SPECIALIZATION PROJECT

ON

“THE IMPECT OF GST ON SMALLM & MEDIUM ENTERPRISE”

Submitted in partial fulfillment for the award of the degree in Master of
Management Studies (M.M.S)

(University of Mumbai)

Submitted By
MIHIR .RAJESH.RATHOD
Roll No. MB23070

Under the Guidance of

DEEPAK NAYAK
Academic Year
2023-2025

SASINSTITUTE OF MANAGEMMENT STUDIES (MMS),

Saravali, Boisar(w),
Tal.& Dist. Palghar (MH)-401501.
 DEEP EDUCATION SOCIETY

SAS INSTITUTE OF MANAGEMENT STUDIES

CERTIFICATE
This is to certify that project titled “THE IMPECT OF GST ON SMALLM
& MEDIUM ENTERPRISE”is Successfully completed by MIHIR RATHOD
.during the IV Semester, in partial fulfillment of the Master’s Degree in
Management Studies recognized by the University of Mumbai for the
academic year 2023-25 through SAS INSTITUTE OF MANAGEMENT
STUDIES.
This project work is original and not submitted earlier for the award of any
degree /diploma or associateship of any other university / Institution.

FACULTY INCHARGE

Name: Signature:

College Seal
 DECLARATION

I hereby declare that the project titled is “THE IMPECT OF GST ON

SMALLM & MEDIUM ENTERPRISE”, an original work prepared by
me and submitted to University of Mumbai in partial fulfillment of SAS
INSTITUTE OF MANAGEMENT STUDIES for the Academic
year 2023-2025

The matter embodied in this project report has not been submitted to any
other university or institution for the award of the degree. This project is
my original work and has not been presented earlier in this manner.

This information is purely of Academic Interest.

Name: MIHIR RATHOD

Roll No : MB23070
Place: Saravali, Boisar(W)
Date:
 ACKNOWLEDEMENT

I express my sincere thanks to my project guide, Assistant Prof, DEEPAK

NAYAK of MBA Department, for guiding me right from the Inception till the
successful Completion of the project, I sincerely acknowledge HIS for
extending HIS valuable guidance, support for literature, critical reviews of
project and the report and above all the moral support HE had provided me for
this project.
I would also like to thank our Director Dr. BHAGESH SANKHE Sir and other
staff members of MBA Department, for their help and cooperation throughout
my project.

(MIHIR RATHOD
INDEX

Chapter Title Pag

No. e
No.

1. Introduction 6
2. Review Of Literature 52
2.1 Objectives Of Research
3 Research Methodology 55
3.1 Types Of Research
3.2 Sources Of Data
3..3 Instrument Of Data Collection
4 Data analysis and Interpretation 58
5 Conclusion 77
6 Suggestion 79
7 Bibliography 80
8 Annexure 81
 INTRODUCTION:

WHAT IS TAX?
The word tax has been derived from the Latin word, “Taxo” which means touch sharply
or change.
Definition of tax according to Wikipedia: A tax is a compulsory financial charge or
some other type of levy imposed upon a taxpayer (an individual or legal entity) by a
governmental
organization in order to fund various public expenditures. A failure to pay, along with
evasion of or resistance to taxation, is punishable by law.
A tax is a compulsory payment levied by the government through its legislative authority
to the individuals and corporates to finance the public welfare activities of the
government. Therefore, the tax collected by government entity through various sources
is used for the welfare of the general public not specific public such as construction of
roads, hospitals, schools, colleges etc. as well as to maintain the existing infrastructures
prevailing in the country. The taxes collected are also used to pay salaries to the
government employees such as Doctors, Nurses, Armies, Navy Officers, Police Officers,
who provide services to the general public. It is also used to provide financial help to the
needy people such as farmers, martyr’s families, natural calamities victims (such as
people who have incurred losses due to earthquakes, floods. Cyclones, etc.) or to build
bridges, dam’s, etc. To put it in a general way, Tax is used for the wellbeing of the
people whether it is fulfilling basic needs of the people such as building houses for poor
people or providing rice, sugar, kerosene at cheaper rates or providing better educational
and health facilities or to protect the country from enemy countries or to invest in
research and development in various fields such as Space Research, Health research and
so on.
Tax is a part of a person’s earning or a part of a company’s profit paid to the
government. Or in other words some portion of an individual’s earnings or company’s
profit is given to the government which is used by the government for the welfare of the
general public. So, the government is a body that collects funds from the public in the
form of tax and utilizes those funds for the best interest of the public or collects and
channels the funds of the public in a way that benefits everyone. Individual or corporates
who pays tax to the government are called Tax payer.

Payment of tax is not uniformly divided but paid as per various factors such as earning
ability, occupation, etc. A person cannot claim that he/she has paid more taxes then
others as a result he should get more benefits from the government. No matter how much
you pay high or low taxes this money is used for the welfare of the general public or for
the development of the nation.

Tax is not a voluntary payment but involuntary or compulsory payment made by the
individuals or corporates to the government. Payment of tax is mandatory for every
citizen of India. Or we can say tax is a liability of a citizen towards its government.
Failure to pay tax or tax evasion is a criminal offence and a punishable act. The
punishment may lead to huge penalty or even in some cases imprisonment.

Since India is a Federal country so Taxes in India are collected by both the Central and
State governments. Local bodies such as municipal corporations also collect taxes on
property tax, drainage, dispose of garbage, water supply, etc.
It is noteworthy that not every citizen is taxed equally but it depends on various factors
such as sources of income, types of occupation an individual is involved in, earning
ability, geographical location of the individual etc.

SOME REASONS WHY PAYMENT OF TAX IS CRUCIAL :

i. To provide basic needs to the public: As early stated that there is a huge disparity
between the rich and the poor and the gap is becoming wider day by day. The rich are
becoming richer and the poor are becoming poorer. The reason for rich becoming rich is
that they possess financial intelligence which is being passed on to generations after
generation but the poor people being financially uneducated does not possess financial
intelligence as a result cannot teach to his/ her coming generations as a result they
become poorer and poorer. A global research organization has found that almost 680
million Indians or 56 per cent of the population are unable to meet their basic needs such
as food, clothing and shelter. So, the tax collected by government is used to fulfill those
needs by giving free meals, building houses for free as well as providing other facilities
such as free electricity, free education, free health and medical treatment, etc. ii. To
finance Government bodies: There are many government bodies at various levels such as
municipality offices, police stations, public schools and colleges, army camps, panchayat
house etc. and to operate them the government needs funds. So, part of the tax collected
is also used for financing various government bodies which provide services to the
public. iii. Building new infrastructures and maintaining the old infrastructures: such as
roads, railways, airports, colleges, schools, hospitals, government offices, etc. to provide
better facilities to the public. iv. Overall development of the nation:
Taxes collected are used for overall development of the nation or economy. According
to sources about 68.4% of the government funds is used for revenue expenditures.
Revenue expenditures are recurring in nature and are incurred by government to finance
the operational cost such as financing the day to day activities of the government such
salaries of government employees in all sectors, pensions, subsidies(food subsidy, fuel
subsidy and fertilizer subsidy) provided to public, grants given to state and union
territories, etc. It is noteworthy that money spent in operating the government
infrastructure and providing public services does not create any asset neither it is a
liability.

It is incurred to fulfill their basic obligations towards the public. The country cannot
grow or develop just by spending the funds on the operational activities so the
government spends almost 13.6% on acquisition of various assets such as land,
buildings, investment in various securities. The funds are utilized to construct hospitals,
schools, colleges, dams, railway station and railway tracks, airports which will provide
revenue to the government. Such expenditure is called Capital expenditure and it is
considered as an asset because it yields profits or dividends as revenue for the
government. v. Reducing poverty and income inequality: As people pay tax in
proportion to their earnings and this implies that higher income people or rich people
will pay more taxes and low-income people or poor people pay less taxes. One of the
main objectives of collecting tax is to reduce income inequality and move people away
from the poverty. This is done by collecting higher taxes from rich and high-income
level which is used for funding social welfare programs.
Tax helps in redistribution of wealth and reduces the disparity between the rich and the
poor. vi. More employment opportunities: Simply funds are required to build more
government infrastructures such as hospitals, colleges, municipality offices, legal
offices, airports to provide more employment to the public. Fund are also required to pay
salaries to individual working in those organizations. Tax collection helps in building
those infrastructures and payment of salaries to the employees. More tax more funds will
be available to the government which can be used for generating employment in the
nation.

CONSTITUTIONAL POWERS :

Constitution of India (COI) is the supreme law and all the laws are formed as per the
constitution and so all the laws and actions of the government are subordinate to it which
means no one go against the constitution and make and law and levy any amount of tax to
the public so Article 265of the Indian Constitution states that “No tax shall be levied or
collected except by the authority of law”. As per Article 246 of the Constitution, Parliament
has the powers to make new laws or to amend existing laws in respect to matters of the
Central Government given in Union List(List I of the Seventh Schedule) and matters given
of the State in the State List(List II of the Seventh Schedule). In case of matters of both the
Central and the State Government, the matter is contained in Concurrent List (List III of the
Seventh Schedule), where both the state and central government have concurrent powers to
legislature.
TAXATION POWERS OF UNION AND STATE GOVERNMENT
India is a three-tier federal structure comprising of the following: a) The Union Government
b) The State Government c) The Local Government In India the power to collect or levy tax
is given to Central Government, State government and local municipal bodies in accordance
with the provisions of the Indian Constitution. These makes up the structure of the Indian
Tax System. The central government levies taxes such as Custom duty, Income Tax, Service
Tax, and Central Excise duty whereas the State government has the power to levy income
tax on agricultural income, professional tax, Value added tax(VAT), state excise duty, land
revenue and stamp duty and the local bodies are given the power to collect tax such as
property tax, taxes on drainage and water supply, electricity bills, etc.

It is noteworthy that not anyone can impose any amount of tax to the public. Even the
government (Central and State) and municipal bodies cannot charge any amount of tax to the
public even though they have the power to impose and collect taxes. In order to impose any
tax, it has to be passed in both the houses i.e. Rajya Sabha and Lok Sabha and signed by the
president to consider it as a legal imposement and collection of Tax. In other words, tax has
to be passed as a law.

TAXATION PROVISION OF CONSTITUTION

The power to levy and collect taxes are given in the constitution of India and no citizen of
India can make tax laws as per their wish. All tax should be made for the welfare of the
general public and made as per the provision stated in the constitution which are given as
follows:
• Article 265: As stated earlier no one can impose tax as per their wish even governments or
Mukesh Ambani who is the richest person of India cannot impose tax as per their wish. Tax
should be levied and collected except by the authority of law. The constitution of India
prohibits arbitrary collection of tax. In India the tax imposement and collection powers are
given to Union government, State government and Local authorities such Panchayats and
Municipalities.

