST.

Stock Transfers:
Under GST, intra-state stock transfers are taxable only when the entity has more than one
registration in the state. However, stock transfers outside the state will attract GST. The value of
goods will be the transaction value (i.e. the price that is paid or is payable for supply of goods).

Stock Valuation:
GST valuation rules also state that if the transaction value is not available, then the value for the
good or service would be considered as the transaction value. This doesn’t have any effect on the
end consumer. But for the businesses it will lead to working capital blockage. Meaning that money
which companies could use elsewhere will be used for paying taxes on stock transfer.
Tax Holidays & Exemptions:

Tax Holidays:
Tax holidays under GST, GST Impact on FMCG, FMCG Industry
Nestle, ITC, and many other companies have their warehouses set up in places like Himachal
Pradesh. Such places often enjoy tax holidays or tax exemptions. It is beneficial for the companies to
set up their warehouses here, for obvious reasons.

Industries in the north eastern and Himalayan states will continue to get exemption till March 2027.
This could be harmful to the traders based out of other states like Punjab.

Excise Duty Exemptions:

The Department of Industrial Policy and Promotion has also revealed a scheme that replaces the
earlier excise-free zones. Industrial units in these areas will need to pay duties first and claim a
refund later. This scheme offers a 58% Central GST reimbursement. Earlier, companies would get a
100% refund or exemption of the excise-duty paid in cash. The refund will be available only on the
portion of tax paid in cash after all the collected ITC has been utilized to pay Central and integrated
GST.

The impact of GST on the FMCG Industry seems more gloomy than positive or negative depending
on the state in which a company operates. The silver lining for the FMCG Industry is the E-way Bill
and no check posts. will obviously reduce the transit time and corruption. This will give a boost to
the logistics options. Read about the impact of GST on consumers of the FMCG Industry here.

Impact of GST on IPL

Board of Cricket Council of India (BCCI) is considered to be a recognised sports body for the purpose
of GST. As far as IPL is concerned, only a few services (Example: services provided by umpires directly
to BCCI for supporting IPL matches) will be exempted. Rest other services are liable to GST.
The services of support staffs of IPL team and the commentators remain taxable.

Selling Broadcasting media rights, IPL title sponsorship, corporate sponsorship, auctioning franchises
rights are the major source of revenue for BCCI and IPL Franchisees.

IPL title sponsorship: BCCI promotes the Brand VIVO through IPL. Sponsorship services provided by
BCCI to VIVO Mobile Communication Device (Dongguan) Co. Ltd is Liable to GST @ 18% under
Reverse charge. This means that VIVO is liable to pay GST to the government directly.

Brand Promotion Services: As per IPL rules space on player’s jersey, sports kits, sleeves, trouser
pockets, rear and sides of helmet is available for sponsoring. All sponsorship services/brand
promotion services that franchises provide are subject to GST @18% under reverse charge.
Franchise service: As per the “Franchise Agreement”, the franchisee has been granted certain rights
and obligations. The services are classified under as licensing services for the right to use
trademarks/franchises. The BCCI is liable to pay GST @18%.

Sale of IPL media rights: Star India won the global media rights of IPL for a period of five years (2018-
2022). Star India also won the audio-visual production rights for IPL for the 11th season. GST @ 18%
is applicable to licensing services to broadcast the tournament.

IPL match tickets: Under GST, club sports events like the IPL attract a GST of 28%. Tickets for events
organized by National Sports Federations (NSFs) will attract GST at 18%. National sports leagues
which earlier enjoyed exemptions are also under the tax net now.

Costlier sports Goods: The biggest impact in the industry is evident on the price of sports goods, a
number of which are set to go up. Earlier, the sports manufacturers paid a 2% excise duty on goods,
after the government imposed the charge in 2011. Under GST, these goods fall under the 12-28%
slab, a steep rise from the previous charges.

However ,it seems like nothing can deter the cricket enthusiasts – whether it is the high 28% GST or
the match-fixing rumours. The opening match in IPL 2018 saw fans flocking the stadium on the
weekend.

