Munich Personal RePEc ArchiveReview on Global Implications of Goodsand Service Tax and its Indian ScenarioR, Revathi and L. M., Madhushree and Aithal, SreeramanaSrinivas Institute of Management Studies, Srinivas University,Mangalore – India, Srinivas Institute of Management Studies,Srinivas University, Mangalore – India, Srinivas Institute ofManagement Studies, Srinivas University, Mangalore – IndiaApril 2019Online at https://mpra.ub.uni-muenchen.de/95152/MPRA Paper No. 95152, posted 16 Jul 2019 16:20 UTC
Review on Global Implications of Goods and Service Taxand its Indian ScenarioRevathi Radhakrishnan1, Madhushree L. M.1 & P. S. Aithal2Research Scholar, Srinivas Institute of Management Studies, Srinivas University,Mangalore-575 0012Srinivas Institute of Management Studies, Srinivas University, Mangalore-575 001E-mail: email@example.comApril 20191ABSTRACTGoods and Service tax is tax regime adopted by 160 countries over the globe in order toevade cascading of tax in the economy. India introduced GST in the year 2017 whereas manyother countries implemented GST many years before in their tax system. France was theprimary country to adopt this single tax system in 1954 and followed by Germany, Italy,Japan, South Korea. GST is one of the top initiatives taken by most of the countries for astructured and developed economy. A value-added tax levied on mainly goods and servicesprovided or sold for domestic or household consumption is called Goods and Service Tax.GST provides revenue or income for the government in the growth procedure of theeconomy. The section of GST which is accumulated or collected from the consumers by thebusiness or seller of the goods forwarded to the government. In some countries, Goods andService Tax is also acknowledged as Value Added Tax. This review paper focused on theimplications of GST on different countries economy and its collision on the society. Manyscholars have researched on this topic before and after the implementation in India. The paperthrows light on the various aspects of GST, and how it affects different industrial sectors inthe economy. The paper also analyses how various researchers have interpreted their studyabout GST, its future implications, and impacts in their countries with special emphasis onIndia.Keywords: Goods and Service tax, Value added Tax, ASEAN, Asia, Europe, Oceania, India.1. INTRODUCTION :Goods and service tax also called GST is an indirect tax system implemented currently in 160countries all over the world. A value-added tax levied on mainly goods and services provided or soldfor domestic or household consumption is called Goods and Service Tax. The GST is mainly leviedon consumers of goods and services, but the business people like wholesalers and retailers selling thegoods and services are remitted these taxes to the government. As a result, GST provides revenue andincome for the government in the growth process of the economy. The GST is an indirect federal salestax that is set on the basis of the rate slab of saleable goods and services under consideration. TheGST is added to the value of the product/service at the business level and a consumer who purchasesthe product/service has to pay the sales price plus GST. The GST portion collected and from theconsumers and accumulated by the business or seller should be forwarded to the government. In somecountries, this kind of tax is referred to as a Value-Added tax in simple way VAT. The first country toimplement the GST was France in 1954, and ever since then an approximate 160 countries haveadopted and implemented this indirect tax system in some of the other ways. Other countries whichimplemented GST include Canada, Vietnam, Italy, Nigeria, Brazil, Australia, Singapore, the U.K.,Monaco, Spain, and South Korea. On 1st July 2017, India joined the GST group by combining thesales tax, value-added tax, and other indirect taxes under single umbrella .Generally, the countries which adopted GST have a single unified tax system, which means that asingle tax rate is applied all over the country. A country with an integrated GST platform mergescentral taxes such as excise duty tax, sales tax, and service tax with state-level taxes such asentertainment tax, entry tax, transfer tax, sin tax, and luxury tax and collects them as one solitary tax.