• ARTICLE 246: It states that the parliament has exclusive powers to make laws with
respect to any matters of the state or central government individually or in case of matters of
both the central and the state government collectively. The parliament can make laws for the
entire nation or any part of the nation and the State legislature can make laws for the entire
state or part of the state.

• SCHEDULE VII (IN ARTICLE 246): The seventh schedule contains three lists which
contains the matters under which the union and state governments have the authority to
make laws as per the needs. a) UNION LIST (LIST I): The Central government are given
exclusive powers by the Constitution of India to make laws with the help of parliament in
respect of matters of the union government stated in entries between 82-92C of Union List
i.e. List I. b) STATE LIST (LIST II): The constitution of India has given powers to
respective state governments or respective authority to make laws on behalf of matters stated
in List II (State List), entries between 45-63.

c) CONCURRENT LIST

(LIST III): The constitution also has given powers to both Union and State government to
make laws in matters stated in List III (Concurrent List).

1.6 REVENUE AUTHORITIES a) THE CENTRAL BOARD OF DIRECT TAXES: Also

known as CBDT is one of the components of the Department of Revenue under the Ministry
of Finance. The Central Board of Direct Taxes are responsible for formulating policies
related to direct tax in India. They are also in charge to implement the new policies
formulated as well as monitor direct tax laws in the country. b) THE CENTRAL BOARD
OF EXCISE DUTY: Also known as CBEC is also a component of the Department of
Revenue under the Ministry of Finance. The Central Board of Excise Duty is responsible for
formulating policies related to indirect tax in India and they are also in charge for
administering customs, central excise duty and service tax in India. c) THE CENTRAL
BOARD OF INDIRECT TAXES & CUSTOMS: Also known as CBIC is responsible for
formulating policies related to GST.
TAX STRUCTURE IN INDIA :

There are basically two types of tax in India via direct and indirect tax.

DIRECT TAX:
Direct tax is those tax which is to be paid by the individual or corporate
entities to whom it is levied. The tax burden cannot be shifted to another person or tax payer.
Therefore, it is a non-transferable tax. Direct tax is directly paid by the individuals or
corporate entities to the tax authorities of the Government of India. The Central Board of
Direct Tax (CBDT) is authorized for planning and framing the policies relating to direct tax.
The CBDT is a statutory authority functioning under the Central Board of Revenue Act,
1963. These includes wealth tax, gift tax, income tax, etc. The most important feature of
direct tax is that it is a progressive tax which means that if the income of the person
increases their tax liability also increases which result in more payment of tax by the rich
people and less payment of tax by the poor people and helps in reducing the income
inequality gap between the rich and the poor persons.
Some benefits
Some benefits of Direct Tax:

a) CONTROLLING INFLATION: Inflation means the currency value is depreciating as a

result the individual has to pay higher prices for the same goods or services they were
purchasing at lower cost in the past. So, if the incomes of individuals do not rise than the
public will not be able to purchase goods and services as a result the economy will be
stagnant. Inflation is caused when RBI circulates more money in the economy or when a
country faces economic disasters etc. So, to decrease money supply in the economy the
government will charge high taxes to higher income level people as a result the demand for
goods and services will also go as a result inflation is controlled or reduced .
b) REDUCING INCOME DISPARITY: High taxes are imposed to high income peoples and
minimum taxes are imposed on poor people as a result direct tax helps in reducing the
income inequality between the rich and the poor.
c) REDUCE POVERTY: The direct tax collected from high earned individual are used for
upgrading the poor people and providing benefits to the poor people.
TYPES OF DIRECT TAX :

CORPORATE TAX WEALTH TAX INCOME TAX CAPITAL GAINS TAX :

a) Income Tax: Income tax is a direct tax imposed on the earning of a person from various
sources mentioned below in a particular financial year. Any earning person is liable to pay
income tax to the government. The tax payer must file Income Tax Returns (ITR) on a
yearly basis and failure to file ITR may lead to huge penalty. Tax Deduction at Source
(TDS) is a part of Income Tax. According to Section 2(31) of the Income Tax Act, a person
includes: o An individual o Hindu Undivided Family o A company o A firm Associate of
person o A local authority o Every individual judicial person not falling within any of the
above categories. If the person stated above is earning income from any of the below
mentioned head of income than they are liable to pay income tax to the government.

Heads of Income:
Income from salary o Income from house property o Income from profit and gains from
business or profession (PGBP) o Income from capital gains o Income from other sources
(such as dividend incomes, winning from lotteries, horse races, gambling, gifts received by
individual and HUF, etc.)
b) Wealth Tax: Wealth tax is levied to the richer section of the population. It is calculated on
the basis of net worth of a person. Net worth is nothing but all the assets possessed by a
person minus all the liabilities or debts of that person. Individuals, HUF’s, corporates having
a net worth exceeds Rs 30lakhs are liable to pay wealth tax at rate of 1% to the government.
The major intention of charging wealth tax to the rich people is to minimize income
inequality between the poor and the rich people.
c) Corporate tax: As we all know a corporate operates to earn profit and the corporates has to
pay a certain portion of profit as a tax to the government. Corporates are liable to pay
corporate tax annually. Domestic as well as Foreign companies running their business in
India are inclined to pay tax. There are various sources from which the companies earn profit
such profits earned from operating the business, capital gains from various assets, etc.
d) Capital Gains Tax: It is a tax levied on the profits earned from selling of assets such as
land, buildings, machinery, precious metals, etc. as well profits from selling of investments
(such as bonds, shares, etc.) and all within a predefined period of time. The capital gain is
nothing but the difference between selling price of the assets minus the cost price of the
asset. There are two types of capital gains: o Short term capital gains: If a person’s sells
assets or investments and earns profits within 3 years of acquisition than it is considered as
short-term capital gains and is charged at the rate of 15%. o Long term capital gains: If a
person sells assets or investments and earns profits after 3 years of acquisition it is
considered as long-term capital gains.

INDIRECT TAX:
Indirect tax are imposed on goods and services. Simply put taxes which are not paid directly
to the government bodies is called Indirect tax. Indirect taxes are those taxes that are not
paid directly by the assesse (Individuals and corporates) to the government authorities and
hence tax burden can be shifted from one person to the other. Indirect taxes are generally
levied on transfer of goods and services. As we all know that between the manufacturer and
customer or consumer there are many intermediaries in between such as whole sellers,
retailer’s, etc. So, taxes on goods and services are at first imposed to manufacturer then
passed to the suppliers who later passes the tax burden to the end user of the goods or
services that is customers.

These includes Value Added Tax (VAT), excise duty, etc. The immediate tax liability is
upon manufacturers/sellers/service provider, etc. which ultimately is transferred to the end
user of the product or services i.e. customers. And hence it is indirectly paid by the
consumer as a result it is called indirect tax. Indirect tax is regressive tax which means it
doesn’t take into consideration whether you are rich or poor the government the same
amount of tax from the assesse.

The government imposes high tax rates on harmful or sin products like alcohol, tobacco, etc.
to discourage or reduce consumption of such unhealthy products. Indirect tax is the major
source of revenue for the government. More than 50% revenue of the government comes
from imposing and collecting indirect taxes.
SOME MAJOR TYPES OF INDIRECT TAXES IN INDIA:

a) Sales Tax: Sales tax is imposed on selling and buying of goods and services such as if we
go to mall to purchase clothes than the amount paid includes the price of that particular cloth
as well as the sales tax and this tax collected by the buyer is transferred to the respective
governments. If the sales are inter-state than the sales tax is paid to the Central Government
and if it is intra-state it is paid to the State Government. Intra state sales tax is also known as
VAT. Sales tax are imposed on various household items, clothing, and other basic
requirements. The sales tax is the major source of revenue of the State Government.
b) Excise Duty: Excise duty is imposed or levied by the Central government on all
tangible items i.e. goods produced or manufactured within the country such as purchase
of raw materials, etc. and is paid by the manufacturer or producer to the government
who later passes the tax burden to the end user of that product. Excise duty is also
commonly known as Central Value Added Tax (CENVAT).

c) Value Added Tax (Vat): The concept of VAT was introduced in India in 2005. VAT is
an indirect tax levied on the transfer or sale of tangible goods within the country. Before
the product is ready for sale it has to pass through various stages such as inbound

DIFFERENCE BETWEEN DIRECT AND INDIRECT TAX:

DIRECT TAX INDIRECT TAX

• Direct taxes are imposed on income or • Indirect taxes are imposed on goods and
earning of a person services.
• Direct tax liability and burden is beard by the • Tax liability and burden is on the different
same person. Tax liability cannot be person. Tax liability is upon different business
transferred from one person to another. units such as manufacturer/purchaser/seller and
later it is transferred to the end user of the
product or services i.e. consumer.

• Direct taxes are progressive in nature. • Indirect taxes are regressive in nature.
• Tax liability cannot be shifted or transferred • Tax liability can be shifted or transferred
from one person to another person from one person to another person.
• Examples: Income tax, wealth tax, etc. • Examples: Entertainment tax, sales tax, VAT,
etc.
PRE GST-ERA: INDIRECT TAXES IN INDIA

a) Before GST there was the existence of many indirect taxes in the country, more than 14
different indirect taxes collected by the central and state government individually on
manufacture/purchase/sell of goods and services.
b) Tax on goods and services were as high as 50% and normally between 30-35%.
c) We know that the ultimate indirect tax burden is paid by the general public and since it is a
regressive tax it does not take into consideration whether it is paid by a rich or poor person
as they have to pay equally as a result the rich will be richer and the poor the poorer and
hence it is difficult to reduce income inequality in the country as opposed to direct tax where
poor people pay less taxes and rich people pay more taxes thus reducing the gap between the
rich and the poor people.
d) And since more than one indirect tax are imposed on the same product hence the price of
the product increases as a result the public has to pay more taxes. For example, if a
refrigerator is manufactured in Mumbai, after the production of refrigerator in the factory
excise duty is levied, then to reach the product has to pass through various states and
entering each state entry tax is imposed on that particular product, then VAT is charged So,
we can see that in a single product 3 different tax is charged and there same type of tax is
charged more than once in a single product which is called cascading effect, in this case
Entry tax which is charged again and again on entering into different states within the
country which will make the
e) Tax on tax i.e. cascading effect increases the price of goods and services.

