1.

INTRODUCTION

India is known to be a socialist, republic and democratic country. The Indian tax
system is categorized under two heads of taxation i.e. direct taxation and indirect
taxation.

DIRECT TAXES

A type of tax where the impact and the incidence fall under the same category can
be defined as a Direct Tax. The tax is paid directly by the organisation or an
individual entity to the government.

It is calculated on income or wealth of a person. Due to the presence of direct

taxes there is a sense of certainty from the government and the tax payer. The
amount that must be paid and the amount that must be collected are known to
the tax payer and the government respectively.

The tax payer cannot shift the burden of tax on someone else. It depends on
‘Ability to pay’ principle which means if the earnings are more so will be the rate
of tax.

The very function of direct tax is to re-distribute the wealth of nation. Direct tax is
measured to be progressive tax in nature since it depends upon the ability to pay.
Direct taxes play a very important role in India’s economy.

Examples of Direct Taxes are Income Tax, Property Tax, etc.

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INDIRECT TAXES

The Indirect Taxes are imposed on goods and services and paid to the
government. It is calculated on value of goods. It can be defined as taxation on an
individual or an entity which is ultimately paid for by another person. The person
that collects the tax will then remit it to government.

Import duties, fuel, liquor and cigarettes are all considered under indirect taxes.
Some indirect taxes are also referred to as consumption taxes such as VAT. Except
alcoholic beverages which still come under VAT and also petroleum products like
petrol, diesel, fuel, crude oil, and aviation fuel are exempted from GST.

The main advantage of indirect tax is its ease to collect and that the tax payer does
not feel a pinch of paying tax, hence chances of tax evasion are less. It does not
affect the income and savings of a person directly. Indirect taxes are levied evenly
on everyone, hence it is known to be regressive in nature as all tax payer rich or
poor have to tolerate the same burden.

It can be charged at high rate on luxury goods to reduce the consumption. It is the
major source of revenue for government.

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1.1 TAX SYSTEM BEFORE GST

In previous years there were many indirect taxes levied by both Central and State
Government like Entertainment tax, Octroi and Local Tax. Every State had a
different set of rules and regulations. These lead to overlapping of taxes.

The following is the list of taxes before GST:

 Central Excise Duty

 Customs
 Cess
 States VAT
 Central Sales tax
 Purchase tax
 Luxury tax
 Entertainment tax
 Entry tax
 Taxes on advertisements
 Taxes on lotteries, betting and gambling.

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1.2 INTRODUCTION OF GST IN INDIA

In 2014 Lok Sabha Election the Bhartiya Janta Party-BJP (NDA) government was
elected into power. Seven months after the formation of the Modi government,
the new Finance Minister Arun Jaitley introduced the GST bill in the Lok Sabha,
where BJP had majority. In February 2015, Jaitley set another deadline of 1 st April,
2017 to implement GST.

In May 2016, the Lok Sabha passed the constitution Amendment Bill, paving way
for GST. However, the opposition party demanded that GST bill be again sent back
for review to the Select Committee of Rajya Sabha due to disagreements on
several statements in the bill. Finally in August 2016, the Amendment Bill was
passed.

The introduction of Goods and Service tax i.e. GST was at midnight on 1 st July 2017
by the President and Government of India. The launch was marked by a historic
midnight session of both the houses of parliament.GST replaced existing multiple
taxes levied by Central and State government.

The Central and State Government collects taxes on various goods and services
known to be GST i.e. Goods and Service Tax. Various Central and State taxes are
absorbed or merged into one indirect tax i.e. GST. This tax is a major source of
revenue for the government.GST is implemented at every step in manufacturing
process but is meant to be repaid to all parties on various level of production
other than the consumer. The old taxation system was quite with complexities like
cascading or double taxation, possibility of tax evasion.

GST is single indirect tax for the whole country.GST law emphasizes on intentional
compliance and on accounts based treatment and monitoring method.

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GST is a destination based consumption tax i.e. it is a tax which is levied in the
state where goods and services are utilized and not where they are formed.

The basic or main objective of GST is to subsume all other indirect taxes in the
country like Excise, VAT/ Sales Tax, Service Tax, etc. The GST is paid by consumers
and is remitted to the government.

The GST portion is collected by the business or seller and forwarded to the
government.GST has lead to more transparency in the taxation minimising the tax
theft and corruption in India.

GST is a win-win circumstance for the whole nation. It brings benefit to all the
shareholders of industry, government and consumers.

It lowers the cost of goods and services, improving the country’s economy making
goods and services globally competitive.

GST tax system divides an item or product into categories that are:

 0%
 3%
 5%,
 12%
 18% and
 28%.

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Taxes included in GST

 STATE TAXES

 VAT or Sales Tax

 Purchase tax
 Entry tax, Octroi or Local Body Tax
 Entertainment tax
 Luxury tax
 Betting, Gambling and lottery tax
 Surcharges and State Cesses.

 CENTRAL TAXES

 Central Excise Duty

 Additional Duties of Excise
 Excise on Medicinal and Toiletries Preparation Act
 Additional Custom Duty
 Special Additional Duty
 Service Tax
 Surcharge and cesses – Infrastructure Cess, SBC, EC
 Central Sales Tax.