The GST on a given good or service can be calculated at a single rate and at a sole point, which willbe more trouble-free for the consumers, the business people as well as the government to keep trackon it. This model eliminates confusion and complexity of the taxing system from both consumer andbusiness people point of view.1.1 Countries Implemented GST/VAT :Table 1: The number of countries implemented GSTS. No.Region1ASEAN2Asia3Europe4Oceania5Africa6South America7Central America, North America & CaribbeanNo. of Countries0719537441119Out of 160 countries, eight countries are not United Nation member states and they are Azores,Taiwan, Faroe Islands, Isle of Man, Jersey, Kosovo, Madeira and Niue. Numbers of UN memberstates are 193 and out of them only 41 member countries did not implement VAT/GST and are listedin Table 2.Table 2: List of Countries which are yet to adopted GSTASEANASIAEUROPE OCEANIAAFRICACARIBBEAN, SOUTH,CENTRAL& NORTHAMERICAMalaysiaAfghanistan lComorosCubaMarinoIslandsMyanmar BhutanMicronesiaDjiboutiSaint ted States of AmericaMaldivesSolomonLibyaIslandNorth KoreaTuvaluSao TomeandPrincipeOmanSomaliaQatarSouthSudanSaudi ArabiaSwazilandSyriaTimor LesteUnited ArabEmiratesYemenWith the implementation of GST, India is joined select League of Nations which incorporated goodsand service tax model. In fact, France was the first country to implement the GST in 1954. Since then,Germany, Italy, the UK, South Korea, Japan, have introduced the GST. The countries whichimplemented GST first in their nation are France in 1954, Russia in 1991 and China in 1994.Merely a handful such as Canada has a dual GST system. Compared to a combined GST economywhere the central or federal government collects the tax and then circulated to the states. In a dualsystem of GST, the central or federal GST is imposed in addition to the sales tax of the state. Forexample, in Canada, the central government levies a 5 percent tax and several provinces or states alsolevy a provincial state tax which in short called PST, which varies from 7-10 percent. In this situation,
a consumer or customer's receipt will obviously have the GST and PST rate that is imposed on his orpurchase value. Recently, the GST and PST have been mutually combined in several provinces into asingle tax system recognized as the Harmonized Sales Tax which in short called as HST. In 2013,Prince Edward Island adopted the HST for the first time by combining Canada's federal andprovincial sales taxes to a solitary tax at 14 percent. Ever since then, quite a few other provinces havefollowed this tax system including Nova Scotia and Ontario New Brunswick, Newfoundland, andLabrador.1.2 Adoption of GST by India :India implemented the dual tax system called GST on 1st July 2017, which is one of the biggestreforms in the country’s tax structure in decades. The main purpose of incorporating the GST is toeradicate tax on tax or double taxation in goods and services, which cascades from the manufacturinglevel to the consumption level of the goods and services. GST is an indirect tax which replaced almostall the indirect taxes in India.1.3 Replaced Taxes in India :India has adopted the goods and service tax on 1st July 2017, which was one of the utmost initiativestaken by the country government. Till that, there were a huge number of taxes levied on people and onorganizations by both the central government and the state government. At the central level, centralexcise duty, additional excise duty, additional customs duty, special additional duty of customs,service tax and excise duty levied under medicinal and toiletries preparations. Under state-level VAT/Sales tax, entertainment tax, Luxury tax, tax on lottery/betting/gambling, octroi, and purchase taxwere charged. Table 3 shows various tax heads and the rates which were later replaced by GST inIndia.Table 3 : List of various tax heads and the rates which were later replaced by GST.TaxesRatesCentral Excise Tax12.36%Duties of Excise12.36%Additional duties of excise26.5%Cess22%State VATLiquor, cigarettes- 12.5% , others 14-15%Additional duties of custom12.36%Special additional duty of custom4%Central sales tax15%Luxury Tax3% pa - 12 to 13 paSales Tax14.5- 15%Entry TaxDiffers for statesEntertainment Tax15%-30% (differs for states)Taxes on lotteries, betting and gambling15%Taxes on advertisements6%2. HISTORY OF GST :GST replaced various indirect taxes which were practiced in India. The Act was passed on 29thMarch of 2017 in the Parliament and on 1st July 2017, the GST Act came into effect. GST in India isa broad, destination-based, multi-stage and comprehensive tax which is levied on every valueaddition. Goods and Service Tax is solitary indirect tax for the entire country. Under GST the tax islevied at each point of sale. In case of interstate sales, tax will be chargeable to Integrated GST andintra state sales, tax will be chargeable to Central GST and State GST.
