PUBLIC OPINION TOWARDS AWARENESS ON GST IMPLEMENTATION IN INDIA

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1 PUBLIC OPINION TOWARDS AWARENESS ON GST IMPLEMENTATION IN INDIA R. N. VIVEKANANDAR 1 Dr. P. RAJINI 2 1 HoD - School of Commerce UG, Rathnavel Subramaniam College of Arts and Science, (Autonomous), Sulur, Coimbatore. 2 Academic Coordinator for B. Com, HoD Research, School of Commerce UG, Rathnavel Subramaniam College of Arts and Science, (Autonomous) Sulur, Coimbatore. ABSTRACT Goods and Services Tax is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition. There are multiple steps an item goes through from manufacture or production to the final sale. Buying of raw materials is the first stage. The second stage is production or manufacture. Then, there is the warehousing of materials. Next, comes the sale of the product to the retailer. And in the final stage, the retailer sells you the end consumer the product, completing its life cycle. Goods and Services Tax will be levied at every point of sale. At every step of the manufacturing process, businesses will have the option to claim the tax already paid in the previous transaction. Understanding this process is crucial for businesses. The GST mechanism is advancement on the VAT system, the idea being that a unified GST Law will create a seamless nationwide market. It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate. The researcher has framed the objectives to study about the role of GST in India and to analyse on the public opinion about awareness on GST implementation in India with a sample size of 150, by using convenient sampling technique. Keywords: Tax, Indirect tax, Goods and Service Tax (GST), India. 1.1 INTRODUCTION Goods and Services Tax is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition. To understand this, we need to understand the concepts under this definition. Let us start with the term Multi-stage. Now, there are multiple steps an item goes through from manufacture or production to the final sale. Buying of raw materials is the first stage. The second stage is production or manufacture. Then, there is the warehousing of materials. Next, comes the sale of the product to the retailer. And in the final stage, the retailer sells you the end consumer the product, completing its life cycle. So, a pictorial description of the various stages, would look like: 38 icmrrjournal@gmail.com

2 Goods and Services Tax will be levied on each of these stages, which make it a multi-stage tax, which is about Value Addition. Let us assume that a manufacturer wants to make a shirt. For this he must buy yarn. This gets turned into a shirt after manufacture. So, the value of the yarn is increased when it gets woven into a shirt. Then, the manufacturer sells it to the warehousing agent who attaches labels and tags to each shirt. That is another addition of value after which the warehouse sells it to the retailer who packages each shirt separately and invests in marketing of the shirt thus increasing its value. GST will be levied on these value additions the monetary worth added at each stage to achieve the final sale to the end customer. There is one more term we need to talk about in the definition Destination-Based. Goods and Services Tax will be levied on all transactions happening during the entire manufacturing chain. Earlier, when a product was manufactured, the centre would levy an Excise Duty on the manufacture, and then the state will add a VAT tax when the item is sold to the next stage in the cycle. Then there would be a VAT at the next point of sale. So, earlier the pattern of tax levy was like this: 39 icmrrjournal@gmail.com

3 Now, Goods and Services Tax will be levied at every point of sale. Assume that the entire manufacture process is happening in Rajasthan and the final point of sale is in Karnataka. Since Goods & Services Tax is levied at the point of consumption, so the state of Rajasthan will get revenue in the manufacturing and warehousing stages, but lose out on the revenue when the product moves out Rajasthan and reaches the end consumer in Karnataka. This means that Karnataka will earn that revenue on the final sale, because it is a destination-based tax and this revenue will be collected at the final point of sale/destination which is Karnataka. 1.2 STATEMENT OF THE PROBLEM GST is not a new phenomenon. It was first implemented in France in 1954, and since then many countries have implemented this unified taxation system to become part of a global whole. Now that India is adopting this new tax regime, let us look back at the how and when of the Goods and Services Tax and its history in the nation. France was the world s first country to implement GST Law in the year Since then, 159 other countries have adopted the GST Law in some form or other. In many countries, VAT is the substitute for GST, but unlike the Indian VAT system, these countries have a single VAT tax which fulfills the same purpose as GST. In India, the discussion on GST Law was flagged off in the year 2000, when the then Prime Minister Atal Bihari Vajpayee brought the issue to the table. The basis of Goods and Services Tax is the seamless flow of Input Tax Credit (ITC) along the entire value addition chain. At every step of the manufacturing process, businesses will have the option to claim the tax already paid in the previous transaction. Understanding this process is crucial for businesses. Hence the researcher has concentrated to study on- whether a nationwide tax reform is acceptable by the public? 1.3 SIGNIFICANCE OF THE STUDY The idea behind having one consolidated indirect tax to subsume multiple currently existing indirect taxes is to benefit the Indian economy in a number of ways. It will help the country s businesses gain a level playing field. It will put us on par with foreign nations who have a more structured tax system. It will also translate into gains for the end consumers who not have to pay cascading taxes any more. There will now be a single tax on goods and services. In addition to the above, the Goods and Services Tax Law aims at streamlining the indirect taxation regime. As mentioned above, GST will subsume all indirect taxes levied on goods and service, including State and Central level taxes. The GST mechanism is advancement on the VAT system, the idea being that a unified GST Law will create a seamless nationwide market. It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate icmrrjournal@gmail.com