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Taxes not included in GST

 STATE TAXES

 State Excise Duty

 Stamp Duty
 Professional Tax
 Motor- Vehicle tax

 CENTRAL TAXES

 Basic Custom Duty

 Research and Development Cess
 Export Duty
 Anti-Dumping Duty
 Safeguard Duty

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1.3 TYPES OF GST

 Central Goods and Service Tax

Central Goods and Service tax i.e. CGST is based on CGST Act 2017. The CGST
Act has been enacted to make a provision for levy and collection of tax on inter-
state supply of goods and services.
CGST replaced all the existing Central Taxes including Service Tax, Central Excise
Duty, Customs, etc. The rate of CGST is generally equal to that of SGST rate. Tax is
charged on the base price of the product. CGST Act 2017 comprises of 174
sections in 21 chapters and three schedules.

 State Goods and Service Tax

SGST or State Goods and Service tax is one of the tax components of GST in
India levied on every intra-state i.e. within one state.
SGST is levied by the State where the goods are being sold or purchased. It falls
under the State Goods and Service Tax Act, 2017.
The earlier State Sales Tax, VAT, Luxury Tax, Entertainment Tax, Octroi are
subsumed into one tax called SGST. All the tax proceeds collected under the head
SGST is for State Government.

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 Integrated Goods and Service tax

IGST or Integrated Goods and Services Tax are a part of GST. It falls under
Integrated Goods and Service Act, 2017.
IGST is charged when movement of goods and services from one state to another
state takes place. IGST is charged by the Central Government.
The IGST rate is equal to CGST rate plus SGST/UTGST rate. The revenue out of IGST
is shared by both Central and State Government as per the rates fixed by the
Authorities. The IGST payment can be done by utilizing ITC on account of IGST for
first and balance payment towards CGST, SGST and UTGST.

 Union Territory Goods and Service Tax

The Union Territory Goods and Service Tax referred to as UTGST.

This GST applicable on the goods and services that takes place in any of five Union
Territories of India , including Andaman and Nicobar Islands, Dadra and Nagra
Haveli, Chandigarh, Lakshadweep and Diu and Daman.
This UTGST will be charged in addition to Central GST i.e. CGST + UTGST.

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1.4 FEATURES OF GST

 GST is an Indirect Tax which covered all the other taxes in India.
 GST is the dual-model system i.e. both Central and the State Government has
authority for levy and collection of taxes.
 GST has two mechanisms one levied by Central and credited to the Central i.e.
CGST and another imposed by States and credited to States i.e. SGST in case of
supply of goods and services within the state.
 In case of inter-state supplies IGST will be imposed by Central and credited to
Central and States as per the norms of IGST Act, 2017.
 Supply of goods and services within the Union Territory is governed by a special
provision referred to as UTGST i.e. Union Territory Goods and Service Tax Act,
2017.
 Since the CGST and the SGST are to be treated separately, taxes paid against the
CGST shall be allowed to be taken as Input Tax Credit for the CGST and could be
utilized against the payment of CGST and thereafter IGST. The similar principle
shall be valid for SGST.
 GST is applied when turnover of the business exceeds Rs.20 lakhs per year,
while limit of Rs.10 lakhs for the north-eastern states. Traders who would like to
get the Input Tax Credit should make voluntary registration under GST even if their
sales are below Rs.20 lakhs per year.
 The benefit of Input Tax Credit can be earned by every tax payer while paying
taxes on outputs may take credit for taxes paid earlier by the supplier on inputs.
However this will not be applicable Son supplies related to motor-vehicles when
used for personal consumption, food, health services, etc. unless they are further
used to make supply.
 The Central and the State Government will share the tax revenues in the ratio of
50:50 (except IGST).

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 GST has helped to avoid double taxation which was in VAT system.
 Due to GST the disputes between Central and the State government can be
avoided.
 The liability to pay GST in relation to supply of goods and services will arise on
the date of issue of invoice or date of receipt of payment whichever is earlier.
 Under GST, there is differential tax structure. A low tax of 5% is charged on
essential services. A tax rate of 12% is on common and commercial services. While
the highest rate of 28%is imposed on luxury services.
 Essential commodities like food items are exempted from taxes, while services
like education provided by an Educational Institution, Post Offices, RBI, etc are
exempted from service taxation.
 The tax payer need to present on time-to-time the returns to both the Central
and the State GST Authorities, there will be a common portal for filing of all the tax
returns.
 Governing GST is accountability of the GST Council; it is the peak policy making
body.

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1.5GST COUNCIL

Goods and Services Tax Council is a constitutional body for making

recommendations to the Union and the State Government on issues related to
goods and services tax.

The GST Council which is a joint forum of the Centre and the States Government
consists of the following members:

 Chairperson – the Union Finance Minister

 Associates of the Council – the Union Minister of State in charge of revenue
or finance.
 Members – Ministers in charge of finance or taxation or any other Ministers
nominated by each State Government.
 The GST Council shall make recommendations to Union and States –

 The taxes, cesses and surcharges levied by the Union, the States and the Local
Bodies which may be subsumed in the GST.
 The goods and services that may be subjected to or exempted from the GST.
 Any special rates for specified period, to raise additional resources during any
natural calamities or disaster.
 Special provision with respect to the States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.
 The threshold limit of turnover below which goods and services may be
exempted from GST.
 The rates inclusive of floor rates with bands of GST.