Impact of GST on Entertainment Industry

Like the end consumers, the Entertainment Industry will see a varied impact of GST implementation.
Movie theatres and amusement parks saw either a positive or a negative impact depending on the
state they are in.

The Good for Entertainment Industry:

1.Availability of ITC:
ITC is now available on the services like catering, renting of premises for movie halls, security costs.
These were not available under the pre-GST regime. So, producers can adjust the input GST paid
when renting a premise with the output GST from selling tickets.

2.Exit of Entertainment Tax:

When GST entered, all previous indirect tax laws exited. Service Tax,VAT, SAD, CVD, etc have been
subsumed under GST. So, state governments cannot levy Entertainment Tax anymore.

The Bad for Entertainment Industry:

1.Power provided to Municipality to tax entertainment and amusement:
Under GST, local governments can charge and collect taxes on entertainment and amusement.
Someone involved in movie making cannot adjust the GST paid and it becomes an additional levy.
The state of Tamil Nadu has levied such tax on film tickets thereby naking the tax burden heavier
than before. Film distributors and theater owners are on a strike to oppose this levy as it kind of
beats the concept of One Nation One Tax.
2.Theatrical rights of films taxable:
The theatrical rights of films were not liable for VAT or Service Tax. Now, sale or lease of all the rights
will attract GST. For the entertainment industry, the tax burden will increase in this aspect. The level
of credit will depend on the inputs of goods and services used by the producers and whether they
are being acquired from a registered dealer. Food, beverages, etc., which form a major part of the
production cost will not be entitled to ITC due to specific provisions.

3.Lapse of Cenvat Credit:

Incase of a film producer or a television content producer, GST is 12%. The rentals and services
provided by artists, technicians and other persons form a major portion of input in a film or a TV.
These attract 18% GST. Major inputs are taxed at 18% GST but the output is charged at 12%.
Therefore, ITC paid will remain unutilized and may have to be written off. In case of TV series, ITC
may remain unutilized.

4.Reverse Charge:
In the entertainment industry, a large section suppliers or service providers may not be registered
under GST. Purchases from them will attract GST which will the buyer will have to pay. The
compliance cost as well as the basic cost of input will increase as service providers have to provide
GST compliant invoices. Services by an author, music composer, photographer, artist or like by way
of transfer or permitting the use of enjoyment of copyright covered under section 13 (1)(a) of the
Copyright Act, 1957 are now subject to Reverse Charge by notification date 28th June. The Reverse
Charge Mechanism has been deferred until March 2018.

GST & Cryptocurrency

“A digital currency in which one uses encryption techniques to regulate the generation of units of
currency and verify the transfer of funds, operating independently of a central bank.”

To break down the above-mentioned definition by Google – cryptocurrency refers to digital money.
Cryptocurrency is a fairly new electronic cash system that uses a peer-to-peer network. The
developers designed cryptocurrency to work as a medium of exchange. It is completely
decentralized with no central authority. These currencies are a type of digital currencies, alternative
currencies, and virtual currencies.
Bitcoin was the first ever decentralized cryptocurrency created accidentally in 2009. Other altcoins
include Litecoin, Ehereum, Dash, etc.

How does it work?

Blockchain technology manages the peer-to-peer transactions with bitcoins. Block-chain is a record
of every transaction ever made with a particular cryptocurrency. It’s essentially a public ledger that
no one can alter or forge.

Is cryptocurrency legal in India?

Bitcoins have started becoming popular in India, given the government’s efforts to move towards a
cashless economy. Cryptocurrencies, in general, are neither authorized nor regulated by any central
authority in India. There are no set rules or regulations to deal with bitcoins. Bitcoins, as of today,
are not centrally administered or regulated by any specific body like the RBI.
If the government classifies these virtual currencies as legal tender, it would mean that the
government would recognize it as a currency. This means that people can freely accept it for
payments and settlements. On the other hand, if it doesn’t fall under legal tender, people cannot
accept it for making a financial transaction. Like gold, people may see value in it and opt to trade
using them.

