ARCHITECTURE AND SOCIOECONOMIC
TRANSFORMATION
This research paper delves into the transformative impact of the Goods and Services Tax (GST)
on India’s tax architecture and socioeconomic landscape. The introduction emphasizes the crucial
role of taxation in economic prosperity and highlights the need for reforms in India’s tax system.
The paper provides a comprehensive history of the GST, from its conceptualization in 2000 to its
implementation in 2017, elucidating the challenges faced during this period.
The positive impact of GST is explored, focusing on its ability to eliminate double taxation,
reduce corruption, and create a more transparent and efficient tax environment. The paper also
examines the negative repercussions, such as uncertainties in the real estate sector and
transitional challenges for various industries. Specific sectors, including FMCG, financial
services, and agriculture, are analyzed in terms of the GST’s influence.
Challenges in GST compliance and transitional adjustments are discussed, with a spotlight on the
solutions adopted by businesses, such as technological integration, reorganization of business
tactics, and comprehensive training programs. Recommendations include routine monitoring,
sector-specific measures, and sustained communication to enhance GST implementation.
In conclusion, while GST has brought about positive trends in indirect tax collections and
taxpayer compliance, the paper acknowledges existing challenges and emphasizes the need for
ongoing research and analysis to ensure the effective execution of GST in the evolving economic
landscape.
Keywords: GST, Tax Reforms, Socioeconomic Transformation, Compliance Challenges,
Indian Economy.
INTRODUCTION
The tax system in any nation has a big influence on how prosperous its economy is. Taxes
provide the government with the greatest proportion of its income. The economic benefits to a
nation of having a tax structure that encourages business operations and deters tax evasion. India
has made several reforms to its tax structure, but it is still far from ideal. Future significant
changes to the Indian tax system will probably be necessary to address a variety of problems,
including the nation’s reliance on indirect taxes, black money, and the expansion of the parallel
economy.
Tax policy plays a crucial role in the economy, impacting efficiency and equity. A good system
should address income distribution while supporting government expenditure. GST, or Goods
and Services Tax, heralds significant changes in India’s complex indirect tax system, unifying
taxes at the national level. This reform is considered the most substantial since 1947,
streamlining multiple taxes imposed separately by the union and states. It aims to create a
seamless national market, altering market dynamics 1 .
GST is a comprehensive tax on goods and services across India, replacing central and state
levies, collected at each transaction stage, and applied at the point of consumption. Introduced by
France in 1954, GST is adopted by 160 countries, with some using a dual system like India’s,
incorporating both CGST and SGST.
RESEARCH METHODOLOGY
A doctrinal approach will focus on case law, legislation, and other legal sources. It varies from
distinctive processes in that it takes a glance at the law inside itself; an absolutely doctrinal
methodology does not endeavor to take a glance at the influence of the law or how it’s applied
rather inspects law as a formulated assemblage of rules that can be honored and using just legal
sources.
LITERATURE REVIEW
1 A.N, Kumar, Shah Deo, and Prerna Kittu Singh. “GST: India’s New Journey towards Indirect Taxation.”
International Journal of Science and Research 6, no. 7 (July 2017).
Maulshree Rao, Sushant Kumar Vishnoi, Teena Bagga (2018): “GST: One Country, One
Community and One Taxation Command 2 ”
The research paper examines how the Goods and Services Tax (GST) was implemented and how
it affected Indian taxation, with a focus on how pre-GST and post-GST tax regimes changed. The
study looks into the history, tax slabs, difficulties, and post-GST tax collections of the GST. The
study, which is based on data from indirect tax collection, sheds light on the revolutionary role of
GST but admits its limits in taking other relevant aspects into account.
Miriam George (2017): “GST-A Game Changer in Indian Tax Structure 3 ”
The research paper explores the origins and development of the Goods and Services Tax (GST)
in India, following its development from ancient taxation regimes to the current framework. It
examines the economic ramifications, obstacles, and landmarks of the GST and how it affects the
tax environment in India. It provides information about the need for, advantages of, difficulties in
implementing, and the economic impact of GST, influencing India’s tax system.