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 The GST Council shall recommend the date on which GST is levied on petroleum,
crude, high speed diesel, petrol, natural gas and aviation turbine fuel.
 The GST Council shall establish a mechanism to adjudicate any dispute –

 Between the Government of India and one or more states; or

 Between the Government of India and any State or States on one side and one
or more other States on the other side; or
 Between two or more States arising out of recommendations of the Council or
implementation.

 Decision making –

 Every verdict of the GST Council shall not be less than 3/4th of the member’s
attendance and voting.
 The vote of Central Government have weight-age of 1/3rd of the votes and
 The State Government have a weight-age of 2/3rd of the total vote in the
meeting.
• At the GST Council's meetings, a quorum of one-half of the total number of me
mbers is required.

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1.6 GST NETWORK

The GSTN or Goods and Service Tax Network are a non-profit, non-government
organization. It manages the entire IT-system of the GST portal, which is the
mother database for everything GST.

This portal is used by the government to track every financial transaction and
provide tax payers with all services from registration to filing taxes and
maintaining all tax details.

Initially private sector owned 51% share in the GSTN and the rest is owned by the
government.

The authorized capital of GSTN is Rs.10 Cr. of which 49% of shares are divided
equally between Central and State Government and the remaining is with the
Private Banks.

The Infosys helped for developing the GSTN technology.

Data can be accessed by the tax officials having authority as per the GST Law.
Audit Authorities can access data as per the law. The data available with the GSTN
cannot be accessed by any other entity.

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The functions of GSTN are:

 Three front services are provided by GSTN to the tax payer viz. Registration,
payment and return.
 Develop back-end IT designs for the states who have sighed for the same.
 Facilitate registration
 Returns are forwarded to the Central and the State Authorities.
 Match tax payment information with banking set-up.
 Based on the tax payer’s return information, provide various MIS information to
Central and State Authorities.
 Provide study of tax payer’s summary or profile; and
 Run the identical engine for matching, reversal and reclaim of ITC.

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1.7 EFFECT OF GST ON DIFFERENT SECTORS

Effect on Small and Medium Enterprise

 GST will help and ease the process of starting a business in India. Earlier, every
business in India was required to obtain VAT registration, which differed from
state to state and even rules and regulations were different; thus it was a very
confusing procedure.
 For any business, it was mandatory to make VAT payment, if the annual
turnover was more than Rs.5 lakhs in some states and more than Rs.10 lakhs in
some other states, this lead to confusion.
 While under GST a business does not have to register if or collect tax if the
annual turnover is Rs.10 lakhs, which is applicable to every state. This will allow
many small businesses having turnover between Rs. 5-10 lakhs to avoid applying
for GST return.
 GST allows small and medium enterprises to do their businesses with ease in
India, due to less complexities; the distinction between goods and services will be
gone and this will make compliance easier.

Effect on Importers and Exporters

 IGST will have to be paid when the importer receives the delivery of the
imported goods on a monthly basis.
 Earlier CVD was charged on the valuation of MRP principle. However, now IGST
will include CVD and it will be charged on the transaction value.

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 Taxes which were paid during the import are now available as a credit under the
new law under the Import and Sale Model which wasn’t available in pre-GST tax
system.
 As per the GST Council, the export of goods and services has been considered as
a zero-rated supply and there will be no GST levied on such exports. The purpose
of making it zero rated is to promote exports.

Effect on Economy

 Removal of bundled indirect taxes such as VAT, Service Tax and Excise, etc.
 Less tax compliance and a simplified tax policy compared to previous tax system.
 Removal of cascading effect i.e. removes tax on tax.
 Different tax barriers such as check-post and toll plazas lead to wastage of
unpreserved items being transported. This penalty transforms into major costs
due to need of buffer stock and warehousing costs. A single taxation system will
eliminate this roadblock.
 Increase the demand and consumption of goods, which will ultimately lead to
rise in the production of goods.

Effect on Consumers

 Due to introduction of GST there is reduction in price of goods and services as

the payment of taxes over taxes is removed as the Input Tax Credit i.e. ITC is made
available for all the goods and services at each and every stage of supply chain,
resulting in decrease of the final price.

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 As GST is based on ‘ONE NATION ONE TAX’ principle, there is a uniform price for
all the goods and services throughout the nation so it is beneficial to the
consumers.
 GST increased the level of transparency in the tax system because everything is
computerised, this shall boost the trust of consumer.

