GST IN INDIA A BOON OR BANE ? AN OVERVIEW

GST

1. GST IN INDIA: A BOON OR BANE? AN OVERVIEW ON Pre-Induction Assignment By Puneet Kothidar PRN: 25020241032 MBA-IB DIV-A

2. Destination-Based Tax: Tax is levied at the point of consumption, not production. Dual Model: Both Centre and States can levy tax (CGST + SGST or IGST). Elimination of Cascading Effect: Seamless input tax credit across goods and services. Simplified Compliance: Common return filing system, e-invoicing, and GSTN portal. Uniformity: Brings consistency in taxation across states, reducing confusion for businesses Key Characteristics of GST: Key Components: • GST (Goods and services tax ) replaced pre-existing VAT (Value added tax) on 1st July 2017. •This reform unified various central and state taxes into a single tax structure, aiming to streamline the taxation process and enhance compliance • GST streamlined taxes into 4 types • CGST : Tax collected by the Central Government on intra-state sales. • SGST: Tax collected by the State Government on intra-state sales. • IGST : Tax collected by the Central Government on inter-state and import transactions. • UTGST: Tax collected on intra-Union Territory sales, managed by the Central Government.

3. TAX SLABS A FIVE TIER SYSTEM 0% Daily Needs, Health & Education 5% Essential goods and services, aimed at affordability e.g : salt 12% Slightly processed goods and daily necessities e.g : Packaged food 18% Most goods and services e.g : Soaps 28% Non-essential, demerit or luxury items e.g : Luxury cars

4. Unified tax system replacing multiple indirect taxes, simplifying compliance. Eliminates cascading tax effect, reducing overall tax burden. SWOT ANALYSIS- APPROACH Strenghts : Technological and infrastructure challenges. High compliance costs, especially for small businesses. Weaknesses: Potential to increase tax revenue and reduce evasion. Expansion in e-commerce taxation and formalization of unorganized sectors. Opportunities: Risk of tax evasion and fraud persists. Uneven implementation across states Threats:

5. Survivability in the Global Environment Particulars India Canada UK Singapore Standard Rate 0% (for food staples), 5%, 12%, 18% and 28% (+ cess on luxury items) GST 5% and HST varies from 0% to 15% 20 %Reduced rates- 5 %, exempt, zero rated 7% Reduced rates- Zero rated, exempt Returns and payments Monthly or quarterly and 1 annual return, based on  turnover Monthly, quarterly or annually based on turnover Usually quarterly. Small business option- annual Usually quarterly Business option- Monthly returns. Exempt supplies Sale of land and completed buildings, certain healthcare and educational services, essential food items, etc. Petrol, diesel, Alcohol, tobacco are still taxed under state taxes Real estate, financial services, rent (Residence), charities, health, education Medical, education, finance, insurance, postal services Real estate, Financial services, Residential rental

6. So How well does India lie in TAXATION Scenario? India: Challenges vs. Global Systems Too many tax slabs (complex for businesses). Frequent rate changes → uncertainty. High compliance burden for small businesses. Delayed refunds , especially for exporters. Cess and exceptions dilute the simplicity. So is Indian implementation of GST useless? NO! As india shows positive movement as Since its implementation in July 2017, the Goods and Services Tax (GST) has significantly transformed India’s indirect tax landscape. One of the most notable achievements is the substantial growth in tax collections, with monthly revenues consistently crossing ₹1.5 lakh crore and peaking at over ₹2.1 lakh crore in April 2024—reflecting improved compliance and economic resilience. The taxpayer base has more than doubled, growing from around 65 lakh in the pre-GST era to over 1.45 crore registered entities, signaling greater formalization of the economy. GST has also simplified the tax structure by eliminating multiple cascading taxes, enabling businesses to claim seamless input tax credit (ITC), which in turn reduced operational costs and improved competitiveness. The removal of inter-state barriers fostered a unified national market, reducing logistics costs by 20–30% and improving delivery timelines. Technological integration through the GST Network (GSTN), e-invoicing, and e-way bills enhanced transparency, curbed tax evasion, and streamlined compliance, with over 99% of returns now filed online. Additionally, India’s leap in the World Bank’s Ease of Doing Business ranking—from 130 in 2016 to 63 in 2019—was partly driven by the efficiency and uniformity brought in by GST. Overall, GST has laid the foundation for a more efficient, transparent, and growth-oriented tax regime in India.

