Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION

UNIVERSITY

Lucknow

Faculty of Law

Subject- Investment Banking

Project on

Mutual Funds: Is a simple plan for investors in India

Submitted by

Vivek Mishra

[Roll No. 74]

B.Com. LL.B (Hons.) 8th Semester

Submitted to

Mr. Shageer Ahmad Sir

(Guest Faculty)
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University
 ACKNOWLEDGEMENT

I, Vivek Mishra B.Com LLB(Hons.) 9th semester Roll no. 74. I feel myself highly elated, as it
gives me a tremendous pleasure to come out with work on the topic Mutual Funds: Is a simple
plan for investors in India. I started this project two weeks ago on its completion. I feel that I
have not only successfully completed it but also earned an invaluable learning experience. First
of all I express my sincere gratitude to my teacher Mr. Shageer Ahmad Sir who enlightened me
with such a wonderful and elucidating research topic.

I also express my humble gratitude to my parents and classmates for helping me in completing
this project.
 INDEX

1. Introduction to GSt…………………………………………………………….04
2. Components of GST………………………………............................................05
3. Advantages of GST…………………………….………………………………05-07
4. Disadvantages of GST………………………………………………………….08-09
5. Conclusion………………………………………………………………………10
6. Bibliography…………………………………………………………………….11
 Introduction to GST

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service
Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July
2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based
tax that is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods
and services. This law has replaced many indirect tax laws that previously existed in India.

GST is one indirect tax for the entire country.

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales,
Central GST and State GST are charged. Inter-state sales are chargeable to Integrated GST.

Components of GST
There are 3 taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale.

 SGST: Collected by the State Government on an intra-state sale.

 IGST: Collected by the Central Government for inter-state sale.

Illustration:

 Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs.
50,000. The tax rate is 18% comprising of only IGST.

In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the
Central Government.

 The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on
the good is 12%. This rate comprises of CGST at 6% and SGST at 6%.

The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the
Central Government and Rs. 3,000 will go to the Gujarat government as the sale is
within the state.
 Advantages of GST

1. GST eliminates the cascading effect of tax

GST is a comprehensive indirect tax that was designed to bring the indirect taxation
under one umbrella. More importantly, it is going to eliminate the cascading effect of
tax that was evident earlier.

Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this example to
understand what is Tax on Tax:

Before GST regime:

A consultant offering services for say, Rs 50,000 and charged a service tax of 15% (Rs
50,000 * 15% = Rs 7,500).

Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT (Rs 20,000 *5% =
Rs 1,000).

He had to pay Rs 7,500 output service tax without getting any deduction of Rs 1,000 VAT
already paid on stationery.

His total outflow is Rs 8,500.

2. Higher threshold for registration

Earlier, in the VAT structure, any business with a turnover of more than Rs 5 lakh (in
most states) was liable to pay VAT. Please note that this limit differed state-wise. Also,
service tax was exempted for service providers with a turnover of less than Rs 10 lakh.

Under GST regime, however, this threshold has been increased to Rs 20 lakh, which
exempts many small traders and service providers.

3. Composition scheme for small businesses

Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can benefit as it gives
an option to lower taxes by utilizing the Composition scheme. This move has brought
down the tax and compliance burden on many small businesses.
4. Simple and easy online procedure

The entire process of GST (from registration to filing returns) is made online, and it is
super simple. This has been beneficial for start-ups especially, as they do not have to run
from pillar to post to get different registrations such as VAT, excise, and service tax.

5. The number of compliances is lesser

Under GST, there is just one, unified return to be filed. Therefore, the number of returns
to be filed has come down. There are about 11 returns under GST, out of which 4 are
basic returns which apply to all taxable persons under GST. The main GSTR-1 is manually
populated and GSTR-2 and GSTR-3 will be auto-populated.

6. Defined treatment for E-commerce operators

Earlier to GST regime, supplying goods through e-commerce sector was not defined. It
had variable VAT laws. Let us look at this example:

Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had to file a VAT
declaration and mention the registration number of the delivery truck. Tax authorities
could sometimes seize goods if the documents were not produced.