a. MULTIPLICITY OF INDIRECT TAXES: As discussed above there was existence of

many indirect taxes in India such as custom duty, service tax, etc. which was imposed by
Union government and VAT, luxury tax, entertainment tax, etc. imposed by State
Government. So, there was a need to replace multiple taxation system with a single tax
system
b. LESS COORDINATION BETWEEN UNION AND STATE GOVERNMENT: As in a
single good/service the Union government was charging say excise duty and State
government was charging VAT separately so

NEED FOR GOODS AND SERVICES TAX IN INDIA:

a. MULTIPLICITY OF INDIRECT TAXES: As discussed above there was existence of

many indirect taxes in India such as custom duty, service tax, etc. which was imposed by
Union government and VAT, luxury tax, entertainment tax, etc. imposed by State
Government. So, there was a need to replace multiple taxation system with a single tax
system

b. LESS COORDINATION BETWEEN UNION AND STATE GOVERNMENT: As in a

single good/service the Union government was charging say excise duty and State
government was charging VAT separately so there was no or less coordination between
Union government and State Government. So, a new tax system was required to increase
coordination between the Union and State Government.

c. HIGH TAX RATES: In many goods and services more than one tax was levied which
result in increase in price of goods and services and prior to GST the tax rate was high as
50% and normally between 30-35% so a single tax system was required to decrease the cost
of goods and services.

d. COMPLICATED TAX SYSTEM: Pre GST government used to impose Custom duty on
import on raw materials of goods and services and from manufacturing phase till the goods
are sold the person has to different taxes such as excise duty on manufacturing, central sales
tax if the goods are delivered and sold to various states within India, and if to sold within the
state it is manufactured than VAT was charged, if any services is used during the
manufacturing of the product then service tax was charged, etc. So, the taxation system
before GST was complicated and difficult both for the government and the person selling
goods and services as they have to understand and follow different tax laws to run a single
business so as a result there was a need to replace or convert complex indirect tax structure
to a simple tax system in India.

e. DIFFICULTY PAYING TAXES: Prior to GST the person has to pay different taxes and
there were difficulties filing return and paying taxes as some CA’ s practiced only Central
Government taxes or State Government taxes as a result they had to visit different tax
practitioners to pay taxes.

f. TIME CONSUMING AND COSTLY FOR TAX PAYERS: Due to existence of multiple
taxes, the tax payer had to register to different tax departments, file returns on different dates
and pay multiple taxes on goods and services which discouraged many traders, sellers,
whole-sellers and so on, so a better tax system was required to make the taxation system
easier so that business can flow easily in the economy and encourage many people to start
and run their own businesses.

g. RISE IN INFLATION RATE: Indirect taxes were the main source for continuous
inflation rate in India as a result the government has to come up with some solutions to
decrease the continuous inflation rate.

h. CASCADING EFFECT. There was existence of cascading effect i.e. tax on tax so it was
necessary to eliminate cascading effect. Above mentioned are the few problems and
loopholes in the indirect taxation structure prior GST in India which led to the formation of
new indirect tax structure by submersing 17 different indirect taxes into a single tax system
called GST.

CENTRAL TAXES SALES TAXES

• Central Excise duty • State VAT/Sales Tax
• Additional duties of excise • Central Sales Tax
• Excise duty levied under Medicinal & • Purchase Tax
Toilet Preparation Act • Entertainment Tax (excluding tax
• Additional duty of customs (CVD & levied by municipal bodies)
SAD) • Luxury Tax
• Service tax • Entry Tax
• Surcharges & Cesses • Taxes on lottery, betting & gambling
DEFINITION: GOOD AND SERVICES TAX
Article 366(12A) defines “Goods and Services tax” means any tax on supply of goods, or
services or both except taxes on the supply of the alcoholic liquor for human consumption.

Definition Article Definition

1 Goods 366(12) Includes all materials, commodities, and articles. 2 Services 366(26A)
Anything other than goods [Introduced vide 101st Constitutional Amendment Act] 3 State
366(26B) With reference to article 246A, 268, 269, 269A, and article 279A includes a Union
territory with Legislature. [Introduced vide 101st Constitutional Amendment Act] “Goods
and Services tax” law of India Is a unique indirect taxation system but while having unique
principle, it has taken significant elements of prior Central and State laws and is also
inspired by VAT/GST legislation of EU, Australia, Malaysia, etc. who have already
implemented GST before India along with International VAT/GST guidelines of OECD.

CENTRAL TAXES
• Central Excise duty • Additional duties of excise • Excise duty levied under Medicinal &
Toilet Preparation Act • Additional duty of customs (CVD & SAD) • Service tax •
Surcharges & Cesses
• State VAT/Sales Tax • Central Sales Tax • Purchase Tax • Entertainment Tax (excluding
tax levied by municipal bodies) • Luxury Tax • Entry Tax • Taxes on lottery, betting &
gambling • Surcharges & Cesses
SALES TAXES

Goods or Services Tax (GST)

Goods or Services Tax or GST is a single uniform indirect tax levied on more than 1200
goods and services to replace almost 17 different indirect taxes and 9 cesses levied by
Central and State Government. As stated earlier due to the various loopholes in the indirect
tax structure prior GST, both the government and the indirect tax payers were facing
difficulties such as complex indirect tax structure, multiple compliances, cascading effect,
inflation, etc. so there was a need to reform the preexisted indirect tax structure into a simple
and clear taxation system. So, GST was implemented at midnight on 1st July 2017 by the
President of India and the Government of India.
GST is considered as the biggest tax reformation in India since Independence because it
provided solutions to various loopholes that existed in previous indirect taxation system in
the nation such cascading effect, multiple compliances, etc. and eliminated or submersed 17
different indirect taxes into a single tax called GST thus making the flow of goods faster in
the economy, reduced transportation costs, and making the registration, filing and paying of
tax easier and faster which will encourage more people to start their own business or be
selfemployed. The population of India is approximately 1.3 billion population and pre-GST
there were only 60 lakh people who were under the Indirect tax regime but only after 7
months of implementation of GST the number of people has increased from 60 lakh to
almost more than 1 crore.

DEFINITION OF GST ACCORDING TO WIKEPEDIA: “Goods and Services Tax (GST)

is an indirect tax (or consumption tax) used in India on the supply of goods and services. It is
a comprehensive, multi-stage, destination-based tax.”
GST is a comprehensive tax because it will subsume all the 17 different Indirect taxes that
existed in the previous Indirect taxation system or bring all the indirect tax under one
umbrella thus making a unified taxation system.
GST is a multi-stage taxation system: Multi- stage taxation system implies that at every
stage tax is charged at every stage of production. As we all know that before the goods
reaches the end user i.e. customer it has to pass through various stages and business units
such as Manufacturer, whole-seller, retailer, and customer (end-user) and at each stage value
is added to the product as shown below:

At first the manufacturer procures or purchases raw material and converts it into finished
product so a value is added to the raw material than value is again added such as labeling,
packaging in the warehouse and the product is sold to whole-seller who distributes it to
various retailers and then it is sold to retailer who markets the product thereby, adding value
to the product before it finally reaches the end-user.
GST is a destination-based consumption tax: Prior GST tax was collected on the location
where goods was manufactured but after the implementation of GST tax will be collected on
the location where it is sold or consumed. This is the most important feature because it
eliminates cascading effect. For example, before GST, tax was imposed on place where
goods were
manufactured of produced but after the implementation of GST tax is imposed on the place
where it is sold and not where it is manufactured. For instance, if a good manufactured in
Mumbai and sold in another state than before GST, tax was imposed on the place where it
was manufactured i.e. Mumbai but after the implementation of GST tax will be imposed on
the place where it is sold i.e. By doing so the direct tax imposed on that particular good will
be eliminated and the public will have to pay only one tax i.e. GST. For example, if a
refrigerator is manufactured in Mumbai, after the production of refrigerator in the factory
excise duty is levied, then to reach the product has to pass through various states and
entering each state entry tax is imposed on that particular product, then VAT is charged in
So, we can see that in a single product 3 different tax is charged and this tax on tax is called
Cascading effect and GST eliminates it.

COMPARISON BETWEEN PRE-GST INDIRECT TAX SYSTEM AND

TAXATION AFTER IMPLEMETATION OF GST:
• Prior to GST there was existence of • After the implementation of GST only
various indirect taxes in India. one type of tax will be charged on
goods and services I.e. GST.
Whole
• Due to cascading effect the assesse had • Elimination of Cascading effect.
to pay high taxes normally between 30-
35% and was as high as 50%
• More compliances • Few compliances.
• Pre-GST tax structure was very • GST is a simple tax because the assesse
complex as the assesse had to pay has to pay one tax on all goods and
different taxes on goods and services services
and assesse had to pay almost 20
different indirect taxes
PROCESS AND FRAMEWORK OF GST:

The then Union Finance Minister Mr. P. Chidambaram while presenting the Union Budget
for the financial year 2007-2008 announced to implement comprehensive indirect tax
reform in the country and also announced to introduce GST from01/04/2020 and for the
implementation of GST from the specified date an Empowered Committee of State Finance
Ministers was constituted or established. The committee was formed with a purpose that the
committee would work with the central government and assist the government to prepare a
road map for introduction and implementation of GST in India.
After the announcement of formation of Empowered Committee of State Finance
Ministers, they decided to setup a joint working group on 10th May 2007. The joint group
after having many meetings and discussing on various issues and interaction with experts
and representatives of Chambers of Commerce and Industry submitted its report to the
Empowered Committee in November 2007. And many suggestions were also taken from
various interest groups including trade and industry bodies in the last decade.
The then Finance Minister Mr. Arun Jaitley also while presenting the budget speech during
July 2014, announced that GST would be implemented by the beginning of the financial
year 2015-16 but due to various reason it could not be implemented. Again, the Finance
Minister hoped to implement from 01/04/2016 and the government tried its best to pass the
GST bill in the parliament and it was passed in the lower house but it was not passed in the
upper house i.e. Rajya Sabha because the government could not get consensus in favor of
implementation of GST.
In principle GST is similar to VAT already implemented in the nation but the only major
difference is VAT is a sales tax imposed on goods only and not on services but GST will be
a VAT on both goods and services.
As per the GST bill the Central government will impose and administer Central GST i.e.
CGST and the State government will impose and administer State GST i.e. SGST and the
compliances will be monitored independently at the two levels. GST council will state the
rates of both CGST and SGST whose members will be State Finance/ Revenue Ministers
and the chairman will be the Union Finance Minister. After the implementation of GST
individual states will lose their right set tax rates as per their interest.

BENEFITS OF GST
➢ Before GST both the central and state government levied various taxes on different
goods and services mentioned above but due to implementation of GST a single type of
tax is levied on various different goods and services.