7. Too many Tax Rates:  There are  four primary tax rates  (5%, 12%, 18%, and 28%) under GST. Besides this,  there are  special rates  (0%, 0.25%, 1%, and 3%). Additionally, there are more than 50  different cess rates  ranging from 1% to 25% that complicate the tax structure.  Issue:  When there are multiple tax rates then there exists a  risk of misclassification,  as taxpayers try to classify their products or services  under lower tax brackets , whereas tax authorities would try to classify them under higher tax brackets.  . Challenges Revenue Neutral Rate The revenue-neutral rate (RNR) is the tax rate at which the GST system would generate the same revenue as the pre-GST indirect tax regime. The Aravind Subramanian Committee had  recommended an RNR of 15%–15.5%.  This was to ensure that the   income to the states and the Centre is not eroded in absence of pre-GST taxes.  Issue:  India’s GST Council has over the years reduced several tax rates, resulting in the lowering of the average GST rate to  around 12% percent  from recommended ideal RNR. This has  hurt the revenue collections  for both the Centre and states. Issues with Exemptions:  Issue:  When a good/service is exempted from GST, only the final output is exempted from the tax but the  input taxes paid  in the process of manufacturing the goods are  not refunded.  Solution:  Zero rating can be more transparent than exemption, as the taxes paid on inputs and the resulting tax liability can be easily tracked and verified. This can help to reduce the risk of tax evasion and increase the overall effectiveness of the tax system.

8. An Overview: Healthcare sector Applicability to Healthcare: •Essential healthcare services: Exempt (0%) •Pharmaceuticals & medical equipment: 5% / 12% / 18% GST Benefits: Unified tax structure •Streamlined logistics & supply chain •Reduced cascading tax burden Challenges: •Increased cost on medical devices (12% GST) •Complexity in input tax credit for hospitals

9. Healthcare sector: Taxes Commodity/Service Pre-GST Tax Type Pre-GST Total Tax (%) Post-GST Tax (%) Change (%) Life-saving drugs Exempt (0%) Medical devices Excise duty (6%) + VAT (5%) 11 12 1 Healthcare services (private hospitals) Service Tax (15%) 15 -15 Ayurvedic medicines VAT (5%) 5 12 7 Diagnostic services Service Tax (15%) 15 -15 X-ray/MRI services Service Tax (15%) 15 -15 Surgical instruments Excise (6%) + VAT (5%) 11 12 1

10. So, What Difference did it really make? GST was introduced as very ambitious plan, to make taxation easy and increase tax collections, but politics and half-hearted implementation made it perform way lower than what it was supposed to. Tobacco, Alcohol, Petrol and Diesel, one of the major commodities not encapsulated in GST, along side such complex multi tier taxation and are one if the reasons unfortunately Being ambitious and positive all, we can vouch for is that GST is more of a boon in the long run due to its potential to formalize the economy, improve compliance, and simplify taxation.

11. BIBLOGRAPHY: ClearTax – GST Rates and Slabs: https://cleartax.in/s/gst-rates PwC India GST Insights : https://www.pwc.in/assets/pdfs/publications/2017/pwc-gst-in-india.pdf Economic Survey of India (Government of India) : https://www.indiabudget.gov.in/economicsurvey/ NSE India – Market Sector Classification: https://www.nseindia.com/market-data/sectors IBEF (India Brand Equity Foundation) – Sector Reports : https://www.ibef.org/industry/it-industry-india.aspx World Bank – India’s Economic Sectors: https://data.worldbank.org/indicator/NV.SRV.TETC.ZS?locations=IN GST Rates on Medicines – ClearTax : https://cleartax.in/s/gst-rates-on-medicines Economic Times, Budget 2025: Rationalising GST on medical devices, insurance incentives, and healthcare spending https://economictimes.com/industry/healthcare/biotech/healthcare/budget-2025-will-fm-sitharaman-give-indias-healthcare-sector-the-boost-it-desperately-needs/articleshow/117722493.cms GST on Healthcare Services – GST Applicability, Taxability and Exemption Limit for Services - https://gsthero.com/blog/gst-on-healthcare-services-gst-applicability-taxability-and-exemption-limit-for-services/ Challenges in GST Implementation- https://compass.rauias.com/current-affairs/challenges- gst -implementation/