1.8 RATES OF GST ON GOODS

RATES  Gold GOODS

3%  Silver
0% or Nil  Processed
Meat(not Diamond
frozen)
 Platinum
Fish
 Pearls
Milk
 Live trees and plants
 Gems
 Edible Vegetables and fruits
 Imitation jewellery
Coffee-beans
 Coins, etc.
Unprocessed Tea-leaves
 Condoms
 Stamp-papers
 Newspapers, periodicals, journals
 Fish and fruits
Unpacked (in frozen state)
Food-grains
5%
 Concentrated
Flour, maida, milk
besan
 Preserved
Joggers vegetables
 Jadi-booti
Salt
 Tea
Raw Jute and Raw Silk
 Egg
 Coffee
 Sugar
 Tobacco leaves
 Newsprint in rolls or sheets
 Brochures, leaflets
 Solar panels
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 Footwear (MRP up to Rs.500 per pair)
 Apparels (sale value up to Rs. 1000)
  Meat (in frozen state)
12%  Butter, Ghee
 Dry fruits
 Fruit Juice
 Beverages containing milk
 Tooth powder
 Notebook, Drawing and colouring book
 Cartons, boxes and cases of paper
 Envelopes
 Sports goods
 Pencils and crayons
 Apparels (salve value more than Rs.1000
per piece)

 Condensed milk
 Biscuits
 Jams and Jellies
18%  Mineral Water
 Electronic Toys
 Footwear (MRP above Rs.500)
 Monitor and TV Screen sizes up to 32
inches
 Video games
 Movie tickets (more than Rs. 100)
 Insurance cover of goods carrying
vehicles, etc.
 Molasses
28%  Aerated water
 Tobacco products
 Wall paper
 Motor car, etc.

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1.9 RATES OF GST ON SERVICES

RATE SERVICES

 Selling of room for advertisement

 Service by way of job in relation to
5% printing or textile yarns and fibres
 Service of cut and polished diamonds,
precious and semi precious stone or
plain and studded jewellery of gold and
other metals
 Printing of books, periodicals and
journals
 Processing of hides, skin and leather

 Transportation of passengers by railway

5% in first class or air conditioned coaches
 Transportation of passengers by airways
(with ITC of input in economy class
services)  Transport of passengers by air,
embarking from or terminating in a
regional connectivity scheme airport
 Transport of goods by railways
 Transport of goods in a ship
 Hiring of air-craft by a programmed
airline for programmed operation

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 5%  Transportation of passengers by Air-
(without ITC) conditioned agreement carriage other
than motor cab or arena carriage or
Radio Taxi
 Renting of motor cab where the cost of
fuel is included in the consideration
charged from the service recipient
 Service of goods transport agency in
relation to transportation of goods
 Supply of services by tour operator
 Restaurant services (not located in
hotel)

 Accommodation in hotel rooms,

12% cottages, guest houses, clubs, campsites
or other business places meant for
residential or lodging purposes having
room tariff Rs. 1000 and above but less
than Rs. 2500 per room per day
 Transportation of passengers by airways
in other than economy class
 Transport of goods in containers by rail
by any person other than Indian
Railways
 Momentary or permanent transfer of
enjoyment of Intellectual Property (IP)
right in respect of commodities other
than IT software

12%  Services provided by foreman of Chit

(with ITC) Fund in relation to chits
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 12%  Construction of a complex, building , civil
(without ITC) structure or a part thereof intended to
sale, wholly or partly ( the value of land
is deemed to be 1/3rd of total amount)

 Restaurant services (located in a hotel)

18%  Supply of foods or drinks in outdoor
catering
 Accommodation in hotel rooms,
cottages, guest house, club, campsites or
other business places meant for housing
or lodging, where room tariff is of Rs.
2500 and above but less than Rs. 7500
per room per day
 Services by way of admission to
exhibition of cinematograph
 Bundled services by way of supply of
food or any other article of human
consumption or any drink in a place
including hotel, club, shamiana or any
other place together with renting of
such premise.
 Services by way of admittance or
entrance to circus, Indian Classical dance
including folk dance, theatre
performance, drama

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1.10 IMPACT ON HOTEL INDUSTRY

A.PRE-GST:

Restaurants and Food Service Businesses in India is the fastest growing business.
Due to the growth in tourism and travel with rising domestic and foreign tourist,
hotel sector is continuously growing. The Indian hotel market estimated around 17
billion US dollars. It contributes greatly to tourism and around 7.5% of GDP. Due to
changes in tax collection framework the development of business is affected.

Services provided by hotel industry –

 Serving of food and liquor
 Room accommodation services
 Renting a cab
 Laundry services
 Renting space for events and conferences
 Telecommunication like fax, WIFI, telephone

Before GST, Value Added Tax i.e. VAT, Service tax, Luxury tax was applied in all the
sectors of the economy. VAT was levied on things that are sold out, where value
was added to an item before it was sold to a person. One had to pay VAT on goods
and services on various stages of their production, distribution and sale, it was
creating complexity in accounting. Tax rate was not uniform as they were imposed
by both the Central and State Government.

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 In restaurants VAT wasn’t indictable on pre-packed items; however it was
applicable on food and drinks prepared within the restaurant. VAT varies from
state to state, it was anywhere between 5 to 20.

 VAT was levied @5% on cooked foods and snacks by a restaurant.

 VAT was levied @20% on cold drinks.
 It was @14% on alternative non-food items.
 Entry tax was @1% on staple and incidental items in manufacture of cooked
food.
 Service tax was charged 14% and in addition with 0.5% Swachh India Cess and
05% Krishi Kalyan Cess.