4 1.4 SCOPE OF THE STUDY GST will play such a significant role in transforming the current tax structure, and therefore, the economy. Currently, the Indian tax structure is divided into two Direct and Indirect Taxes. Direct Taxes are levies where the liability cannot be passed on to someone else. An example of this is Income Tax where you earn the income and you alone are liable to pay the tax on it. In the case of Indirect Taxes, the liability of the tax can be passed on to someone else. This means that when the shopkeeper must pay VAT on his sale, he can pass on the liability to the customer. So, in effect, the customer pays the price of the item as well as the VAT on it so the shopkeeper can deposit the VAT to the government. This means that the customer must pay not just the price of the product, but he also pays the tax liability, and therefore, he has a higher outlay when he buys an item. This happens because the shopkeeper has paid a tax when he bought the item from the wholesaler. To recover that amount, as well as to make up for the VAT he must pay to the government, he passes the liability to the customer who has to pay the additional amount. There is currently no other way for the shopkeeper to recover whatever he pays from his own pocket during transactions and therefore, he has no choice but to pass on the liability to the customer. Goods and Services Tax will address this issue after it is implemented. It has a system of Input Tax Credit which will allow sellers to claim the tax already paid, so that the final liability on the end consumer is decreased. 1.5 REVIEW OF LITERATURE Anushuya, Karam Pal Narwal Junior Research Fellow, Haryana School of Business, GJUS&T, Hisar, India. Professor, Haryana School of Business, GJUS&T, Hisar, India. International Journal of Economic Practices and Theories, Vol. 4, No. 6, 2014, e-issn , have stated that GST is now accepted all over the world and countries are using it for its sales tax system. Its concepts and impacts are analyzed with various aspects and techniques. Analyzing it with the help of CGE is at introduction stage and this paper assesses different literatures on it to find out CGE application in GST by examining 21 research papers of the period The major finding of the paper is that CGE is mostly used for welfare effect of GST and various aspects are still waiting to open. Nitin Kumar (2014) studied, Goods and Service Tax- A Way Forward and concluded that implementation of GST in India help in removing economic distortion by current indirect tax system and expected to encourage unbiased tax structure which is indifferent to geographical locations. Pinki, Supriya Kamma and Richa Verma (July 2014) studied, Goods and Service Tax- Panacea For Indirect Tax System in India and concluded that the new NDA government in India is positive towards implementation of GST and it is beneficial for central government, state government and as well as for consumers in long run if its implementation is backed by strong IT infrastructure. 1.6 OBJECTIVES To study about the role of GST in India. To analyse on the public opinion about awareness on GST implementation in India. To offer suggestions. 1.7 RESEARCH METHODOLOGY PRIMARY DATA: A structured questionnaire is used to collect the primary data. SECONDARY DATA: Secondary data is collected by referring related books, journals and web sites icmrrjournal@gmail.com

5 SAMPLE: The sample size of the study is PERIOD OF THE STUDY The study covers a period of two months from 1 st April 2017 to 31 st May TOOLS AND TECHNIQUES Simple percentage 1.10 LIMITATIONS The survey was restricted to general public. The number of respondents was limited to 150 only. Some of the respondents were not open in giving their opinions CHAPTER SCHEME CHAPTER I - includes Introduction, Statement of the problem, Significance of the study, Scope of the study, Objectives of the study, Research methodology, Tools and techniques, Limitations and Chapter scheme. CHAPTER II - Review of the literature. CHAPTER III- Theoretical presentation of an overview of GST implementation in India. CHAPTER IV- Collected data are analysed and interpreted. CHAPTER V- Includes the Findings, Suggestions and Conclusion. TABLE - 1 GENDER OF THE RESPONDENTS Gender No. of respondents Percentage Male Female The above table shows the gender of the respondents. Out of the total respondents taken for the study, % are male and the remaining % are female. Most of the public respondents are male. TABLE - 2 ABOUT GST About GST No. of respondents Percentage Generalised Sales Tax Goods and Service Tax The above clearly states the awareness of explanation of GST. Out of the total respondents taken for the study, % of the public are not aware of GST and wrongly given the explanation as Generalised Sales Tax. Remaining % of the public are aware of the explanation of GST and given as Goods and Service Tax. Majority of the public are not aware of GST and wrongly given the explanation as Generalised Sales Tax icmrrjournal@gmail.com