Fig. 2: The formation and mechaniism of GST ini India Advantaages of GSTT: Removing cascading taxx effect Higher thresshold for registration Compositionn scheme forr small businnessT Online simppler procedurre under GST Lesser comppliances Defined treaatment for E--Commerce Increased effficiency in loogistics Regulating thet unorganizzed sectorTable 4: GST Regimmes in state anda centralTRANNSACTIONNEW REGIMEROLD REEGIMEDDETAILSSale insiide the State CGST SGSTSVAT Serrvice tax/ The revennue collectedd as taxCentral Exciiseare distributed equallyy to thestate and ceentralSale to anotheraStatee IGSTCentral Salles tax Only one oof tax that isi centralExcise/ Servvice taxtax in casee of interstaate sales.The centraal will give thet IGSTrevenuebasedonothedestinationn of the goods3. STRUUCTURE OFO GST ANDD ITS EFFEECTS ON COUNTRY'SS ECONOMMY :As menntioned earliier, GST is an indirect tax introduuced in Indiia in 2017 levied on thhe goodsand servvices which isi supplied. GoodsGand seervice taxes are divided into 5 tax slaabs. It formuulates thecollectioon of tax eassier and thesse slabs are 0%0 -28%. However,Hpettroleum prodducts, electriicity, and
alcoholic drinks are not taxed under GST and as a replacement for are taxed individually bythe individual state governments, as per the previous tax regime. There is a unique rate of 0.25% onsemi-precious stones and rough precious and 3% tax on gold. In addition, a cess of 22% or other rateson top of 28% GST applies on a few items like aerated drinks, luxury cars, and tobaccoproducts. Before the implication of GST, the statutory tax rate for more or less all the goods wasconcerning 26.5%, Post implication of GST, mainly goods are in the max range of 18%.There are three main components for GST in India:1. CGST: Collected by the Central Government on sale of goods and services within the same state2. SGST: Collected by the State Governments on sale of goods and services within the same state3. IGST: Collected by the Central Government for sale of goods and services between two statesThe abbreviation of CGST and SGST is central goods and service tax and state goods and service tax.In order to calculate tax, first, we need to identify whether the taxable transaction is an inter-state i.e.,between two states or intra-state i.e., within the state supply of goods or services. In case of an intrastate transaction that is the location of the supplier and the buyer of the goods and service must be atthe same state. In such kind of transactions, the supplier or the seller has to collect CGST and SGSTfrom the buyer. The CGST collected from the buyer will be deposited to the Central Government andthe SGST collected from the buyer will be deposited to the State Government. This tax system is alsocalled an integrated tax system.The abbreviation of IGST is Inter-State goods and service tax. The taxable transaction between twodifferent states is computed under IGST. In other ways, the place of the supplier and the location ofthe buyer must be in different states. Also, in cases of export or import of goods or services or whenthe supply of goods or services is made to or by an SEZ unit, the transaction is assumed to be InterState. In an Inter-State transaction, a seller has to collect IGST from the buyer.3.1 Tax Slab in India :(1) 0% Tax Slab :The goods or items and services which are not taxed under GST comes under zero percent tax slab.These items are common products which are used in the household for daily use and day to dayworking of the economy.Table 5: List of the goods and services exempted from GST or 0% tax products .Tax in PercentGoods and services0%taxslab Hulled cereal grains like barley, wheat, oat, rye, etc.productsBones and horn-cores unworked and waste of these products.Palmyra jaggeryAll types of SaltDicalcium Phosphate (DCP) of animal feed grade conforming to ISspecification No. 5470 :2002Kajal [other than kajal pencil sticks]Picture books, colouring books or drawing books for childrenHuman hair – dressed, thinned, bleached or otherwise workedSanitary Napkins0%taxslab The government has exempted healthcare and educational services from taxingservicesunder the new regime that is GST.(2) 5% Tax Slab :Table 6: It shows the goods and services which are listed under 5% tax Tax in PercentGoods and services5%taxslab Household necessities such as edible oil, sugar, spices, tea, and coffee (exceptproductsinstant) are included.Coal, Mishti/Mithai (Indian Sweets) and Life-saving drugs are also coveredunder this GST slab.Cashew nutCashew nut in shell
5%taxservicesIce and snowBio gasInsulinAgarbattisKitesCoir mats, matting and floor coveringPawan Chakki that is Wind-based Atta ChakkiPostage or revenue stamps, stamp-postmarks, first-day covers, etc.Numismatic coinsBraille paper, braille typewriters, braille watches, hearing aids and otherappliances to compensate for a defect or disabilityslab Railways-Transportation of goods, passengersGoods transported in a vessel from outside IndiaRenting a motor cab without fuel costTransport services in AC contract/stage or radio taxiTransport by airTour operator servicesLeasing of aircraftsPrint media ad spaceWorking for printing of newspapers(3) 12% Tax Slab :Table 7: It shows the goods and services which are listed under 12% tax Tax in PercentGoods and services12%taxslab Computers and processed food.productsPreparations of vegetables, fruits, nuts or other parts of plants, including