However, cryptocurrencies are not banned or termed as illegal in India. They fall in the grey area
between legal and illegal. Last year on Nov. 30, 2017, finance minister Arun Jaitley said the country
doesn’t recognize cryptocurrencies as legal tender. The government warned people against investing
in them.

Whether Bitcoin is a good or service under GST?

The GST Act defines Goods and Services as follows:

Goods:
Every kind of movable property,
Including actionable claim,
Excluding money and securities.
Including growing crops, grass, and things attached to or forming part of the land which one agrees
to severe before supply or under a contract of supply,
Services:

Everything other than goods, money, and securities,

Including activities relating to the use of money or its conversion by cash or by any other mode, from
one form, currency or denomination, to another form, currency or denomination for which one
charges a separate consideration.
It is evident from the above definitions that one cannot classify cryptocurrencies as either goods or
services. If cryptocurrency gets classified as a currency, the government will consider it as ‘money’.
Hence, there will be no GST on its training.

However, converting bitcoins to rupees a d vice-versa will fall under services for GST levy. It will
come under the category of financial services. In such a scenario, the supplier will pay GST at the
following rates:

Commission for providing exchange services – 18% GST on commission.

No commission charged – 18% GST on 1% of gross amount of money which the recipient pays.

Tax-ability of bitcoin mining under GST

In the bitcoin mining process, individuals process the transactions and secure the network by using
specialized hardware. These individuals then get bitcoins as rewards. In other words, the bitcoin is a
consideration given to individuals for securing the network. Therefore, bitcoin miners may have to
pay GST on the fair market value of bitcoins at 18%.

Different Bitcoins exchanges in India have filed for an Advance Ruling to ascertain the applicability of
GST on bitcoin.
Comparison between GST in india and GST in other countries
If one acknowledges the working of GST in other nations for understanding the GST implication, first
of all, it is a known fact that more than 160 nations have brought up GST and as a matter of fact,
European tax economy has conceived the GST more than 50 years ago
In the Asia Pacific geography, the taxation scheme is a popular and broadly accepted subject of
taxation. But the most important and questionable thought over this discussion concludes that there
are above 40 models of GST applications which are currently running through the system of various
economies in the world which includes a diverse set of rules and regulations.

GST India vs GST Singapore

Singapore also follows the single and consistent rate system on every purchase. GST was initiated in
Singapore in 1994 with the flat GST rate of 3% which was lowest in the market. With effect from
2007, the GST rate has been increased to 7% which is still very less compared to GST rates of India.

GST India vs GST China

After the European and Asia Pacific market, the China has maintained the GST applications over
goods and the conditioned provision of repairs, processing and replacement assisted services, which
also means that it is restrictedly collected on goods which are consumed in the manufacturing
process as the fixed asset goods and service tax in foreign country like China is not under
recoverable terms. There are three tax rates; which includes 0%, 5%, and 19%.

GST India vs GST Canada

Now looking to Canada model of GST, the country governs the taxation regime under 3 schemes i.e.
Federal GST, Joint federal and separate federal. Federal tax is generally accepted tax system while
joint federal runs on the basis of the synchronised behaviour of the economy and states and the last
one separate federal which only applies to the Quebec as it is deemed as a quasi-independent
province. The GST rate in Canada is 5% on supplies of goods and services and in some provinces,
there is harmonised sales tax which is 15%.

GST India vs GST USA

The US is a federal republic where taxes are collected at a separate level from federal, state, and
local governments. Here the federal tax rates are between 10% and 39.6% of taxable income while
state and local government is charging the tax from 0% to 13.30% of total taxable income.

GST India vs GST UK

In the UK there are three tax rates including 0%, 5%, and 20% applicable on goods and services.
Most of the goods are covered under 20% tax rates. The VAT on postage stamps, financial, property
transactions, most food and children’s clothes are exempt from any tax.

GST India vs GST Malaysia

GST has been implemented in Malaysia with effect from 1 April 2015 with the consistent rate of 6%.
Here, Sales tax and service tax are categorised by different tax rates which are 10% and 6%
respectively. Some of the items like piped water, first 200 units of electricity per month,
transportation services, highway toll and health service are exempted from taxation.