➢ Before GST the public had to pay high taxes on various goods and services, generally
30-35% and in some cases it was as high as 50% but due to implementation of GST the
maximum tax rate is only 28%.

➢ Before GST the public had to pay almost 17 different taxes on goods and services but
after the implementation of GST the public have to pay only one tax i.e. GST making
India “one nation one tax” economy. Implementation of GST eliminated various existing
tax such custom duty, additional duty of customs, VAT, Sales tax, Central Sales tax,
State sales tax, entertainment tax, luxury tax and many more.

➢ Before GST, tax was imposed on place where goods were manufactured of produced
but after the implementation of GST tax is imposed on the place where it is sold and not
where it is manufactured. For instance, if a good is manufactured in Mumbai and sold in
Sikkim than before GST tax was imposed on the place where it was manufactured i.e.
Mumbai but after the implementation of GST tax will be imposed on the place where it
is sold i.e. Sikkim. By doing so the direct tax imposed on that particular good will be
eliminated and the public will have to pay only one tax i.e. GST. For example, if a
refrigerator is manufactured in Mumbai, after the production of refrigerator in the
factory excise duty is levied, then to reach Sikkim the product has to pass through
various states and entering each state entry tax is imposed on that particular product,
 then VAT is charged in Sikkim. So, we can see that in a single product 3 different tax is
charged.

GOODS AND SERVICES TAX SLABS:

More than 1200 goods and services are taken into under consideration by the GST council
and these goods and serves in four slabs under Goods and Services Tax which ranges from
5% to 28% according to which tax will be charged. As per the government out of more than
1200 goods and services, 81% of goods and services i.e. 960 goods and services fall under
the 18% slab rate. Although there are some goods and services where is GST not charged
and on luxury goods GST along with CESS is charged.
TAX SLABS GOODS/SERVICES 5% Household necessities or everyday items such as
Sugar, tea leaf, baby milk food, footwear under Rs.500, clothes under Rs.1000, etc. 12%
Honey, ghee, nuts, LED lights, sports equipment, umbrella, mobile phones, etc. 18% Hair
oil, toothpaste, soaps, cornflakes, packaged soups, instant foods, computers, television, etc.
28% Luxury items such as air conditioner, refrigerator, washing machine, shaving cream,
cars, two wheelers, digital camera, etc.
GST
COMPONENTS OF GST:
There are four components of GST which are described in detail below:
CENTRAL GOODS AND SERVICES TAX(CGST): CGST is a tax levied on intra state
supplies of both goods and services (supply within the state) by the Central Government
and will be governed by the Central Goods and Services Act, 2017 under GST. In case of
intra state transaction of goods and services along with CGST, SGST will also be levied
and governed by the State government. However, such supplies do not include alcoholic
liquor for human consumption. Further, the liability to pay CGST shall only arise at the
time of supply of goods or services and not at the time of manufacturing.
Example of CGST: XYZ enterprises, a refrigerator manufacturer in Sikkim supplies 100
pieces of refrigerator worth Rs 1,00,00 to ABC Ltd situated within Sikkim only. In this
typical example ABC Ltd has to pay GST @ 18% i.e. 18,000(18% of 1,00,000) and since it
is an intra state sale the revenue generated gets deposited to both Central and state
governments which implies that 18,000 will get deposited into State and Central
government equally. This means Rs 9000 gets deposited into CGST account and remaining
Rs 900 gets deposited into SGST account.

STATE GOODS AND SERVICES TAX(SGST): SGST is another component of GST. It is

an indirect tax levied and collected by the State government on intra state supplies (i.e.
within the state) of both goods and services. It is governed by the State Goods and Services
Act,2017. As stated above, in case of intra state transactions or supply CGST will also be
levied along with SGST but it will be the levied by the Central government. And similar to
CGST, the liability to pay SGST will arise at the time of supply of goods and services and
not at the time of manufacturing or production of goods.
Example: XYZ enterprises, a refrigerator manufacturer in Sikkim supplies 100 pieces of
refrigerator worth Rs 1,00,00 to ABC Ltd situated within Sikkim only. In this typical
example
ABC Ltd has to pay GST @ 18% i.e. 18,000(18% of 1,00,000) and since it is an intra state
sale the revenue generated gets deposited to both Central and State governments which
implies that 18,000 will get deposited into State and Central government equally. This
means Rs 9000 gets deposited into CGST account and remaining Rs 900 gets deposited into
SGST account.
INTEGRATED GOODS AND SERVICES TAX(IGST): IGST is also a component of
GST. It is an indirect tax levied by the Central government on the inter-state supplies or
transaction of goods and/services (i.e. transaction or supply of goods from one state to
another). It is governed by the Integrated Goods and Services Tax Act, 2017. IGST will also
be imposed or levied on import of goods and services into India and export of goods and
services from India.
Example: A television set is manufactured in Haryana and sold in Sikkim than it is as inter -
state transaction as a result IGST will be imposed by the Central government. For instance,
the price of the television set is Rs 100000 @ 18% than the GST will be Rs 18000 (18% of
Rs100000) which will be deposited in the IGST account of the Central government.

UNION TERRITORY GOODS AND SERVICES TAX(UTGST): India consist not

only of states but also union territories so as result people of union territories are also
liable to pay GST called Union Territory Goods and Services Tax. It is an indirect tax
levied and collected by the Union Territory on the intra-state supply of goods or services.
It is governed by the Union Territory Goods and Services Act, 2017.
According to the UTGST Act, 2017, UTGST will be applicable to the following territories:
Andaman and Nicobar Islands Lakshadweep Dadra and Nagar Haveli Daman and Diu
Chandigarh Other Territory Delhi and Puducherry are the other two Union Territories. But
this Act is not applicable there as they have their own State Legislature and Government.
For both the territories, State GST is applicable.

WHAT DETERMINES IF CGST, SGST, OR IGST IS APPLICABLE?

Since GST is a destination-based tax system so it is not charged on the place where it is
manufactured but it is imposed on the place where it is sold. So, the main criteria to
determine whether CGST, SGST, or IGST will be applicable is whether the transaction is
an intra state i.e. within the state or inter-state.
Or in other words, to levy GST, supplies are classified into two categories which are inter-
state that refers to transaction of goods and services from state to another and intra- state
supplies Or in other words, to levy GST, supplies are classified into two categories which
are inter-state that refers to transaction of goods and services from state to another and intra-
state supplies which refers to transactions within the state
INTRA STATE SUPPLY OF GOODS AND SERVICES:
If the goods are manufactured and sold within a particular state i.e. location of buyer and
location of the supplier and the place of supply is within the state than both CGST and
SGST are imposed by the state and central government respectively and the revenue is
shared between the Central and State government equally. In case of intra state transactions,
a seller has to collect both CGST and SGST from the buyer and the CGST gets deposited
with the Central Government and SGST gets deposited with the State government.
Example: ABC Ltd. is a dealer who sold goods to Anjali Ltd. worth Rs. 10,000. The GST
rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case, the dealer
collects Rs. 1800 of which Rs. 900 will go to the Central Government and Rs. 900 will go
to the Government.

INTER-STATE SUPPLY OF GOODS AND SERVICES:

Inter-state supply of goods and services means transaction of goods and services is between
two or more states I.e. location of the buyer and the location of the supplier and the place of
supply are in different states. In case of import of goods in India or export of goods from
India and transaction of goods or services is made to or by a SEZ unit, the transaction is
assumed to be inter-state and IGST is levied. In case of inter-state supply of goods and
services CGST and SGST is not charged as in case of Intra-state supply of goods and
services but IGST is imposed by the central government but the revenue is shared
between the central and the state government. So, in case of inter-state sale of goods and
services, a seller has to collect IGST from the buyer.
Example: ABC Ltd is a manufacturer of a particular goods in Delhi and if the goods are sold
in other states apart from Delhi than it will be considered as inter-state supply of goods and
services as a result IGST will be imposed. So, ABC Ltd has to collect IGST from the buyer
which will later be deposited in the central government account as it is levied by the central
government.
For instance, if the price of good is Rs 200000 per unit than for each sale ABC Ltd has to
charge Rs 36000(18 % GST) as IGST from the buyer.
WHY THE SPLIT INTO SGST, CGST, AND IGST?
India is a federal country where both the State Government and Centre Government have the
powers to levy and collect taxes and since GST is a single tax structure for the entire nation
so both the Centre and State are simultaneously levying GST.As a result GST is divided or
split into three parts called SGST, CGST, AND IGST to ensure that there is coordination
between state and Centre government to levy and collect tax and to ensure that there is no
confusion or misunderstanding between both government in the matter of tax levying and
collection.
In simple words the division of GST into SGST, CGST, and IGST clearly depicts who will
levy and collect which tax on goods and services.
JOURNEY OF GST