6 TABLE - 3 OPINION ABOUT WHETHER IMPLEMENTATION OF GST WILL CAUSE HIGHER PRICE FOR GOODS AND SERVICES Yes No The above table shows the opinion about whether implementation of GST will cause higher price for goods and services. Out of the total respondents taken for the study, % of the public opined that the implementation of GST will cause higher price for goods and services and the remaining % of the public opined that the implementation of GST will not cause higher price for goods and services. Majority of the public is of the opinion that the implementation of GST will cause higher price for goods and services. TABLE - 4 RESPONDENTS SOURCE OF AWARENESS ABOUT GST Friends Family Mass Media Online Source The above table shows the respondents source of awareness about GST. Out of the total respondents taken for the study, 38 % of the public are aware of GST through mass media, 28 % of the public are through friends, % of the public are through family discussion and the remaining % of the public are through online sources. Majority of the public are aware of GST through mass media. TABLE - 5 OPINION ABOUT THE PEOPLE IN INDIA WHETHER THEY ARE READY FOR IMPLEMENTING GST SYSTEM? Yes No The above table states the opinion about the people in India - whether they are ready for implementing GST system. Out of the total respondents taken for the study, 64 % of the public have stated that they are not ready for implementation of GST system in India. Remaining 36 % of the public have stated that they are ready for implementation of GST system in India. Majority of the public have stated that they are not ready for implementation of GST system in India icmrrjournal@gmail.com

7 TABLE - 6 OPINION ABOUT GST WHETHER BENEFICIAL TO BOTH GOVERNMENT AND PEOPLE Yes No The above table clearly explains the opinion about GST, whether it is beneficial to both government and people. Out of the total respondents taken for the study, 58 % of the public opined that GST is beneficial to both government and public. 42 % of the public opined that GST is not beneficial to both government and public. Majority of the public opined that GST is beneficial to both government and public. TABLE - 7 OPINION ABOUT THE AVAILABLE LEGISLATION IN RELATION TO THE PROPOSED GST Yes Satisfactory No Still needs more clarity The above table shows the opinion about the available legislation in relation to the proposed GST. Out of the total respondents taken for the study, 66 % of the public have opined that they still need more clarity on GST. Remaining 34 % of the public have stated that they are satisfied with the available legislation in relation to the proposed GST. Majority of the public have opined that they still need more clarity on GST. TABLE - 8 OPINION ABOUT DISCUSSION OF GST WITH OTHERS BY RESPONDENTS Yes They discuss No They do not discuss The above table clearly states the opinion about discussion of GST with others by the respondents. Out of the total respondents taken for the study, % of the public opined that they discuss about GST with others and the remaining % of the public opined that they do not discuss about GST with others. Majority of the public opined that they discuss about GST with others. TABLE - 9 WHETHER GST WILL BE EASIER TO COMPLY WITH OR DIFFICULT Easier Difficult Do not know icmrrjournal@gmail.com

8 The above table states whether GST will be easier to comply with or difficult. Out of the total respondents taken for the study, 90 % of the public opined that they do not know about it % of the public are of the opinion that GST will be difficult to comply with. Remaining 3.33 % of the public are of the opinion that GST will be easier for them to comply with. Majority of the public opined that they do not know about it. TABLE - 10 WHETHER CURRENT SOFTWARE SYSTEM IN BUSINESS WILL BE EQUIPPED TO HANDLE THE PROPOSED GST Yes No The above table shows the opinion about whether current software system in business will be equipped to handle the proposed GST. Out of the total respondents taken for the study, % of the public have stated that the current software system in business will not be equipped to handle the proposed GST % of the public have stated that the current software system in business will be equipped to handle the proposed GST. Majority of the public have stated that the current software system in business will not be equipped to handle the proposed GST. TABLE - 11 WHETHER GST IS A FAIR TAX Yes No The table shows the opinion about GST is a fair tax. Out of the total respondents taken for the study, 84 % of the public are of the opinion that GST is fair tax. Remaining 16 % of the public are of the opinion that GST is not a fair tax. Majority of the public are of the opinion that GST is fair tax. TABLE 12 AS A PUBLIC TAX PAYER DO YOU FEEL THAT YOU HAVE AN OPPORTUNITY TO RAISE YOUR VOICE IN INDIRECT SERVICE TAX MATTERS? Yes No The table explains that whether as a public tax payer do you feel that you have an opportunity to raise your voice in indirect service tax matters? Out of the total respondents taken for the study, 90 % of the public have stated that as a public tax payer they feel that they do not have an opportunity to raise voice in indirect service tax matters. Remaining 10 % of the public have stated that as a public tax payer they feel that they have an opportunity to raise voice in indirect service tax matters icmrrjournal@gmail.com