HISTORY OF GST
The Atal Bihari Vajpayee Government presented the idea for the Goods and Services Tax (GST)
in 2000, marking the beginning of the tax’s implementation in India. State finance ministers
formed an Empowered Committee (EC) chaired by West Bengal finance minister Asim Dasgupta
to devise a framework for the Goods and Services Tax (GST). This committee has worked on
several parts of the GST plan throughout the years, such as thresholds, exemptions, interstate
supply taxation, and service taxation.
A task committee led by the finance ministry’s advisor, Vijay L. Kelkar, identified deficiencies in
the current tax system that the GST may fix in 2004. A consistent GST structure covering the full
production-distribution chain was subsequently stated as the government’s medium-to-long term
goal by Finance Minister P. Chidambaram in February 2005 4 .
2 Shuchi Sharma, GOODS AND SERVICE TAX “ONE NATION ONE TAX” IN INDIA., 6 INTERNATIONAL
JOURNAL OF ADVANCED RESEARCH 152 (2018).
3 Dr Sharma & Miriam George, GST-A Game Changer in Indian Tax Structure, 19 IOSR JOURNAL OF BUSINESS AND
MANAGEMENT 55 (2017).
The finance minister had stated in February 2006 that the goal date for the GST’s implementation
was April 1, 2010. The Congress-led government introduced the Constitution (115th
Amendment) Bill for GST in March 2011, but it received criticism, prompting a standing
committee to conduct a thorough investigation. Discussions in the standing committee got
underway in June 2012, with opposition parties voicing concerns over specific provisions 5 .
Despite hurdles, the Constitution Amendment Bill expired in May 2014, the same month that
Narendra Modi took office. The Constitution (122nd Amendment) Bill, 2014 was presented by
Finance Minister Arun Jaitley in December of 2014, and in February of 2015, he declared that
the government intended to enact the GST by April 1st, 2016 6 .
The Constitution Amendment Bill, which excluded petroleum, was approved by the Lok Sabha
in May 2015; however, the Rajya Sabha took longer to consider it. After receiving parliamentary
approval and the President’s assent, four bills pertaining to GST—the Central GST Bill,
Integrated GST Bill, Union Territory GST Bill, and GST (Compensation to States) Bill—became
Acts in 2017 7 . After a brief delay caused by legal complexeties, the GST Council confirmed the
GST rates and regulations, and the government announced that the GST would take effect on
July 1, 2017.
NEED FOR GST
The introduction of the Goods and Services Tax (GST) is a significant milestone in India’s
continuous economic reforms, signifying a deliberate attempt to simplify and update the nation’s
tax system. The Goods and Services Tax (GST) unifies various state and national taxes into a
single, all-inclusive system. It resolves issues with the former tax system and initiates significant
changes to the country’s tax structure.
4 Brief History Of GST | Goods and Services Tax Council, https://gstcouncil.gov.in/brief-history-gst (last visited Jan
8, 2024).
5 Garg, Girish. “Basic Concept & Features of GST in India.” International Journal of Scientific Research &
Management 2, no. 2 (2014): 542-549
6 The History of GST: From Concept to Implementation | Marg ERP Blog, https://margcompusoft.com/m/history-of-
gst/ (last visited Jan 8, 2024).
7 GST: History in Making- Onset of New Indirect Tax Regime, https://www.livelaw.in/gst-history-making-onset-
new-indirect-tax-regime/ (last visited Jan 8, 2024).
The capability of the GST to do away with the double taxing and cascading consequences that
were common in the pre-GST era is one of its main benefits. GST considerably minimizes the
cascading effect of taxes by enabling the smooth movement of tax credits down the supply chain,
which results in savings for both consumers and businesses. 8
Moreover, the scattered tax system with varying rates throughout states is replaced by a single
tax structure under the GST. The simplification of compliance processes brought forth by this
harmonization of tax rates promotes economic integration and facilitates easier interstate trade.
The GST broadens the tax base, which makes the nation’s tax structure more consistent.
The reduction of tax fraud and corruption is one of the main advantages of the GST. There are
fewer chances for tax evasion because of the GST framework’s transparency and efficiency. By
utilizing technology-driven compliance procedures and digitization, Goods and Services Tax
(GST) fosters accountability within the tax system, leading to a more equitable and effective
environment.