SERVICE SERVICETAX
CHARGE @10% @14%
+
TOTAL
+ + +
TOTAL AMT.

=
SWACH INDIA CESS KRISHI KALYAN CESS VAT
@0.5% @0.5%
+ + @5%

B.POST-GST:
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The concept of goods and service tax was implemented to abrogate all the extra
money charging schemes which were before embraced by the retailers in order to
make money.

Previously consumers use to pay VAT, Service tax and additional Service charges
on every restaurant bill, but due to GST all the extra and unnecessary charges are
eliminated. GST clearly decreased the cost for the tax payer as under this system
the operation will change into uniform entity and the tax structure will also be
harmonized.

GST is not valid for purchase of liquor in India. However, this is not the reason to
cheer up as the State Government will continue to implement VAT and Excise Duty
were not brought under GST norms for two main purposes :

 To ensure State Government have a tough resource of revenue other than

from the GST. It is shown in the past records that taxes on alcoholic liquor fetch
State Government more than 90000 crore in taxes every year
 Secondly, to restrict the consumption alcoholic beverages by maintaining high
prices for such products

The prices of alcoholic liquor have been continuously rising after the introduction
of GST. The reason behind these is, before implementation of GST the input raw
materials that were used to produce or manufacture beer and liquor used to be
taxed around 12% to 15% under various VAT regimes.

However, with implementation of GST most of the input material used in

production of liquor and beer has now been set at the rate of 18%.Even the
freight, carriage and transportation charges attract GST.

Earlier freight and transportation used to be at the rate of 15% and that GST has
been introduced the rate has increased to 18%.
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For eating in a Non-AC restaurant @5% of tax has to be paid which comprises of
2.5% as Central GST and 2.5% of State GST local restaurants also come under the
same category.

CGST SGST TOTAL

TOTAL
+ @2.5%
+ @2.5%
= AMT.

While in an AC restaurant one has to pay tax @18% irrespective of the fact that
alcohol is served or not.

CGST SGST TOTAL

TOTAL
+ + @9%
+ @9%
= AMT.

 All the pre-processed and packaged food or snack sold from the restaurant
seeks @12% tax from customers.
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 The restaurant having license to serve liquor with full ITC can levy tax @18%.
 Non AC restaurants or heating system restaurants not having license to serve
liquor with full ITC can levy tax @12%.
 5 Star hotels come under the highest slab rate of 28% tax.

BENEFITS OF GST ON HOTEL INDUSTRY

 One nation, one tax policy will help to bring uniformity in the global league for
GST regime.
 Subsuming various taxes for one tax will help in easy billing for restaurants.
 Reduction of taxes on food bill by approx. 9.5% can play a key role in attracting
more customers.
 Small scale restaurant owners will benefit by minimum tax slab of 5-12% tax or
non-tax depending on yearly turnover.
 GST will help in generating government revenue, reduce corruption and reduce
business costs of restaurants.

DRAWBACKS OF GST ON HOTEL INDUSTRY

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 The tax policies for budget and luxury hotels are too wide.
 Medium scale restaurants are unnecessarily forced into tax slab of 28% in these
budget and luxury hotels.
 Increase in overhead expenses as a proper training staff is to be given in GST
compliance.

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 2. RESEARCH METHODOLOGY

2.1 MEANING

Research Methodology is the specific procedures or techniques used to identify,

select, process, and analyse information about a topic. Research is a careful
investigation or inquiry specifically through search for new facts in any branch of
knowledge. Research Methodology is the path through which researchers need to
conduct their research. It is an original contribution to existing stock of knowledge.
It helps a reader to critically evaluate a study’s overall validity and reliability.

2.2 OBJECTIVES

Research is an organized investigation of a problem where the researcher

attempts to gain solution to a problem. In order to get right solution and keep
working in right direction clearly defined objectives are very important.

 The basic object of the research is to study the change in hotel industry after
GST.
 To analyse the rates and percentage of GST charged on different items.
 To go through the pre and post GST phase.
 To know the benefits and drawbacks of GST on this sector.

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2.3 SCOPE OF RESEARCH

The scope of the study basically means all those things that will be covered in the
research project.

 The scope of this research is to understand the effect of the Goods and service
Tax i.e. GST on Restaurants and Hotels Industry
 The research is done to know about the positive and negative effects of GST on
restaurants.
 The research is focused on restaurants in Kalwa region in the same category.
 To assess the views of hotel and restaurant owners regarding GST.

2.4 SOURCES OF DATA

The sources for collection of data for the research are both primary and secondary
sources.

 The primary data is collected by personal interview with hotel manager/owner

by Questionnaire method
 While the secondary data is collected from internet and many previous research
projects on the same topic.

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2.5 SAMPLE SIZE

Sample size is the term used in research for defining the number of subjects
included in it .The size of sample in this research is 5 restaurants within the Kalwa
west region.

2.6 SAMPLE DESIGN

A sample design is the framework or road map that serves as the basis for
selection of Survey sample.

2.7 TOOLS USED FOR COLLECTION OF DATA

The questionnaire was prepared and was asked personally ranging with options
like yes, no or maybe.