The idea of GST came in a meeting between the Prime Minister Atal Bihari Vajpayee and
his advisors, including three former governors IG Patel, Bimal Jalan and C Rangarajan
when they were discussing about the uniformity of tax throughout the country. Atal Bihari
Vajpayee was very much impressed with the idea, as a result in the year 2000 he set up a
committee to draft GST model. CPM leader and the then Finance Minister of West Bengal
Asim Dasgupta was in charge of the GST committee. Asim Das Gupta was the key person
of the GST because he was considered as a great economist in the nation and his
unmatchable expertise in handling financial statistics. GST was not implemented in India
during the NDA government period of 1999-2004 so when United Public Alliance led by
Indian National Congress replaced the NDA government, the then Prime Minister
Manmohan Singh refused to replace him with other person and admitted that Asim Das
Gupta was heading one of the most important reform process in the country. So, after
working for GST model formulated by Atal Bihari Vajpayee Dasgupta also headed another
committee formed by the then Prime Minister Dr. Manmohan Singh to structure GST bills.
Finally playing a key role in modelling GST (2000-2004) and structuring GST (2004-2011)
he resigned in 2011. Asim Das Gupta was succeeded by the then Finance minister of Kerala
KM Mani who continued the work related to GST left by Das Gupta. He also played a key
role on finalizing the GST bills such as he interacted with all the various key people such as
trader bodies and all about the benefits of GST over preexisting indirect tax structures so
that they will accept the new tax structure. But during his period as a head of GST
committee he was embroiled in a corruption scandal in the year 2015 and finally had to quit
as the head of the GST committee. The then Finance minister Amit Mitra succeeded KK
Mani after je resigned as the head of the GST committee.
He was also an economist and the secretary general of the Federation of Indian Chambers
of Commerce and Industry (FICCI). His main work during his period as the head of the
GST committee was that he held a series of meeting with the state governments and
interacted with all the state governments regarding GST convincing them that
implementation of GST is for the welfare of the people of nation without submersing the
interests of the stated under the new indirect tax regime. His efforts did not go in vain and
as a result most states agreed to implement GST in the country.
However, during his period also GST was not implemented in the nation even the central
government had agreed implement on July because he advocated a more calibrated
approach while implementing the biggest tax reform.
The implementation of GST took almost 2 decades during which the GST council held
almost 34 meetings wherein major issues were discussed and recommended to the
government for effective and efficient tax system in India. The GST council discussed
on issues such as reducing compliance burden for taxpayers, providing sector specific relief
measures, etc.
Some of the key issues discussed by GST council and recommended to the government
includes:
. Rationalization of tax rates: As we all that the major population section of India consist of
middle class persons so in order for GST to be accepted by the major population many
necessary commodities which were kept in high tax bracket i.e. 18% and 28% were
reviewed and the tax rate on such essential goods were reduced considering such items as
necessities and not luxurious and were taxed at 5% or in most basic amenities no tax were
imposed. As a result, only few items were placed in high tax slabs to suit the Indian
population.
As we all know that many indirect taxes levied by both the central and state government
existed prior GST and different taxes had different tax compliances such as different
registration dates, dates for filing returns, reconciliation statements, etc. So, keeping this in
mind and to make GST more easy and simple tax compliances were simplified for a
section of taxpayers by extending the due dates, online return filings, reconciliation
statements. Introduction of simplified return filing system, introduction of nationwide e-
way bill, etc
GST rates for under-construction properties were reduced to 1% (for affordable housing)
and 5% (for non-affordable segment) with an intention to boost the real estate sector in the
economy.
The GST council also recommended relief measures for MSME sector (i.e. Micro, Small,
and Medium Enterprises) such as increasing the registration threshold limit, introducing
composition schemes. Extending composition scheme to service providers and so on
which have been welcomed by taxpayers.
The GST council has also recommended the formation of Group of Ministers(GOP) to
study the revenue trend, analyze the various factors affecting the tax collection in various
states, to examine the tax rate and issues in specific important sectors of the
economy such as real estate, lottery, and other issues related to GST.
The CBIC, on the other hand, has played an active role in giving effect to GST Council’s
recommendations, providing various Suo-moto reliefs to the taxpayers in terms of
extending the due dates for various return filings, providing waivers from interest and
penalty, etc. Further, CBIC has issued various clarifications and FAQs to address the
business concerns and sector-specific issues. Some of the key clarifications issued by the
CBIC during the past year include: • Non-inclusion of tax collected at source (TCS) for
the purpose of determination of value of supply under GST as it is an interim levy not
having the character of tax; • Clarification on tax implications/treatment and input tax credit
in respect of various sales promotion activities offered by companies such as distribution of
gifts or free samples, buy one get one free offer, treatment for primary and secondary
discounts, etc.; • Tax implications under reverse charge basis in case of import of the
outsourced services; • Doing away with the requirement of physical submission of
0documents in case of export refunds. g. The clarifications issued by CBIC during the
initial years of implementation of GST will play an important role in guiding taxpayers on
interpretation of tax provisions and also mitigate potential litigation. h. In addition to the
above measures, the CBIC has also introduced the facility for ‘IT grievance redressal
mechanism’ along with a helpdesk facility to resolve the difficulties faced by the
taxpayers owing to technical glitches on the GST portal. i. Besides the GST Council and
CBIC, the Authority for Advance ruling (AAR) established in various states have over
the last year pronounced important rulings providing clarity on issues such as
classification of good/services for determining the GST rate, determining the time and
value of supply of goods/services, registration requirements, etc. An advance ruling brings
certainty in determining the tax liability, as the AAR’s ruling is binding on the applicant as
well as tax authorities. Further, it helps in avoiding long drawn and expensive litigation at
a later date. The AAR’s ruling can
be appealed before an Appellate AAR. Such rulings even though applicable only to the
applicant, have a persuasive value for other taxpayers undertaking similar transactions.
Keeping in view the conflicting rulings of AAR on some of the critical issues and
representations made by the tax payers, the government has recently notified creation of a
National Bench for Goods and Services Tax Appellate Tribunal which will further help in
bringing in certainty and clarity on various GST matters and thus reduces the litigation. j.
The GST regime also provides for a National Anti-Profiteering Authority (NAA) which
ensures that the benefit of reduction in the rate of tax on goods or services or the benefit of
the input tax credit is passed on to the customer by way of a commensurate reduction in
prices. Over the last year, the NAA has dealt with few cases where penalties have been
imposed on a cross section of taxpayers for not passing on the tax benefit to the
consumers. In cases where the ultimate customer is not identifiable, the taxpayers have
been directed to deposit the amount in the Consumer Welfare Fund. However, application
of the anti-profiteering provisions has been fraught with litigation as the current GST
provisions do not prescribe any methodology/mechanism for taxpayers to determine the
quantum of the benefits to be passed on to the consumers. Appropriate guidance from the
government is awaited on this area to reduce unnecessary disputes and litigation. k.
Stabilization of GST collections over the past one-and-a-half year is evidence of the GST
 MICRO, SMALL AND MEDIUM ENTERPRISES (MSME)

Micro-Small and Medium Enterprises (MSMEs) are small sized enterprises defined in
terms of their size of investment. According to Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006, MSMEs are manufacturing and service enterprises.
Manufacturing Enterprises: Manufacturing enterprises are those enterprises engaged in
production or manufacturing of goods pertaining to any industry specified in the first
schedule to the industries (Development and regulation) Act, 1951 or employing plant
and machinery in the process of value addition to the final product having a distinct name
or character or use. The Manufacturing Enterprise are defined in terms of investment in
Plant & Machinery.

Service Enterprises: The enterprises engaged in providing or rendering of services and are
defined in terms of investment in equipment. These two categories of MSME are further
categorizes into Micro, Small and Medium Enterprises in terms of investment made in
plant and machineries (in case of manufacturing sector) and investment in equipment for
service sector companies
CLASSIFICATION OF MSMESs (ON THE BASIS OF INVESTMENT)

MANUFACTURING SECTOR
ENTERPRISES INVESTMENT IN PLANT
AND
MACHINERY

1) Micro Enterprise 1) Investment is less than Rs. 25

lakhs rupees
2) Small Enterprises 2) Investment is more than Rs. 25

lakhs but does not exceed Rs 5

3) Medium Enterprises
crores.
3) Investment is more than Rs. 5
crores
but does not exceed Rs. 10
crores.

SERVICE SECTOR
ENTERPRISES INVESTMENT IN EQUIPMENTS
1) Micro Enterprises 1) Investment is less than Rs. 10
2) Small Enterprises lakhs rupees
2) Investment is more than Rs. 10
3) Medium Enterprises
lakhs but does not exceed Rs 2
crores.
3) Investment is more than Rs. 2

crores but does not exceed

GOVERNING BODY OF MSME :The Ministry of Micro, Small and Medium
Enterprises (branch of Indian Government) is the governing body of the MSMEs around
that nation. It is the executive body for the formulation and administration of rules,
regulations and laws relating to MSMEs in India.

The governing body of MSME is headquartered in New Delhi and is headed by Nitin
Gadkari since 31st May 2019. In 2018, a cabinet meeting was by the Ministry of Micro,
Small and Medium Enterprises which proposed to change the definition of MSMEs. It
was decided that MSMEs (both manufacturing and service enterprises) will be defined
and categorized or classified on the basis of annual sales turnover of the enterprises
instead of the investment criterion and there will be no distinction between
manufacturing and service enterprises.
CLASSIFICATION OF MSMESs (On the basis of Annual Sales Turnover)
MANUFACTURING/SERVICE SECTOR ENTERPRISES ANNUAL SALES
TURNOVER Micro Enterprises Annual sales turnover is up to Rs 5 crores. Small
Enterprises Annual sales turnover exceeds Rs 5 crores but does not exceed Rs. 75
crores. Medium Enterprises Annual sales turnover exceeds Rs 75 crores but does not
exceed Rs 250 crores.

SIGNIFICANCE OF MSMES :

Although MSMEs are small but their contribution to the Indian economy is enormous
and significant which can’t be neglected. However, because of its smaller size it is under
estimated but being India a knowledge-based, entrepreneurship driven economy of
which MSMEs are the major part and the contribution towards its economic and social
growth by the MSMEs are enormous. That’s why it’s said that MSMEs are the silent
performers who are carrying India’s 5 trillion goal on their shoulders. As of October,
2019 there are almost 63.4 million MSMEs in India which contributes to about 1/4th of
the India’s GDP, output(about 45% of the manufacturing output), exports(about 40%
of the total exports) and employment(about 69 million persons in over 29 million units
throughout the country).MSMEs also helps in industrialization of rural areas by
providing huge employment opportunities at comparatively lower capital cost than large
industries.

IMPORTANCE OF MSMEs

Employment generation: MSMEs is the second largest employment generator sector

after agriculture by providing employment to more than 63.4 million people across the
nation. India is country having scarce capital but abundant manpower with low wages
and MSMEs are sector which requires low capital and more manpower than large scale
industries so it perfectly fits the Indian economy and if capitalized well MSMEs can
provide enormous economic and social growth to the nation. And due to this reason, the
government is continually encouraging people to enter into the MSME sector
by formulating favorable policies and providing various government schemes to
promote MSMEs in the nation.
Contribute to GDP: As already stated MSMEs contribute about 27% to the India’s GDP
and has set a target to increase its contribution to GDP to 50% and more by 2025 as
Prime Minister Narendra Modi has started a mission to make India a $ 5 trillion
economy.
Nation Development: SMEs also play a prominent role in Nation development through
high contribution to Domestic Production, Significant Export Earnings, Low
Investment Requirements, Operational Flexibility, Location Wise Mobility, Low
Intensive Imports, Capacities to Develop Appropriate domestic Technology, Import
Substitution, Contribution towards Defense Production, Technology – Oriented
Industries, Competitiveness in Domestic and Export Markets thereby generating new
entrepreneurs by providing knowledge and training.
To sustain economic growth and increase exports: More than 90% of the MSMEs are
engaged in manufacture and export of non-traditional products (such as readymade
garments, plastic products, etc sports goods,.). These products are manufactured and
handcrafted by unskilled or semi-skilled employees and are eco-friendly as a result there
exist an enormous potential or opportunity to expand the quantum of MSME led
exports. It also helps in raising manufacturing sector production and extending support
to large industries by supplying raw material, basic goods and other vital components,
etc.
Exports: MSMEs contribute 40% of the total outputs.
Manufacturing output: It contributes about 45% to the manufacturing output.
LIST OF ENTERPRISES THAT ARE ENGAGED IN PROVIDING OR
RENDERING SERVICES