Government data and expert opinions both support GST’s upward trajectory. Based on studies,
the Goods and Services Tax (GST) is expected to improve mechanisms for collecting taxes,
stimulate economic growth, and provide equity in the tax system 9 . The primary goal of the Goods
and Services Tax (GST) implementation in India is to streamline procedures, minimize
complexities, and create an open and effective tax system that will greatly boost the nation’s
economic progress and development.
POSITIVE IMPACT OF GST
The enactment of the Goods and Services Tax (GST) in India has led to a lot of beneficial
impacts and has completely changed the tax climate in the nation. The elimination of indirect
taxes by substituting a single taxation system for numerous levies is one of the main benefits. By
8 51_GST_Flyer_Chapter45.pdf, https://old.cbic.gov.in/resources//htdocs-cbec/gst/51_GST_Flyer_Chapter45.pdf
(last visited Jan 8, 2024).
9 Goods and Services Tax (GST) Implementation in India: A SAP–LAP–Twitter Analytic Perspective – PMC,
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8790948/ (last visited Jan 8, 2024).
streamlining compliance for companies and taxpayers, this tax structure simplification promotes
a more uncomplicated and effective system.
A reduction in the administrative load on state and union governments as well as centralization
are brought about by GST. Improved governance and resource efficiency are achieved by the
system’s ability to streamline several indirect tax administration and collection procedures.
The removal of the tax-on-tax, or cascading impact of taxes, is one of the main advantages of the
Goods and Services Tax (GST). The manufacturing industry may more successfully compete on
cost by eliminating the cascading effect, which could increase productivity and promote
competitiveness 10 . Additionally, the shift to one tax system fosters a business-friendly climate, as
evidenced by the rise in the tax-to-GDP ratio, which points to a stronger and better-organized tax
structure.
The transition to a single tax system is anticipated to reduce corruption in the tax system,
indirectly benefiting the general public by ensuring fairer tax administration and compliance.
Furthermore, the Goods and Services Tax (GST) holds the potential for long-term economic
growth and revenue generation, thereby stimulating the Indian economy. This revenue influx can
fund crucial sectors such as infrastructure upgrades and developmental initiatives, fostering
sustainable economic expansion 11 . Essentially, the benefits of GST go beyond making tax
procedures simpler; they also include increased economic gains, a decrease in corruption, and an
overall improvement in the effectiveness of the Indian tax system.
NEGATIVE IMPACT OF GST
There have been a number of perceived negative effects of the Goods and Services Tax (GST)
implementation in India across a number of different sectors. The real estate industry is one
prominent area that was impacted; with the introduction of the GST, there were uncertainties and
10 Mohd Azam Khan & Nagma Shadab, Goods and Services Tax (GST) in India: Prospect for States, 4.
11 Impact-of-GST-on-Economy-and-Businesses.pdf, https://www.phdcci.in/wp-content/uploads/2021/07/Impact-of-
GST-on-Economy-and-Businesses.pdf (last visited Jan 8, 2024).
interruptions in the market, which made it difficult to conduct business in real estate while
maintaining market stability.
Value Added Tax (VAT) was a common way for many dealers to avoid paying central excise tax;
however, the move to GST required tax payments for all dealers 12 . This change might have an
effect on businesses’ overall economic dynamics by changing their operating costs and financial
structures.
Short-term transitional challenges and adjustments in multiple industries have an adverse effect
on the overall economy. Despite the GST system being marketed as a single tax system, worries
about possible double taxation were raised by the complex nature of its structure. Businesses had
operational difficulties and misunderstandings as a result of this complexity, especially when it
came to compliance 13 .
Due to the uneven cost burden for various consumer goods and services, consumers had varied
effects from the GST, with certain goods being less expensive while others increased in price. It
was anticipated that certain services, like banking, telecom, and aviation, would increase in cost
as a result of increased GST rates or modifications to tax laws 14 .