GST India vs GST France

GST has been firstly implemented in France in 1954 with 4 tax rate slabs. The rates here are
chargeable in the slab of 2.1%, 5.5%, 10% and 20%. Among the tax rates, 20% is the standard rate
applicable to most of the goods in France.
In all cases, GST rates are prefixed between 16 to 20 percent and India has somehow taken the cues
from this and jotted down the similar pattern. Also, it is expected that the Indian economy will
expand with a great pace as the speculated taxpaying community is likely to get a growth of 5 to 6
times than the current figure.

Strategies used by companies to evade GST

There have been cases of new structures being created in order to avoid paying taxes.Some of them
are:
Inter-state movement: Companies use this technique to move goods from one state to another
state. Once the vendor in the state which receives the good claims input credit the vendor in the
state who sells it vanishes.

Stay small: Tax experts said that smaller companies with a size of Rs 50 crore or below are more
difficult to track. Hence, they stay small and redirect revenues into personal accounts.

Engage small tax firms: The big four accounting firms look at client reputation before working with
them. Hence, these companies would have smaller chartered accountants to manage their accounts.
Cash transactions: Cash does not leave a trail behind. Hence, companies have been found to deal
heavily in tax so that they can avoid taxes. While several companies are still in the process of
implementing GST, it is likely that transactions will go completely electronic.

Billed versus unbilled revenue: Several smaller entities including pharmacies and grocery chains do
not prepare bills for transactions. Only those who insist on them are given bills. This can be used to
hide revenue earned as long as the cash is not deposited in bank accounts.

Backdate transactions: One of the most common methods used to avoid paying taxes is to backdate
the transaction to a particular day which is convenient to both the payer and the claimant.

Changing product category: One of the mechanisms which some companies use to avoid paying
taxes or cut down on tax is to change the category of product that they manufacture. GST tax rates
have been revised for 80,000 items in the country depending on the type of product and the
ingredients used in its manufacturing. Hence, a chocolate could be categorised as a toffee, cocoa-
filled confectionary, candy, biscuit or wafer-coated biscuit.

Threshold exemption limit: Those with a turnover of Rs 20 lakh or below are exempt from GST.
Smaller tax consultants are also seeing a demand for splitting larger businesses into smaller multiple
units to claim tax relief.

Trade in exempted goods: Several products including puja products, khadi, agricultural equipment,
earthen pots and local handicrafts are exempt from taxation. Tax experts said that entities,
especially, in South India, dealing primarily in puja articles and products, have been seen to change
the category registration to ‘religious articles’ to avoid taxes.

Change registration location: Underdeveloped areas like the North-East have access to tax holidays
as an incentive. Companies operating in those areas are also giving tax-breaks to boost their
business which is in fact misused by smaller entities to incur zero taxes. Often these ‘registered
offices’ are unmanned and exist only on paper.

Case study- One of the biggest GST fraud

The detection of one of the biggest frauds — the generation of fake bills worth ₹1,200 crore — after
the Goods and Services Tax (GST) regime was implemented last July came after a detailed
investigation spread over two months into a web of fake companies.

The accused — Suhail, Mohammed Basha and Hafeezur — had obtained GST registrations for fake
companies that were shown to be engaged in trading of iron and steel scrap to other companies.
They exploited the loophole of the system not being able to match GSTR-1 and GSTR-3. “The system
is currently unable to match the returns. This loophole is being plugged now,” a source said.

Though the companies floated were here, the input tax credit may have been used by iron and steel
producers located outside the State too, said investigators, who used data analytics to zero in on
them. GST officials also believe that such fraudulent transactions are being seen in plastic,
aluminium, iron and steel trade.

While Baha had obtained 14 GST registrations in the names of his relatives and others, Suhail had
obtained six. They floated fake companies by giving made-up addresses, which made the
investigation difficult.

“It took us two months of meticulous investigation to unearth the module and arrest the three
kingpins,” said G. Narayanaswamy, Commissioner (Bengaluru South) of Central Tax. “The accused,
though they had 20 companies registered, were operating on a single computer to generate all the
bills. They were detected using the IP address,” he said.