9 Majority of the public have stated that as a public tax payer they feel that they do not have an opportunity to raise voice in indirect service tax matters. TABLE 13 WHETHER THE PROPOSED GST IS A PREDOMINANTLY COMPLIANCE TAX OR A TECHNICALLY ORIENTED TAX? Compliance tax Technical oriented tax The above table explains whether the proposed GST is a predominantly Compliance tax or a technically oriented tax? Out of the total respondents taken for the study, % of the public opined that GST is a predominantly Compliance tax and the remaining % of the public opined that GST is a predominantly a Technical oriented tax. Majority of the public opined that GST is a predominantly Compliance tax. FINDINGS Most of the public respondents are male. Majority of the public are not aware of GST and wrongly given the explanation as Generalised Sales Tax. Majority of the public is of the opinion that the implementation of GST will cause higher price for goods and services. Majority of the public are aware of GST through mass media. Majority of the public have stated that they are not ready for implementation of GST system in India. Majority of the public opined that GST is beneficial to both government and public. Majority of the public have opined that they still need more clarity on GST and opined that they discuss about GST with others. Majority of the public neither opined that GST compliance is easier not difficult. They opined that they do not know about it. Majority of the public have stated that the current software system in business will not be equipped to handle the proposed GST. Majority of the public are of the opinion that GST is fair tax. Majority of the public have stated that as a public tax payer they feel that they do not have an opportunity to raise voice in indirect service tax matters. Majority of the public opined that GST is a predominantly Compliance tax. Suggestions The public suggested that there should be a smooth, transparent and simple transition provisions which is easily understandable. Special focus on awareness and training of all officers, professionals and assesses should be given on GST. Since the public are very clear about GST, any disputes on GST introduction should be proactively addressed by way of speedy redressal of cases icmrrjournal@gmail.com

10 INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW GST is the future tax. GST law should therefore have forward looking and open for futuristic businesses such as e-commerce, technology based, IT etc and recognize internet, digital economy, start ups etc., An expert panel should be formed to draft the suitable enabling provision for the concurrent taxation powers and recommend consequential modifications to the Constitutions and it should be published for the mass public. GST can also be used as an effective tool for fiscal policy management if implemented successfully due to nation-wide same tax rate. Conclusion As India moves towards a dual GST, there would be a hoard of changes required in the system. To begin with the constitution of India would need an amendment. In any case, the first test for any tax reform in the country is to stand the test of constitutional validity. Thus, becomes imperative that the GST is implemented within the reigns of the constitution. Currently, the Centre is precluded from taxing purchase or sales of goods. This power has exclusively been preserved in the Constitution for the States. In turn, The States are preserved in the Constitution for the States. In turn the States are precluded from the taxation of service. This division of taxation powers is time worn and goes back to the time the constitution was written with a few amendments to their credit. The implementation of GST is a changing face of India which is a welcome move and the government should be well equipped for that which is a symptom of fast paced economy. References First Discussion Paper On Goods and Services Tax In India The Empowered Committee Of State Finance Ministers, New Delhi, November 10, Goods and Service Tax, Abhishekh A. Rastogi & Aditya Kumar, Taxmann Publication. Chatterjee, Timir.Baran.,2008, An Introductory Study on Goods and Service Tax, New Delhi,Nabhi Publication. Rastogi, Abhishek A & Kumar, Aditya.,2009, Illustrated Guide to Goods & Service Tax (GST), New Delhi,Nabhi Publication. Gururaj, B.N.,2010, CENVAT on Goods and Services , New Delhi,Nabhi Publication. R. Muralidharan, 2007, Service Tax on Goods Transport Agencies, Service Tax Journal, Manupatra,p5-6. Publishing Limited. In NCAER (2009), Moving to Goods and Services Tax in India: Impact on India s Growth and International Trade, Thirteenth Finance Commission, Government of India html icmrrjournal@gmail.com