pickle,murabba, chutney, jam, jelly.Ketchups, sauces and mustard sauce but excluding curry paste, mayonnaise andsalad dressings, mixed condiments and mixed dressingsBari made of pulses including mungodiMenthol and menthol crystals, peppermint, fractionated/de-terpenatedmenthaoil, dementholised oil, Mentha piperita oil and spearmint oilAll diagnostic kits and reagentsPlastic beadsExercise books and notebooksFly ash blocksGlasses for corrective spectacles and flint buttonsSpoons, forks, ladles, skimmers, cake servers, fish knives, tongsFixed Speed Diesel EnginesTwo-way radio (Walkie talkie) used by defence, police and paramilitary forcesetc.Intraocular lensCorrective spectaclesPlaying cards, chess board, carom board and other board games, like ludo, etc.12%taxslab Rail transportation of goods in containers from a third party other than IndianservicesRailwaysAir travel excluding economyFood /drinks at restaurants without AC/heating or liquor licenseRenting of accommodation for more than Rs.1000 and less than Rs.2500 perdayChit fund services by foremenConstruction of building for the purpose of saleIP rights on a temporary basis
(4) 18% Tax Slab :Table 8: It shows the goods and services which are listed under 18% tax Tax in PercentGoods and services18%taxslab Hair oil, toothpaste and soaps, capital goods and industrialproductsintermediaries are covered in this slab.Kajal pencil sticksDental waxPlastic TarpaulinSchool satchels and bags other than of leather or composition leather; toiletcases, Hand bags and shopping bags of artificial plastic material, cotton or jute;Handbags of other materials excluding wicker work or basket workHeadgear and parts thereofPrecast Concrete PipesSalt Glazed Stone Ware PipesAluminium foilAll goods, including hooks and eyesRear Tractor tyres and rear tractor tyre tubesRear Tractor wheel rim, tractor centre housing, tractor housing transmission,tractor support front axleWeighing Machinery other than electric or electronic weighing machineryPrinters other than multifunction printersBall bearing, Roller Bearings, Parts & related accessoriesTransformers Industrial ElectronicsElectrical TransformerStatic Converters (UPS)RecorderCCTVSet top Box for TVComputer monitors not exceeding 17 inchesElectrical Filaments or discharge lampsWinding Wires, Coaxial cables and Optical FiberPerforating or stapling machines (staplers), pencil sharpening machinesBaby carriagesInstruments for measuring length, for use in the hand (for example, measuringrods and tapes, micrometers, callipers)Bamboo furnitureSwimming pools and paddling pools18%taxslab Food/drinks at restaurants with liquor licenseservicesFood /drinks at restaurants with AC/heatingOutdoor cateringRenting for accommodation for more than Rs.2500 but less than Rs.5000 perdaySupply of food, shamiyana, and party arrangementCircus, Indian classical, folk, theatre, dramaSupply of works contract(5) 28% Tax Slab :Table 9: It shows the goods and services which are listed under 28% tax Tax in PercentGoods and services28%taxslab Luxury items such as small cars, consumer durables like AC and Refrigerators,productspremium cars, cigarettes and aerated drinks, High-end motorcycles are includedhere.28%taxslab Entertainment events-amusement facility, water parks, films, theme parks, joyservicesrides, merry-go-round, race course, go-carting, casinos, ballet, sporting events
like IPLRace club servicesGamblingFood/drinks at AC 5-star hotelsAccommodation in 5-star hotels or above4. OBJECTIVES :The purpose of this review is to study and analyse the global implications of Goods and Service Tax(GST) with special emphasis on the Indian scenario. The specific objectives are listed below :(1) To study the concept of GST from different countries perspectives.(2) To review the available literature on GST globally to know its advantages and limitations.(3) To study the structure of GST and its effects on the country economy.(4) To gather knowledge regarding various industrial sectors influenced by GST.(5)To find a research gap on GST to check its effectiveness by studying expectations, implementation,and its impact on society for further research.5. METHODOLOGY :Secondary Data: The study is conducted by collecting published research papers on the topic Goodsand service tax in order to get more knowledge and understanding in the new tax regimeimplemented.6. SCHOLARLY REVIEW OF LITERATURE FOR GST :India took a huge initiative by introducing GST to the nation. It is the leading tax reform happened inthe past decades. Many researchers have a different view on the introduction of GST by replacingVAT. They have adopted different methodologies to discover the impact of GST on the Indianeconomy. Eva, Van et al (2017)  in their study discuss the multilayered taxes like central and stateindirect tax structure of the country. It says the new tax regime had replaced 10 types of indirect taxand unified them into one single tax system throughout the country. The paper has explained the taxrate imposed on different goods and services which trade in India. They analyz
Keywords: Goods and Service tax, Value added Tax, ASEAN, Asia, Europe, Oceania, India. 1. INTRODUCTION : Goods and service tax also called GST is an indirect tax system implemented currently in 160 countries all over the world. A value-added tax levied on mainly goods and services provided or sold for domestic or household consumption is called .
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