Their modus operandi, according to him, was creating fake addresses, issuing fake GST invoices, and
generating e-way bills with fake/wrong vehicle registration details without actually supplying any
goods.

“The companies were floated with the intention to fraudulently pass on input tax credit. So far, we
have found generation of GST invoices worth around ₹1,200 crore that had a GST liability of about
₹200 crore. We are expecting [the amount] to go up as we investigate further. There could be more
such modules,” Mr. Narayanaswamy said. He added that more than 18 iron and steel producers,
who have used these bills to claim input credit, were on the department’s radar.

Case study – Impact of GST on Municipal Corporation of Greater Mumbai

In compliance with the new GST regime, the Municipal Corporation of Greater Mumbai (MCGM) has
had to abolish octroi, which on average had contributed almost 35 percent of its annual total
revenue. MCGM is one of the largest municipal corporations in India and is responsible for running
Mumbai, the country’s financial capital. Its budget is equal to the combined budgets of several small
states in the country.

For other municipal bodies in the states of Maharashtra and Gujarat, the Local Body Tax (LBT) was a
major source of revenue, superseding the octroi and cess system of taxation. Local civic bodies of
India would impose the LBT on the entry of goods into a local area for consumption, use or sale
therein. The LBT has now been discontinued, and most state indirect tax levies such as VAT, CST and
entry tax have been subsumed under the GST, as listed earlier.

The GST Constitutional Amendment Bill accounts for the compensation owed to states by the central
government for losses to the state exchequer due to the implementation of GST. States, in turn,
must assess revenue losses for civic bodies and compensate them for the same. However, this is not
mandated, since the decision is taken at the state level and not mentioned in the Amendment Bill.[3]

The 74th Constitution Amendment Act, 1992 (CAA) recognises municipal corporations as the third
tier of the government. The 12th schedule mandates 18 functions[4] that municipal bodies must
carry out. These functions are categorised into three sections: regulatory functions, provision of
services, and infrastructure development.

As part of the devolution process, State Finance Commissions (SFCs) were set up to formulate
principles for disbursing adequate finances from the state to local governments. In addition to their
own revenue handles, these ULBs were to be empowered through grants from the centre and
respective state governments (which may or may not be tied) as well as transfers formulated by the
finance commission.[5] The expectation was that SFCs would follow the Central Finance Commission
(CFC), which devolves funds from the Government of India to state governments. However, so far,
this has not happened.[6]

While the constitutional amendment called for the devolution of powers and finances from the
centre and state to municipal bodies, the GST has not been implemented with the city in mind.[7]
Municipal corporations must be better funded to allow their finances to match their functions. They
should be aligned with a predictable and growing source of self-sustaining revenue, independent of
state and central government interventions.

The GST has levied a steep tax increase in civic services, especially on labour works carried out by
contractors, resulting in increased costs for road construction and repairs, desilting, conservancy,
housekeeping, street lighting, and other similar activities.[8] This has raised concerns about credit
availability for contractors and corporations, as funds are currently blocked. Municipalities in India
do not have access to taxes from income, business, sales, value added or goods and services as base,
to keep up with the economic growth.[9]

This raises several questions on how corporations like MCGM are dealing with this change. Will it
impact the compositions of capital and revenue expenditure? How can it be ensured that after these
changes, the budget still caters to the people’s needs?

The introduction of GST on 1 July 2017 has raised various concerns. Octroi was a buoyant tax, which
meant that it increased as the prices of commodities did, without any need to raise the tax
percentage. GST, on the other hand, is an indirect tax and not directly linked with the prices of
goods. Thus, there has been apprehension about whether GST would take care of annual increases
in interest rates, since there is no direct mechanism by which it would get passed on to the MCGM.
However, the state amendment in Maharashtra, which fixed a compensation clause to the loss of
octroi, has resolved this to some extent.

The local bodies need assurance that GST—to be collected by the central and state governments—
will be channelled to the MCGM, since the transfers from the state governments in India are neither
guaranteed nor predictable. Moreover, octroi’s daily cash-collection method ensured cash inflow to
the MCGM, taking care of its urgent needs. On the other hand, the GST compensation is a fixed
amount given on a fixed date, forcing the corporation to borrow from banks during emergencies.
The situation further depends on the state’s own finances, i.e. if finances worsen, the state will not
be able to fulfil commitments.