31
2.8 LIMITATIONS OF RESEARCH

Every study has limitations. The limitations of the research are those points which
influenced the findings of the research.

 As the managers were busy in their daily schedules it was not possible to spend
more time to interact with them.
 The study is limited to a certain region or area, the survey is been in account
with 5 restaurants only.
 The subject of this project is vast so it is difficult to cover every aspect of the
topic.

32
 3. REVIEW OF LITERATURE

3.1 MEANING

Review means to think or talk about something again, in order to make changes to
it or to make a decision about it. A review of a situation is its formal examination
by people in authority. This is usually done to see whether it can be improved or
corrected.

A Review of literature is a survey of a specific topic. It provides an overview of

current knowledge allowing one to identify relevant theories, methods and gaps in
existing research. Conducting a literature review involves collecting, evaluating
and analyzing books, magazines and journals that gives a clear picture of the
knowledge of research.

3.2 REVIEWS BY AUTHORS

 C.As of Agarwal Sanjiv and Company

The Chartered Accountants of the Agarwal Sanjiv and company States that the
restaurants and hotel industries are the most beneficial after the implementation.
They say that the food and beverages bills have multiple components and it can
inflate bills by 30-35% and it will lead to savings of consumers by 10-15% on the
overall bill. However they think that liquor should be included in GST. Overall they
think GST should be positive for restaurants and hotels assuming the multiplicity
of taxes are ended.

33
 Diksha Panwar and Siddheshwar Patra – Management Department

According to Diksha Panwar and Siddheshwar Patra the first time restaurant
owners may face difficulties in classification and rates resulting in confusion. They
state that GST created a standardized price and it will benefit the customer.
Reduction in taxation will increase the consumption resulting in employment
opportunities.
However Diksha and Siddheshwar noted that medium scale restaurants are
affected as they are dragged in tax slab of 28%. They even talked about the input
tax credit which will optimize the future working capital of restaurants.

 C.A Arvind Singh Chawla

According to the study of C.A Arvind Singh Chawla, hoteliers and tourism sector
were much more beneficial during the previous tax regime. As the tax rates were
@5% VAT and tax rate now under GST is 18% on hotel services.
Only those registered under the composition scheme have tax rate of 5% with no
input tax credit availability. He also mentioned that when restaurant owners
purchase raw materials from unregistered person, they are liable to pay full rate
which would be real hardship for composition scheme.

34
 Aryan Agarwal – Research Analyst

The study reports of Aryan Agarwal gives detailed insight of impact of GST
implementation in the markets of Uttarakhand and Kerala. He say that the
transition cost of business of business post-gst was somewhere around Rs.2320
depending on nature of business, this amount was 3.5 times less than the cost of
obtaining the VAT. Although it wasn’t that high 90% of the businesses had to face
difficulty to file taxes on their behalf, resulting in a 2.025 times increase in
compliance costs. He also observed the discontent amongst the people because of
changing tax rates, constant crashing of GST website, complex ITC system and
increase in the number of returns filed.

 Awasthy Krishna and Divya –

According to Awasthy Krishna and Divya a company which focuses on food and
beverages are the biggest beneficiaries of GST. GST includes uniform tax structure
unlike before multiple taxation system. Now this is removed.This will even help
the consumer and leads to savings. They say that the budget hotels are the most
benefitted while the hotels falling under 18% to 28% slab rate bears the adverse
effects of GST. They also mentioned that, it will improve financial management
and will remove the problems faced by hotel sectors leading to cost optimization
and free flow of transactions.

35
 Shana and Rohit Bhat - Department of Management
And Commerce, Mysore

As per the analysis of Shana and Rohit Bhat, it has been found that the impact of
GST on the customers have an effect on their income, gender and age. They did
research considering the age and gender factor and found out that both male and
female respondent have same notion of thinking in regarding with GST rates and
its impact on hotel industry.
They state that the lower income people are facing financial burden in paying
higher GST in much localised hotels. And in high class hotels middle income people
faces over paying excess tax so it is found that, Luxury tax should be abolished for
ensuring required tax revenue through reasonable GST in hotels. As per them, the
rates charged by hotels should be customer focused.

36
 4. DATA ANALYSIS

4.1 MEANING OF DATA ANALYSIS

Data Analysis is defined as a process of inspecting, transforming and modelling

data to useful information for decision-making. It is a process for obtaining raw
data and converting it into useful information. Data is collected and analyzed to
answer the questions and prove theories. Data analysis is done to avoid mistakes
done in the past and even looking forward for future.

4.2 DATA INTERPRETATION

1. Do you know about GST?

No. Particulars Respondents Percentage

1 Yes 5 100%

2 No - -

Total 5 100%

Table no. 1

37
 Diagram no. 1

yes

 The above pie-chart states that all the restaurant owners know about GST.

38
2. Are you registered under GST?

No. Particulars Respondents Percentage

1 Yes 5 100%

2 No - -

Total 5 100%

Table no. 2

39
 Diagram no. 2

yes

 The diagram shows that all the restaurants are registered under GST system.

40
3. Do you know about rules and regulations of GST?