The adoption of GST led to higher costs for online buying, which affected affordability and
consumer spending patterns. Sellers’ growing profit margins added to the possibility of product
price increases, which would have an effect on consumers’ purchasing power.
IMPACT ON SPECFIC SECTORS
The introduction of the Goods and Services Tax (GST) in India has affected several economic
sectors, changing their dynamics and methods of operation.
12 DM.pdf.pdf, https://nipfp.org.in/media/medialibrary/2022/12/DM.pdf.pdf (last visited Jan 8, 2024).
13 Khurana, Akanksha, and Aastha Sharma. “Goods and Service Tax in India: A Positive Reform for Indirect Tax
System.” International Journal of Advanced Research 4, no. 3 (2016): 500-505.
14 The Impact of India’s New GST Tax on the Economy – In the Trenches – IMF F&D Magazine – June 2018 |
Volume 55 | Number 2, IMF, https://www.imf.org/en/Publications/fandd/issues/2018/06/impact-of-indias-new-GST-
tax-on-the-economy-trenches (last visited Jan 8, 2024).
The consumer goods business, in particular the Fast-Moving Consumer Goods (FMCG) sector, is
one area where GST has a major impact. The FMCG sector, which makes up 30% of the
Household and Personal Care sector and 50% of the Food and Beverage sector, is vital to the
economy’s direct and indirect tax contributions. The pre-GST era’s numerous tax laws had an
impact on the location of industrial facilities and the distribution of commodities. The effect of
GST on this industry is significant since taxes have a direct bearing on FMCG companies’ cost
structures, which in turn affects how they operate as a whole 15 .
The tax rate on financial services, previously at 15% before the absorption of service tax into
GST, now stands at 18% for stock investments and brokerage services. This change may not
significantly affect long-term investors, but it could impact the economics for short-term traders,
potentially influencing market volumes and liquidity. In the case of cement, which previously
had variable VAT rates and a 12.5% excise tax, under the GST, the tax rate is now fixed at 28%,
aligning closely with the previous tax system.
Due to the regressive nature of food taxes, which account for a sizable amount of lower-income
households’ spending, the food sector faces difficulties. The extension of GST to the food sector
is hindered by the disorganized nature of food production and distribution in India, in contrast to
several other nations where food is subject to nil or reduced taxes 16 .
Services in the fiercely competitive telecom industry are subject to 18% GST, an increase from
the previous 15%. With the exception of hybrid vehicles, which are subject to a 28% tax rate, the
automotive industry as a whole anticipates a neutral effect. On the other hand, the tractor
business expects a bad outcome because they now pay 12% tax instead of the previous 6-7% 17 .
CHALLENGES
15 Kumar, Dr.Mohan, and CA Yogesh Kumar. “GST & its Probable Impact on the FMCG Industry in India.”
International Journal of Research in Finance and Marketing 7, no. 4 (2017): 66-7
16 GST Impact across Sectors, DESKERA, https://www.deskera.com/in/gst-impact-across-sectors (last visited Jan 8,
2024).
17 Impact of GST Bill on Different Sectors in India | SAG Infotech, (Aug. 3, 2016),
https://blog.saginfotech.com/impact-gst-bill-different-sectors-india (last visited Jan 8, 2024).
Adopting technology for GST compliance is a significant problem that businesses, particularly
small and medium-sized firms (SMEs), have to overcome. When integrating digital
infrastructure for processes like GSTN integration, tax filing, and invoicing, many SMEs
face difficulties. A steep learning curve is presented by the need for digital interfaces and online
filing systems, necessitating investments in new technology and knowledge to enable a seamless
transition.
Businesses face a number of transitional difficulties while switching from the old tax system to
the GST. Complexities arise from matters like interpreting transitional laws, valuing closing
stock, and transferring existing input tax credits. It becomes difficult to reconcile credits and
match needs with the new system, which could cause delays and uncertainty during the
implementation process.
In addition, the implementation of the Goods and Services Tax (GST) results in modifications to
tax rates, classifications, and exemptions that affect firms that operate in many states and deal
with a range of goods and services 18 . In order to comply with the new tax structure, businesses
have had to quickly review their inventory management systems, reevaluate their logistical
schemes, and reevaluate their vendor relationships. The distribution networks, warehousing
operations, and the flow of commodities have all experienced temporary disruptions as a result
of these changes 19 .