To protect the interests of the MCGM, after several negotiations, the government passed the
Maharashtra Goods & Services (Compensation to Local Bodies) Act, 2017, which guarantees
compensation for the loss of revenue following the abolition of octroi. The law protects the current
financial year’s octroi collection and ensures that the state pays the current amount of octroi with an
eight percent compounded interest in perpetuity to the MCGM every year, in monthly instalments.
This process is ongoing and has already gained momentum. The perpetual arrangement is
guaranteed through an escrow account to ensure an annual direct deduction of the promised
compensation amount to the MCGM.

The MCGM has been assured that the revenue resource would be completely protected. However,
for 2018–19, the Mumbai civic body is promised only INR 85,000 million from the government as
compensation for its loss of revenue from octroi, despite the revenue being pegged at INR 240,000
million. The expenditure is estimated to be INR 275,000 million, and the corporation thus faces a
deficit of INR 35,000 million. The abolition of octroi has also meant less cashflow for ongoing and
new projects.

In 2018–19, the MCGM, for the first time, decided to draw funds from the corporation’s special
reserves of INR 690,000 million to tackle this deficit over the next few years. These are fixed deposits
in 31 banks drawing an annual interest of 7.5 percent, available to the corporation on zero-interest
loans. While INR 210,000 million is kept aside in the banks as fiduciary fund for provident fund,
gratuity, deposits and bank guarantees, the remaining INR 480,000 million has been allocated for
infrastructure projects that need cashflow, e.g. the coastal highway, Goregaon–Mulund Link Road,
Gargai–Pinjal water sources, hospital bed-capacity upgradation in suburban Mumbai, and Sewage
Treatment Plants (STPs). These will be withdrawn as and when needed. Additionally, a fund of INR
27,440 million has been set aside for mega projects.

The launch of the GST has weakened the cash-holding status of the MCGM. The only sizeable source
of tax revenue that has remained with it post-GST is the property tax. In the case of the MCGM,
when the share of other sources of revenue—such as fees, user charges and penalties—are added to
the revenue from property tax, the total is only 50 percent of the amount that the corporation needs
to perform its functions. When octroi was still an active income source, the MCGM made 86 percent
of the total funds required. Under the GST system, therefore, Mumbai will not be able to
independently generate more than 50 percent of its revenue requirements.

Moreover, almost half of the functions of the MCGM are mandated but not funded. No finance is
provided, for instance, for education, health, running a bus company and providing electricity. This
situation will only exacerbate with the continuing and rapid urbanisation of Mumbai.

If MCGM, one of the most robust municipal bodies in the country contributing to a sizable portion of
the GDP is feeling the heat, then the smaller ULBs are even more likely to be affected. They are, after
all, much more dependent on intergovernmental transfers. Prior to GST, municipal bodies’ own
revenues comprised 53 percent of the total revenue, and the balance was accounted for by
assignment, devolution and grants-in-aid from states (33.4 percent), central government grants (5.3
percent), and grants from the finance commissions (two percent).

Globally, India’s municipal corporations are the least funded; the implementation of GST has made
them even weaker. The country’s municipal tax-to-GDP ratio is small and is declining with each
passing year. The figure, which was 0.39 percent in 2002–03 and 0.40 percent in 2007–08, declined
to 0.33 percent in 2012–13. In contrast, the local tax-to-GDP ratio was more than two percent in 22
of the 34 OECD countries in 2010. It was 16.1 percent in Sweden, 12.7 percent in Denmark, 10.4
percent in Finland, 7.2 percent in Japan, 4.2 percent in Korea, and four percent in the United
States.[14] However, under the GST system, the local tax-to-GDP ratio is bound to go down, unless
revenue gains are included in it.

The 74th Constitution Amendment Act, 1992 (CAA) declares municipal corporations as the third tier
of the government and mentions devolving powers, which includes financial independence. The GST
system undercuts this idea.