Small road and water transport operators (original investment in vehicles up to

Rs.200.00 lacs under Priority sector)
Retail trade (with credit limits not exceeding Rs.20.00 lakhs) • Small business (whose
original cost price of the equipment used for the purpose of business does not exceed
Rs.20.00 lakhs)

Professional and self-employed persons (whose borrowing limits do not exceed

Rs.10.00 lakhs of which not more than Rs.2.00 lakhs should be for working capital
requirements except in case of professionally qualified medical practitioners setting up
of practice in semi- urban and rural areas, the borrowing limits should not exceed
Rs.15.00 lakhs with a sub- ceiling of Rs.3 lakhs for working capital requirements)

GOVERNMENT SCHEMES TO PROMOTE MSMES

Credit Linked Capital Subsidy Scheme (CLCSS) is operational for upgradation of

technology for MSMEs.
Udyog Aadhaar memorandum: Aadhaar is a 12 digit individual identification number
issued by the Unique Identification Authority of India on behalf of the Government of
India. The number serves as a proof of identity and address, anywhere in India. In this,
the Aadhaar card is a mandatory requirement. The benefit of registering in this scheme
is ease in availing credit, loans, and subsidies from the government. Registration can be
done both ways in the online mode or the offline mode.
Udyami Mitra Portal: launched by SIDBI to improve accessibility of credit and
handholding services to MSMEs.
Digital MSME Scheme: It involves usage of Cloud Computing where MSMEs use the
internet to access common as well as tailor-made IT infrastructure
A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE):
creates new jobs & reduce unemployment, promotes entrepreneurship culture,
facilitates innovative business solution etc.
Prime Minister Employment Generation Programme: It is a credit linked subsidy
program under Ministry of MSME.
Zero Defect Zero Effect: Any goods that are manufactured for export have to adhere to
certain standard so that they are not rejected or sent back to India. So, to make sure
thatthe goods exported are not sent back to India the government has launched this
scheme to check the quality of the goods and to be sure that those particular goods are
eligible for some rebates and concessions.
Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI):
organizes traditional industries and artisans into clusters and make them competitive by
enhancing their marketability & equipping them with improved skills.
National Manufacturing Competitiveness Programme (NMCP): to develop global
competitiveness among Indian MSMEs by improving their processes, designs,
technology and market access.
Micro & Small Enterprises Cluster Development Programme (MSE-CDP) - adopts
cluster development approach for enhancing the productivity and competitiveness as
well as capacity building of MSMEs.
MSME Sambandh: To monitor the implementation of the public procurement from
MSMEs by Central Public Sector Enterprises.
MSME Samadhaan -MSME Delayed Payment Portal –– will empower Micro and Small
entrepreneurs across the country to directly register their cases relating to delayed
payments by Central Ministries/Departments/CPSEs/State Governments.
CONTRIBUTION OR SHARE OF MSMEs IN INDIAN ECONOMY:
According to the Planning Commission,2012 the Micro, Small and Medium Enterprises
contributes
about 45% of manufacturing output,
about 1/4th of the total GDP.
about 40% of the total exports of the country
provide employment to about 69 million persons throughout the nation which is the
second largest employment generation after agriculture in India.
About 80 million people are engaged in over 29 million units throughout the country
Out of total registered MSMEs around 54.27% of them are located in urban areas and
45.35% in rural areas and gIt has created about 11.10 crore jobs in the nation.

OBJECTIVE OF MSME SECTOR:

Objectives of MSME sector according to the Twelfth Plan are as follows: Promoting
competitiveness and productivity in the MSME sector. Contribute more in exports.
Improved managerial processes in MSMEs pay taxes of different rates at different dates.
As a result, the process of doing business in context to tax was quite complicated which
discouraged many people to start their own venture after the implementation of GST
the business has to register for only one tax i.e. GST and all the GST related work such
as registering and filing returns can be done online. They don’t have to visit different
departments to file returns and as a result it had made doing business easy and simple
in context to tax which will encourage many people to start their own venture
Increase Customer Base: Prior to GST Central Sales Tax(CST) was levied on inter state
sales which restricted small and medium enterprises to reach their potential customers
outside their state due t o additional tax but after the implementation of GST Central
Sales Tax(CST) is eliminated and as a result there are no restrictions or additional cost
to reach their potential customers within the nation. 2

NEGATIVE IMPACT OF GST ON MSME:

Expensive: As all the process from registration to payment of tax are online in the new
taxation system so all MSMEs need to purchase GST software to carry out the GST
related work. There are also other expenses such as training of employees or recruitment
of employees who possess the skill to use the GST software.
Lack of Tax Differentiation for Luxury Items and Services: Under the new taxation
regime i.e. GST there is lack of differentiation between luxury goods and services and
normal goods as a result same tax is charged for both normal and luxury goods and
services. This will impact the poor people badly as they have to spend the same amount
for both the luxury and essential items.
The burden of higher tax rate for Service Provider: Presently Service Tax rate is 15%.
GST rate will be around 18%. The scenario in the service sector will further be impacted
as the concept of Centralized Registration has been done away with and each unit in
different states will have to take separate registration. Thus, even if services
aresupplied by company's one Unit in State A to another Unit in State B then also taxes
will be payable.
Burden for MSMEs: Prior to GST the threshold limit was 1.5 crore but after the
implementation of GST the threshold limit is reduced to 20 lakh and in the north eastern
states it is 10 lakh as a result implementation of GST has been burden to the MSMEs as
prior to GST business with an annual turnover of more than Rs 1.5 crore were liable to
pay tax but after the implementation of GST businesses with an annual turnover of Rs
10 lakh in northeastern states are liable to pay GST
Not uniform taxation system: GST was implemented with an idea to levy a single tax
for all goods and services around the nation and create a uniform market but GST is not
applicable to Alcohols, petroleum, etc. hence it fails to create a uniform market.
Excess Working Capital Requirement: Taxation of stock transfer will primarily impact
the working capital requirements. The quantum of impact will vary depending on stock
turnaround time at warehouse, credit cycle to customer, quantum of stock transfer, etc.
Higher amount of Capital Requirement Jill increases interest cost which ultimately will
increase the price of Finished Goods.
Complex Registration Compliance for Inter State Transactions: It is mandatory for
every business to register for GST in every state they operate and hence such
compulsions increase the burden such as paperwork of the businesses,

GST was not implemented at the correct time: As GST was implemented on the 1st of
July 2017, businesses followed the old tax structure for the first 3 months (April, May,
and June), and GST for the rest of the financial year. Businesses may find it hard to get
adjusted to the new tax regime, and some of them are running these tax systems
parallelly, resulting in confusion and compliance issues.
 REVIEW OF LITERATURE

Review of literature :
A number of research papers and articles provide a detailed insight on GST. The
findings from the literature are presented below:-
Agogo Mawuli (2014), “Goods and Service Tax-An Appraisal” and found that GST is
not good for low-income countries and does not provide broad based growth to poor
countries. If still these countries want to implement GST then the rate of GST should
be less than 10% for growth.
Dr. R. Vasanthagopal (2011), “GST in India: A Big Leap in the Indirect Taxation
System” and concluded that switching to seamless GST from current complicated
indirect tax system in India will be a positive step in booming Indian economy. Success
of GST will lead to its acceptance by more than 130 countries in world and a new
preferred form of indirect tax system in Asia also.
Vidit Mohan and Salman Ali (2018) conducted a study in Raipur, India, to analyse the
impact of GST on MSMEs, gathering qualitative and quantitative data from chosen
MSME owners. According to the findings of the research, there is room for GST to be
implemented effectively. In the Chittoor area of Andhra Pradesh, India, S. Goutami
performed research on GST awareness among micro, small, and medium businesses.
As she pointed out, there is a positive association between firm size and experience, as
well as perceived GST worries and challenges, in the chosen district. According to the
study, 70% of respondents are aware of the GST system; business operators with annual
revenues of more than 1.5 crores are more likely to be aware of GST.
Jojo K Joseph and Ranu Jacob(2019) investigated the association between several
parameters and MSMEs' tax compliance behaviour under the GST regime. They
provided a conceptual model that included information on tax payer awareness,
knowledge, satisfaction, demographic characteristics, and tax compliance service
quality. how these determinants affect MSMEs' tax compliance..
 OBJECTIVE OF THE STUDY:

• To understand the loopholes in indirect taxation system prior to GST in India.

• To understand the concept and features of new indirect taxation system i.e. Goods
and Services Tax in India.

• To study and analyze the impact of GST on major MSME’s

To offer suggestions based on the findings of the study
 RESEARCH METHODOLOGY

NEED OF STUDY:

The MSME sector is one of the important segments of the Indian economy because it
is the second largest employment generating sector after agriculture in the nation. There
are more than 30 million MSME employing around 100 people all around the nation
and the main feature of MSME is that it makes the people independent or self-
reliable(not reliable on government) as a result they are not the burden of the nation but
are assets to the nation continually contributing to the economic growth of the nation.
MSME plays a significant growth in the economic growth of the country by creating
employment and thus helps to reduce income inequality or to reduce poverty. It
contributes almost 8 percent to the country’s GDP

SCOPE OF THE STUDY

In the present study old indirect taxes and its loopholes are studied. The study also
covers how the loopholes are eliminated by the new taxation system i.e. GST as well as
it covers the fundamental challenges faced by the government while implementing the
new taxation system as it took almost two decades to implement GST. And the main
thing the study covers is the concept, features, advantages, disadvantages, comparative
study between the proposed GST and the old tax regime, and impact of GST on
MSME’s

RESEARCH METHOD: primary data and one on one interaction with the MSME
retailer’s or shopkeepers could not be done as a result secondary data is used from
various journals, GST and tax books, internet and so on and questionnaire method is
used by sending questionnaires to relevant persons on social medias such as WhatsApp
and messenger.

SOURCES OF DATA: The study consists of both primary and secondary data so
survey was done by preparing questionnaires and sending it on various social medias
platforms such as WhatsApp, etc. and contacting them through calls and messages.
So, this study consists mainly of secondary data collected from various published and
unpublished reports, handbooks, GST journals & magazines, GST textbooks, Official
GST portal(https://www.gst.gov.in) and from various GST blogs on google.