No. Particulars Respondents Percentage

1 Yes 4 80%

2 No 1 20%

Total 5 100%

Table no. 3

41
 Diagram no. 3

yes
no

The above diagram shows that

 80% of restaurant owners know about the rules and regulations of GST
 While the remaining 20% are struggling in understanding the rules and
regulations of GST.

42
4. Whether there is a change in consumption pattern after introduction of GST?

No. Particulars Respondents Percentage

1 Yes 3 60%

2 No 1 20%

3 Maybe/unsure 1 20%

Total 5 100%

Table no. 4

43
 Diagram no. 4

yes
no
maybe

The above pie-chart shows that

 60% of restaurant owners think that after implementation of GST there is

change in consumption pattern as there is decrease in taxation
 20% of hoteliers think that there is no change in the consumption pattern
 Rest 20% feel that there is slight change in number of customers but it have not
affected consumption pattern.

44
5. Is there an increase in price after implementation of GST?

No. Particulars Respondents Percentage

1 Yes 1 20%

2 No 4 80%

Total 5 100%

Table no. 5

45
 Diagram no. 5

yes
no

The above diagram indicates

 20% feel that the price of goods and services have increased after
implementation of GST, as they are not given the benefit of input tax credit
 And 80% owners feel that the price of goods and services have comparatively
decreased, because of uniform rates.

46
6. Has removal of ITC beneficial?

No. Particulars Respondents Percentage

1 Yes 3 60%

2 No 2 40%

Total 5 100%

Table no. 6

47
 Diagram no. 6

yes
no

The pie-chart shows that

 40% owners think that input tax credit should be provided on purchase of input
goods
 While the rest 60% think that uniform rate of 5% is beneficial for them and even
for the customers.

48
7. Does your restaurant serve alcohol?

No. Particulars Respondents Percentage

1 Yes 3 60%

2 No 2 40%

Total 5 100%

Table no.7

49
 Diagram no. 7

yes
no

The above pie chart describes that

 60% of the restaurants are serving alcoholic beverages

 And the rest 40% do not serve alcoholic beverages.

50
8. If yes, is it billed with food?

No. Particulars Respondents Percentage

1 Yes - -

2 No 3 60%

3 Doesn’t sell 2 40%

alcohol

Total 5 100%

Table no. 8

51
 Diagram no. 8

single bill for all food and drinks

separate bill for food and
beverages

The pie-diagram represents that

 20% are the restaurants who doesn’t sell alcohol.

 Amongst the 60% of the restaurants serving alcoholic beverages, prepares
separate bill for food and alcoholic beverages.
 Single bill for both food and beverages is not allowed as they fall under different
tax regimes i.e. GST and VAT.

52
9. Do you think alcoholic beverages should be considered under GST?

No. Particulars Respondents Percentage

1 Yes 2 40%

2 No 1 20%

3 Doesn’t sell 2 40%

alcohol

T Total 5 100%

Table no. 9

53
 Diagram no. 9

yes
no
doesn't matter

The diagram represents that

 40% restaurant owners think that alcoholic beverages should be considered

under the GST, as this may reduce the current tax rate
 20% restaurant owners feel that getting alcoholic beverages under GST would
affect the revenue earned by their restaurant
 Rest 40% are the ones who do not serve alcoholic beverages.

54
10. After GST implementation does u think there is change in consumption of
aerated drinks?

No. Particulars Respondents Percentage

1 Yes 1 20%

2 No 2 40%

3 Not sure 2 40%

T Total 5 100%

Table no. 10

55
 Diagram no. 10

yes
no
not sure

The above diagram represents that

 20% hoteliers think that there is change in the consumption pattern for aerated
drinks after increase in GST rates
 40% disagree with the fact that increase in the GST have caused any difference
in the consumption pattern
 And rest 40% are the ones who are not sure if it has impacted or not.

56
11. Do you think GST made ease in doing business?

No. Particulars Respondents Percentage

1 Yes 4 80%

2 No 1 20%

Total 5 100%

Table no. 11

57
 Diagram no. 11

yes
no

The pie-diagram shows that

 80% hoteliers feel that GST has resulted in ease of conducting business
 While 20% are still trying to understand the laws of GST, thus disagrees in ease
of doing business.

58
12. After introduction of GST is there an increase in paperwork?

No. Particulars Respondents Percentage

1 Yes 5 100%

2 No - -

Total 5 100%

59
 Diagram no.12

yes

The above pie chart shows that

 100% of the restaurant owners feel that after implementation of GST there is
increase in paperwork as they have to file returns.

60
13. Lastly do you think GST positively impacted hotel industry?

No. Particulars Respondents Percentage

1 Yes 3 60%

2 No 2 40%

Total 5 100%

Table no. 13

61
 Diagram no. 13

yes
no

The pie diagram above states that

 40% does not feel that GST have a whole positive impact, as certain benefits are
not availed to the owners like input tax credit on input purchases
 On the other hand, 60% restaurant owners think that GST has brought a positive
impact on the hotel industries.