 Again, these e-commerce brands were treated as facilitators or mediators by states like
Kerala, Rajasthan, and West Bengal which did not require them to register for VAT.

All these differential treatments and confusing compliances have been removed under
GST. For the first time, GST has clearly mapped out the provisions applicable to the e-
commerce sector and since these are applicable all over India, there should be no
complication regarding the inter-state movement of goods anymore.

7. Improved efficiency of logistics

Earlier, the logistics industry in India had to maintain multiple warehouses across states
to avoid the current CST and state entry taxes on inter-state movement. These
warehouses were forced to operate below their capacity, giving room to increased
operating costs.
Under GST, however, these restrictions on inter-state movement of goods have been
lessened.

As an outcome of GST, warehouse operators and e-commerce aggregators players have

shown interest in setting up their warehouses at strategic locations such as Nagpur
(which is the zero-mile city of India), instead of every other city on their delivery route.

Reduction in unnecessary logistics costs is already increasing profits for businesses

involved in the supply of goods through transportation.

8. Unorganized sector is regulated under GST

In the pre-GST era, it was often seen that certain industries in India like construction and
textile were largely unregulated and unorganized.

Under GST, however, there are provisions for online compliances and payments, and for
availing of input credit only when the supplier has accepted the amount. This has
brought in accountability and regulation to these industries.
 Disadvantages of GST

1. Increased costs due to software purchase

Businesses have to either update their existing accounting or ERP software to GST-
compliant one or buy a GST software so that they can keep their business going. But
both the options lead to increased cost of software purchase and training of employees
for an efficient utilization of the new billing software.

ClearTax is the first company in India to have launched a ready-to-use GST software

called Cleartax GST software.

2. Being GST-compliant

Small and medium-sized enterprises (SME) who have not yet signed for GST have to
quickly grasp the nuances of the GST tax regime. They will have to issue GST-complaint
invoices, be compliant to digital record-keeping, and of course, file timely returns. This
means that the GST-complaint invoice issued must have mandatory details such as
GSTIN, place of supply, HSN codes, and others.

3. GST will mean an increase in operational costs

As we have already established that GST is changing the way how tax is paid, businesses
will now have to employ tax professionals to be GST-complaint. This will gradually
increase costs for small businesses as they will have to bear the additional cost of hiring
experts.

Also, businesses will need to train their employees in GST compliance, further increasing
their overhead expenses.
4. GST came into effect in the middle of the financial year

As GST was implemented on the 1st of July 2017, businesses followed the old tax
structure for the first 3 months (April, May, and June), and GST for the rest of the
financial year.

Businesses may find it hard to get adjusted to the new tax regime, and some of them
are running these tax systems parallelly, resulting in confusion and compliance issues.

5. GST is an online taxation system

Unlike earlier, businesses are now switching from pen and paper invoicing and filing to
online return filing and making payments. This might be tough for some smaller
businesses to adapt to.

6. SMEs will have a higher tax burden

Smaller businesses, especially in the manufacturing sector will face difficulties under
GST. Earlier, only businesses whose turnover exceeded Rs 1.5 crore had to pay excise
duty. But now any business whose turnover exceeds Rs 20 lakh will have to pay GST.

However, SMEs with a turnover upto Rs 75 lakh can opt for the composition scheme and
pay only 1% tax on turnover in lieu of GST and enjoy lesser compliances. The catch
though is these businesses will then not be able to claim any input tax credit. The
decision to choose between higher taxes or the composition scheme (and thereby no
ITC) will be a tough one for many SMEs.
 Conclusion

Change is definitely never easy. The government is trying to smoothen the road to GST.
It is important to take a leaf from global economies that have implemented GST before
us, and who overcame the teething troubles to experience the advantages of having a
unified tax system and easy input credits.
 Bibliography

 Indirect tax reforms in India by Vinay k. Srivastava

 https://cleartax.in/s/gst-law-goods-and-services-tax
 https://cleartax.in/s/benefits-of-gst-advantages-disadvantages