QUESTIONNAIRE: A questionnaire containing 10 questions was framed for the

study which was sent to various MSMEs e-mails, WhatsApp, etc. The questionnaire
consisted of various questions related to the objective of the study stated above and to
know the viewpoints on MSMEs perception towards it. In brief the questionnaire was
framed to measure the impact of GST on MSME.
STATISTICAL TECHNIQUE:

As already stated a questionnaire was prepared and sent to various MSMEs through e-
mails, WhatsApp, Facebook, one to one conversation and their response and feedback
was received through social medias only and the data’s are entered in the excesheets
and analyzed through various diagrammatic representation such as pie charts, bar
graphs, etc.
 DATA ANAYLSIS AND INTERPRETATION :

Questionnaire was circulated to various MSMEs through e-mails, WhatsApp, etc.

data were recorded and converted into percentage and analyzed through pie charts
and bar graphs as follows.

One of the main objectives of implementing GST was to subsume all indirect taxes with
a single tax i.e. GST to make the process of commencing the business easier and
encourage more people in the MSME sector. In this connection, the opinion was
gathered from 10 respondents on impact of GST on ease of starting and running MSME.
Table – 1 depicts that 50% of the respondents strongly agreed and 30% respondents
agreed that, “implementation of GST has made MSME start and run business with ease
as compared to old taxation regime” whereas no respondents strongly disagreed and
10% respondents disagreed that implementation of GST has made them more difficult
to start and run MSME and similarly 10% respondents were undecided with respect to the
statementmade
.

Pie chart-Implementation of GST MSME

made business easy as compared to previous
tax system?

0%
10%

10%
strongly agree
50% agree
neither agree nor disagree
30%
strongly disagree
disagree

In general, we get a fair picture (as shown in figure 1.1 above) that implementation
of GST has made a positive impact (i.e. GST has made easy and simple to start and
run business in the MSME sector) on starting and running business in the MSME
sector

TABLE: 2
Implementation of GST has made tax compliances easier for MSMEs as compared
to
previous tax regime
Opinion Frequent percent Frequent Count
Strongly Agree 70% 7
Agree 20% 2
Neither Agree Nor Disagree 10% 1
Strongly Disagree - 0
 Disagree - 0
Total 100% 10
As we all know that many indirect taxes levied by both the central and state
government existed prior GST and different taxes had different tax compliances
such as different registration dates, dates for filing returns, reconciliation statements,
etc. So, keeping this in mind GST was implemented to simplify tax compliances for a
section of taxpayers by extending the due dates, online return filings, reconciliation
statements. Introduction of simplified return filing system, introduction of nationwide
e-way bill, etc. Table 2 depicts that 70% respondents strongly agreed and 20% agreed,
respectively to the statement made, 10% of the respondents were undecided and the
good part is none of the respondents strongly disagreed or disagreed on the statement
made.
 Pie chart-Implementation of GST made tax
compliances easy for MSMEs

0% 0%

10%

strongly agree
20% agree
neither agree nor disagree
strongly disagree
70% disagree

Figure 2:Pie chart-Implementation of GST made tax compliances easy for MSMEs

In general, the overall response depicts that majority of the respondents are
facing difficulties with the new tax system i.e. GST as result they feel it’s a burden
to them and the customers.

TABLE: 3
GST is a burden to both the customers and MSMEs?
Opinion Frequent percent Frequent count
Strongly Agree 50% 5
Agree 20% 2
Neither agree neither - 0
disagree
Strongly disagree 10% `1
 Disagree 20% 2
Total 100% 10

GST was implemented in India on 1st July, 2017 to simply the indirect tax structure in
India.As there were existence of many indirect tax levied by both the central and state
government on a single good so it was causing problem for both the government and
the tax payers so the government came up with the idea of “one nation one tax” which
would bring transparency in the taxation system , simplify tax compliances, eliminate
cascading effect, reduce the tax burden for the common man and improve ease of doing
business for tax payers in the long.

However. the GST law is ambiguous and it will likely cause difficulties among the tax
payers in the short run although the government has promised that it will be beneficial
for everyone in the long run. In this connection, the opinion of respondents was
collected or gathered on “whether implementation of GST is a burden to both taxpayers
in the MSME sector i.e. MSME dealers or owners and customers”. Table-3 reveals that
50% respondents strongly agreed and 20% respondents agreed on the statement made
to them whereas no respondents were undecided and 10% strongly disagreed and 20%
disagreed that GST is a burden to the taxpayers.

Implementation of GST has made a negative impact on your business?

Opinion Frequent Percent Frequent Count Strongly Agree 30% 3 Agree 10% 1 Neither
Agree nor Disagree 20% 2 Strongly Disagree 20% 2 Disagree 20% 2 Total 100% 10
Prior to GST we all know there existed many indirect taxes as a result MSMEs also
have to pay various different taxes to the respective governments on different dates and
for which the MSME owners or manufacturers have to run to various tax departments
to fulfill all the tax- related documentations. As a result, we can say that the tax
compliance was complex. So, to make the process of paying tax easier many indirect
taxes were subsumed with one tax called GST so that they do not have to pay different
taxes to various departments and the total tax levied by the state government add up to
32% but after the implementation of GST, the business owners of MSME have to pay
a maximum of 18-22 %. So, from this we can conclude that it will make the job of every
business owner easier. “impact of GST on MSME sector”. Table- 4 reveals that 30% of
the respondents strongly agreed and 10% of respondents agreed that implementation of
GST has made a negative impact on their business. This shows that they are facing
difficulties with the new taxation system and not finding it beneficial although it was to
be beneficial to them as tax compliances are made simple as well as tax rates were
reduced. 20% of the respondents were undecided whereas 20% of the respondents
strongly disagreed and 20% of the respondents disagreed that implementation of GST
has made a negative impact on their business.
 GST is burden to both customers and
MSMEs?

20%
strongly agree
agree

10% 50% neither agree nor disagree

strongly disagree
0%
disagree
20%

Fig.3: Pie chart-GST is burden to customers and MSMEs?

In general, it shows (as shown in figure 3)that 30% and 10% of the respondents strongly
agreed and agree respectively that implementation of GST has a negative impact on
their business whereas 20% of the respondents were undecided or they had no idea
whether implementation of GST has a positive or negative impact on their business and
the remaining 20% of the respondents strongly disagreed that implementation of GST
has a negative impact on their business and 20% of the respondents too disagreed on
the statement made.

Implementation of GST has made the MSME industry more competitive? Opinion
Frequent Percent Frequent Count Strongly Agree 20% 2 Agree 10% 1 Neither Agree
nor Disagree 40% 4
Strongly Disagree 10% 1 Disagree 20% 2 Total 100% 10 The government has promised
that implementation of GST will simplify tax structure and unify the market. In the
MSME sector
 Sales

20%
30%
strongly agree
Agree
20%
neither agree nor disagree
10%
strongly disagree
20% disagree

Fig:4 Implementation of GST has made a negative impact on your business?

Business in India was required to obtain VAT registration which were different in
different state and the rules and regulations were also different. Is short the process prior
to GST was ambiguous but after the implementation of GST they only have to register
for GST. Also, the tax rates have been reduced from 32% to around 18-22%, and prior
GST it was mandatory for business to make a VAT payment on an annual turnover of
more than Rs. 5 lakhs in some states and Rs 10 lakh in other states and this differences
causes confusion but after the implementation of GST one rate of tax is charged in the
entire nation such that business having an annual turnover of Rs 10 lakhs have to register
for GST and pay taxes as a result business which have an annual turnover between Rs
5-10 lakhs don’t need to pay any tax under new taxation regime i.e. GST. In brief the
government has formed a policy that will encourage more people to enter into the
MSME sector and thus will result in more competitiveness in the MSME industry or
sector. In this connection, the opinion was gathered from 10 MSME owners from.
It is found that 20% of the respondents strongly agreed and similarly 10% of the
respondents agreed that implementation of GST has made their industry more
competitive. 40% of the respondents were undecided which implies they were not
certain whether implementation of GST has made their industry or sector more
competitive or less competitive. Remaining 10% and 20% respondents strongly
disagreed and disagreed respectively to the statement made to them.

In general, (as shown in figure 5.)majority of the respondents were unaware whether
their industry has become more competitive or less competitive after the implementation
of GST . and 30% respondents were in favor of the statement made to them and the
remaining 30% opposed to the statement made to them that “Implementation of GST
has made MSME sector more competitive
Implementation of GST has made the MSME industry more competitive?

- Implementation of GST has made the

MSME industry more competitive?

12%
25%
strongly agree
agree
neither agree nor disagree
13% strongly disagree
50%

Fig 5: Pie chart- Implementation of GST has made the MSME industry more
competitive?

Implementation of GST has lowered tax rates and thus given enormous relief from tax
burdens? Opinion Frequent Percent Frequent Count Strongly Agree 60% 6 Agree 10%
1 Neither Agree nor Disagree 10% 1 Strongly Disagree - 0 Disagree 20% 2 Total 100%
10 GST treats goods and services as one and the same as a result tax burden on MSMEs
has been reduced as well as tax rates has been reduced from 38% to 18-22% as well as
tax compliances, registration and filing of tax returns have been simplified and
electronic mode will be used for registration, filing returns, etc. as a result electronic
compliances will bring more transparency to the system and it will also reduce the
compliance cost.

In brief implementation of GST has lowered tax rates and has given enormous relief
from tax burdens. In connection to this, opinions were gathered and were found as
follows. 60% of the respondents strongly agreed that implementation of GST has
lowered tax rates and have given enormous relief from tax burdens followed by 10%
respondents agreed on the statement made tothem. 10% of the respondents were
undecided, no respondents strongly disagreed and 20 % of the respondents disagreed to
the statement that implementation of GST has lowered tax rated and have given
enormous relief from tax burdens.
In general, figure 5 depicts that majority of the respondents (60-70%) agreed or strongly
agreed to the statement that implementation of GST has lowered tax rated and have
given enormous relief from tax burdens, small portion of the respondents(10%) were
unaware whether new taxation system has lowered tax rates and reduced their tax
burdens and 10% of the respondents denied that implementation of GST has lowered
tax rated and have given enormous relief from tax burdens but the good news is that no
respondent .
 implementation of GST has lowered tax rates
rateds and thus given enormous relief from
tax burdens?

20%
strongly agree
0%
agree
10% neither agree nor disagree
strongly disagree
60%
disagree
10%

Fig.6: Pie chart- Implementations of GST lowered tax rates and given enormous relief
from tax burdens?