62
 5. CONCLUSION

5.1 Findings and Suggestions

 100% of the respondents have participated in the research project and are
registered under GST.
 The overall analysis that is done through the survey method and most of the
restaurant owners think that GST has benefitted them. The uniformity in the rates
has lead to ease of doing business and have resulted in overall decrease in the
prices of goods and services.
 Also the regulations and functioning of the GST has lead to confusions to various
restaurant owners as the procedures of return filing, registration, refunds,
interests, etc. have changed a lot as compared to the previous tax system.
 The hotel or restaurant owners who are still struggling in understanding the GST
rules and regulations should be made aware of GST works in Hotel Industry.
 Restaurants with bar feel that alcoholic beverages should come under GST
norms, as it may reduce the cost price. Also they feel getting alcoholic beverages
under GST may reduce their paper work as they will be allowed to give single bill
for both food and beverages, as of now they have to maintain separate bills.
 Restaurants owners feel though the rates have decrease they are not availed
the benefit of ITC, which many of them think is the only drawback of GST system

63
5.2 Conclusion

GST has both positive and negative impact on restaurants and on other sectors
too. With sudden shift on indirect tax regime, people have faced certain problems
adapting to this new tax trend. The restaurant industries have been burdened with
high and multiple taxations. It took some time to understand the system of GST,
how it functions, how it is beneficial, etc.

There were various loopholes to the previous tax system which was one of the
reasons for implementation of Goods and Services Tax i.e. GST. Previously there
were various taxes in our country on a single goods and services, resulting in
cascading of taxes. Cascading of taxes means double taxation. Various taxes
including Service tax, VAT, Custom Duty, Central Excise Duty, Entertainment Tax,
etc. Now all these are merged into one single tax known as GST.

Central and the State Government’s huge source of revenue are from hospitality
and tourism sectors. Taxes collected from these sectors contribute comparatively
more to India’s GDP than any other sectors. Also employment percentage is much
higher in this sector.
Also indirect taxes being inclusive in the products, consumers does not feel any
burden while paying taxes.

These revenues generated through implementation of taxes on all the sectors are
used for betterment of nation’s people as well as development purpose.

64
Before GST, restaurants were charged with 5% VAT along with Input Tax Credit,
under composite scheme. During VAT regime, hoteliers were not supposed to pay
purchase tax on purchases made from unregistered persons. Now restaurants
under GST are still charged 5% tax under composite scheme but without Input Tax
Credit. Also the regular filing of returns is a big task for restaurant owners as they
are required to collect and account all the bills to claim Input Tax Credit (if
availed).

Restaurants are benefitted from GST as the tax rates have uniformity. Food and
beverages bills have various components and were charged with different tax
rates. Single tax rates have lead to tax saving for the consumers. Taxes on food
have cut shorted to 5% which earlier were charged 12% under GST. Alcohol is still
under VAT system.

Restaurants would have been much more benefitted, if beverages and alcohol
were included in GST as well. As such this wouldn’t be possible for some reason
because beverages attracts huge tax rate under VAT and also is the lead
contributor for revenue of State Government. But not getting alcoholic beverages
under GST defeats the very purpose of uniform taxation. Also owners of
restaurant with bars, have to give separate bill for food and liquor, which doesn’t
serve to ‘Ease of doing Business’.
There are even other benefits as such for hoteliers serving food in non-air
conditioned room, shall be charged lower rates.
Restaurant owners those who are registered under the composition scheme i.e.
whose annual turnover is below Rs. 1.5 Cr shall pay only 5% tax, with no input tax
credit benefit.

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 QUESTIONNAIRE:

1. Do you know about GST

 Yes
 No
 To some extent

2. Are you registered under GST?

 Yes
 No

3. Do you know about rules and regulations of GST?

 Yes
 No
 Know to some extent

4. Has GST affected the consumption pattern?

 Yes
 No
 Can’t be stated/maybe

66
5. Do you think implementing GST caused higher price of goods and services?

 Yes
 No
 Maybe

6. Has introduction of uniform rate and removal of ITC benefitted?

 Yes
 No
 Maybe/ can’t be stated

7. Does your restaurant serve alcohol?

 Yes
 No

8. How do you prepare bill for alcohol, is it included in same bill as food?

 Yes
 No

67
9. Do you think alcoholic beverages should be considered under GST?

 Yes
 No

10.Do you think that there is change in the consumption pattern of aerated drinks
after implementation of GST (as it falls under highest tax slab-rate)

 Yes
 No
 Not sure

11.Is there increase in paper work after introduction of GST?

 Yes
 No

12.Has GST resulted in ease of conducting business?

 Yes
 No
 Not sure

68
13.Lastly, do u think GST has a positive impact on hotel industry?

 Yes
 No
 Maybe / not sure.

69
 BIBLIOGRAPHY:

 https://www.deskera.in/gst-impact-on-sme/
 http://www.cbic.gov.in/htdocs-cbec/gst/index-english
 https://www.thehindubusinessline.com/economy/retailers-need-to-file-single-
gst-return-every-month-adhia/article9732117.ece
 https://timesofindia.indiatimes.com/business/faqs/gst-faqs/gst-guide-taxes-to-
be-subsumed-under-gst/articleshow/60192017.cms
 http://www.gstindiaexpert.com/Home/Aboutus
 https://www.researchgate.net/publication/
323167356_GST_in_India_Concept_and_SWOT_Analysis

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