GST is a cost and time saving indirect taxation system for MSME? Opinion Frequent
Percent Frequent Count Strongly Agree 40% 4 Agree 30% 3 Neither Agree nor
Disagree 20% 2 Strongly
Disagree 10% 1 Disagree 0% 0 Total 100 10 Implementation of GST has made all the
compliances related to MSME such as registration, payments, returns, refunds are made
simple and easy because it is carried out through online
 GST is a cost and time saving indirect taxation system for MSME?
Opinion Frequent Percent Frequent Count
Strongly Agree 40% 4
Agree 30% 3
Neither Agree nor Disagree 20% 2
Strongly Disagree 10% 1
Disagree 0% 0
Total 100 10
Source :Primary data

Implementation of GST has lowered tax rates and thus given enormous relief from tax
burdens?

Strongly Agree

portals so as a result the taxpayer doesn’t have to visit different tax departments and
department officers and all. In this way GST will save cost, time and effort of MSMEs.
In connection to this a questionnaire was sent to 10 MSME owners and following
response was received. 40% of the respondents strongly agreed and 30% of the
respondents agreed that GST is a cost and time saving indirect taxation system, 20% of
the respondents were undecided to the above MADE statement, 10% of the respondents
strongly agreed and no respondents disagree.
 Pie chart-GST is a cost and time saving
indirect taxation system for MSME?
0%

10%

strongly agree
20% 40%
agree
neither agree nor disagree
strongly disagree
disagree
30%

Fig.7:Pie chart-GST is a cost and time saving indirect taxation system for MSME?

Agree 20% 2 Neither Agree nor Disagree 30% 3 Strongly Disagree 10% 1 Disagree
10% 1 Total 100% 10 Prior to GST, Central Sales Tax (CST) were levied on sales
between different states as a result it attracted more taxes and cost of the product were
costly due to more tax which discouraged MSMEs to reach their potential customers
across India thereby reducing their customer base.

But after the implementation of GST, inter-state sales have become cheaper compared
to old tax regime as the input tax credit can be transmitted irrespective of location of
buyer and seller. So, implementation of GST will enable MSME to expand their
customer base. In connection to this, following response or opinions were recorded.
30% of the respondents strongly agreed and 20% agreed that GST has enable them to
increase their customer base wider.30% of the respondents were undecided and 10%
each respondent strongly disagreed and disagreed to the statement made.
 Figure 8. clearly depicts that almost half of the respondents (50%) were in the favor
that GST has enabled them to extend their customer base across state borders and
reach to their potential customers across India. 30% of the respondents were unaware
whether GST has enabled them

Pie chart-Implementation of GST made

MSME extend customer base wider?

10%

10% 30% strongly agree

agree
neither agree nor disagree
strongly disagree

30% disagree
20%

Fig.8: Pie chart-Implementation of GST made MSME extend customer base wider?

to increase their customer base. A small portion of the respondents (20%) were of
the favor that GST has not enabled them to extend their customer base.
Implementation of GST has unified the market? Opinion Frequent Percent Frequent
Count Strongly Agree 20% 2 Agree 30% 3 Neither Agree nor Disagree 10% 1
Strongly Disagree 20% 2 Disagree 20% 2 Total 100% 10 GST was implemented
with a slogan “One nation, one tax”. And according to it only one tax will be levied
on all goods and services with the same tax rate around the nation and all the indirect
taxes will be subsumed levied by both central and state government of different tax
rates. As a result, there will be uniform procedures, uniform payment of fees, and a
smooth and uniform tax structure in all states thus making it easier and cheaper to
start a business in multiple states. In connection to this, 20% and 30% of the
respondents strongly agreed and agreed respectively on whether GST has unified the
market whereas 10% of the respondents were uncertain whether GST has unified the
market or not and 20% respondents strongly disagreed and the remaining 20% also
disagreed to the statement made.
 Pie chart-Implementation of GST has unified
the market?

20% 20%
strongly agree
agree
neither agree nor disagree

20% strongly disagree

30% disagree

10%

Fig.9: Pie chart-Implementation of GST has unified the market?

From the above data it can be clearly seen that 50% of the respondents were in favor of
the statement that GST has unified the Indian market, 10% were uncertain and
remaining 40% denied that GST has unified the market and the reason may be that
alcohols, petroleum and all does not come under the GST regime. But we can ascertain
the majority of the respondents were in favor of the statement.
Implementation of GST has led to the growth of MSMEs?
Opinion Frequent Percent Frequent Count Strongly Agree 20% 2 Agree 40% 4 Neither
Agree nor Disagree 10% 1 Strongly Disagree 20% 2 Disagree 10% 1 Total 100% 10 In
connection to this, 20% and 40 % of the respondents strongly agree and agree
respectively on the statement whereas 10% of the respondents are uncertain about the
statement and 20% and 10% respondents strongly disagree and disagree on the
statement made.
 Pie chart-Implementation of GST has unified
the market?

10%
20%
strongly agree
20% agree
neither agree nordisagree
stronglydisagree
10% disagree
40%

Fig.10: Pie chart-Implementation of GST has unified the market?

As it can be clearly seen in figure 10.1 majority of the respondents agree with the
statement whereas 10% of the respondents were uncertain and 30% of the respondents
disagreed with the statement.
 CONCLUSION AND SUGGESTION:

Micro, Small and Medium Enterprises (MSMEs) are life blood of the Indian economy.
As stated, earlier MSMEs are enterprises that requires less capital and more manpower
and India is country with abundant manpower and scarce capital hence MSMEs perfectly
fits the Indian economy. MSMEs are playing a crucial role in the socio-economic growth
of the nation as it contributes about 27% to the Gross Domestic Product (GDP), 45% of
manufacturing output, about 40% of the total exports and provide employment to around
63.4 million people around the nation. It provides employment to rural peoples so hence
MSMEs are also playing in the urbanization of rural areas. MSMEs are also playing a
significant role in promoting domestic products and making the public skillful and self-
reliant as 95% of the goods manufactured are non- traditional handcrafted products such
readymade garments, plastic products, etc. MSMEs are also eco-friendly as they are
handcrafted. As our Prime Minister Modi has set a vision to make India a $5 trillion
economy by 2024 and to fulfill this vision the MSME has set an objective to increase their
contribution to the nation GDP from 27% to more than 50% in coming days. As we all
know that tax is an important part of any business whether Micro, Small or Medium
Enterprises so this study was undertaken to ascertain the impact on GST on MSME sector
as we all know that new taxation system is in effect from July 1, 2017.

From the study it has been found that GST will have a positive impact in the long run
even though many MSMEs have faced lots of difficulties in the short run because
implementation of GST has made the tax compliances simpler, threshold has been
reduced, tax rate has been reduced, etc. and this will likely encourage more people to
enter into the MSME sector. Although many people have been negatively
impacted by the implementation of GST such as purchasing new software to carry out the
GST related work or to hire or train employees so that they may be familiar with the new
taxation system, etc. But these problems are for the short term and it will require some
time for the business to be familiar with the new taxation system and can be easily
overcomed and by overcoming it the new taxations system will boost the MSME sector
in the future. In this study questionnaire method is used to analyze the impact of GST on
the MSME sector
contacted Out of 100 responses from 10 people on 10 question 61% of the respondents
werin favor that GST has made a positive impact on their business, 23% of the
respondents were in favor that GST has made a negative impact on their business and the
main thing to concern is that 16% of the respondents were uncertain whether new
taxation system has made an impact on their business or not. However, majority of the
respondents have been benefited by the implementation of GST but few people are
negatively affected and some are uncertain and for the optimum growth and contribution
of the MSMEs towards the social and economic growth of the nation these flaws should
be eliminated.

Out of 100 responses from 10 people on 10 question 61% of the respondents were in
favor that GST has made a positive impact on their business, 23% of the respondents
were in favor that GST has made a negative impact on their business and the main thing
to concern is that 16% of the respondents were uncertain whether new taxation system has
made an impact on their business or not. However, majority of the respondents have been
benefited by the implementation of GST but few people are negatively affected and some
are uncertain and for the optimum growth and contribution of the MSMEs towards the
social and economic growth of the nation these flaws should be eliminated
 SUGGESTION

Even after years of implementation of GST 100% of the people in the MSME sector have
not been benefitted by the impact of GST so major steps should be taken to improve the
MSMEs. Firstly, survey should be performed to find out the problems of the MSMEs
whether its their inability to use the software, or training employees,etc. Secondly,
workshop and training should be provided to the needed one from time to time and after
any update has been made in the GST system. Thirdly, people should be made aware of
various government schemes to encourage them to enter into the MSME sector
 REFRENCES

1. Sharma (December 2017) in his work entitled “A Study of Impact of

GST on Micro, Small and Medium Enterprises- A Critical Analysis”.
2. Franco and Chellammal (June 2018) in their work entitled “GST- Positive
and Negative Impacts on Small Scale Industries” .
3. Jayalakshmi and Venkateswarlu (April 2018) in their study entitled
“Impact of GST on Micro, Small and Medium Enterprises”.
4. You tube
5. Various Journals on GST and MSMEs
6. GST books
 ANNUXURE

Q.1Implementation of GST has made MSME starting and running business easy
as compared to previous tax system?
a) Strong Agree b) Agree
c) Neither Agree nor disagree d) Disagree
e) Strongly Disagree

Q2 Implementation of GST has made tax compliance easier for MSMEs easier as
compared to previous tax regime?

a) Strong Agree b) Agree

c) Neither Agree nor disagree d) Disagree

e) Strong f)Disagree

Q.3GST is a burden to both the customers and MSMEs?

a)Strong Agree b)Agree

c)Neither Agree nor disagree d)Disagree
e)Strongly Disagree

Q4. Implementation of GST has made a negative impact on your business?

a) Strong Agree b) Agree c) Neither Agree nor disagree d) Disagree
Q.5 Implementation of GST has made the MSME industry more competitive?

a) Strong Agree b) Agree

c) Neither Agree nor disagree d) Disagree

e) Strongly Disagree

Q6. Implementation of GST has lowered tax rates and thus given enormous relief from
tax burdens?
a) Strong Agree b) Agree c) Neither Agree nor disagree d) Disagree
e) Strongly Disagree

Q7. GST is a cost and time saving indirect taxation system for MSME?
a) Strong Agree b) Agree

c) Neither Agree nor disagree d) Disagree

e) Strongly Disagree

Q8. Implementation of GST has made MSME to extend their customer base wider with
ease?
a) Strong Agree b) Agree
c) Neither Agree nor disagree d) Disagree
e) Strongly Disagree

Q9. Implementation of GST has unified the market?

a) Strong Agree b) Agree c) Neither Agree nor disagree d) Disagree

e) Strongly Disagree
Q10. Implementation of GST will help MSMEs complete with the international market
goods and all?
a) Strong Agree b) Agree c) Neither Agree nor disagree d) Disagree
e) Strongly
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