Uncertainty has defined the transitioning phase, with businesses encountering difficulties with
new tax rates, procedural changes, and compliance requirements 20 . Businesses find it difficult to
adjust to the changing GST framework due to the ambiguity created by the authorities’ constant
revisions and clarifications. Businesses have found it more difficult to comply and make a
seamless transition as a result of this uncertainty.
18 Challenges In The Current GST Structure: A Way Forward, HTTPS://WWW.OUTLOOKMONEY.COM/,
https://www.outlookmoney.com/finance/challenges-in-the-current-gst-structure-a-way-forward-3870 (last visited Jan
8, 2024).
19 What Are the Common Challenges Faced by Retailers Under GST? – CaptainBiz Blog, (Nov. 27, 2023),
https://www.captainbiz.com/blogs/what-are-the-common-challenges-faced-by-retailers-under-gst/ (last visited Jan 8,
2024).
20 Soni, Dr. Shri Prakash G., Mr. Sumit Omprakash Bahiti, Mr.Govind Pravin Chandak, and Mr. Akshta Girish Suri.
“GST- A Paradigm Shift in Indirect Taxes.” International Journal of Research in Economics and Social Sciences 2,
no. 2 (2017): 160-167.
SOLUTIONS
Indian businesses have taken a diversified strategy to overcoming the challenges presented by
the introduction of the Goods and Services Tax (GST). Acknowledging that technology plays a
critical role in guaranteeing smooth compliance, companies have invested heavily in
sophisticated accounting software and systems. These technology developments improve
accuracy and efficiency in integration with the GST by automating activities related to tax filing,
reporting, and invoicing. Technology adoption has made record-keeping more accurate while
also making compliance obligations easier to follow.
The implementation of the Goods and Services Tax (GST) required a comprehensive evaluation
of business tactics. To maximize operations under the new tax structure, businesses reorganized
their pricing policies, supply chain logistics, and warehouse locations. Reducing tax obligations,
streamlining business procedures, and improving overall compliance effectiveness were the
goals.
Businesses carried out comprehensive training programs because they understood how important
personnel were to maintaining compliance. The purpose of these programs was to train
employees on modified tax laws, procedural modifications, and GST compliance. Staff skill
development was prioritized to facilitate more seamless transitions and competent compliance
with the updated tax laws 21 .
Businesses that used an agile strategy made constant adjustments to their operations, accounting
procedures, and compliance plans in response to the changing GST environment. Acquiring
knowledge from preliminary encounters and input, they maintained their adaptability in
modifying strategies to guarantee adherence and effectiveness within the dynamic GST structure.
Businesses have benefited greatly from these proactive steps in minimizing early disruptions,
comprehending the complexities of GST compliance, and honing their tactics to efficiently
function within the revised tax framework. Although the process of adaptation has differed
21 T.I, Sherline. “India Tax Structure & Relevance of GST.” International Journal of Commerce, Business and
Management 5, no. 06 (2016).
between industries and firm sizes, it has been essential for the progressive stability and effective
operation of the new GST system.
SUGGESTIONS:
Several suggestions to improve the Goods and Services Tax’s (GST) implementation are revealed
by an investigation of the GST in India. First and foremost, in order to recognise issues and
guide any modifications, it is imperative to set up routine monitoring and assessment procedures.
In addition, there is an urgent need to streamline compliance processes by offering more
assistance and training, especially to small and medium-sized businesses (SMEs).
It is imperative to tackle industry-specific obstacles, and customised measures for sectors like as
real estate and food should be investigated to guarantee a fairer implementation of the Goods and
Services Tax. Sustaining communication and educational endeavours is critical to minimise
ambiguities and enable a more seamless transition for companies managing the changing tax
landscape. Promoting the use of technology for GST compliance, particularly among SMEs, may
greatly increase productivity.expansion and advancement in India.
For GST to be successful over time, a flexible implementation strategy that includes regular
evaluations and modifications depending on changing economic conditions is essential. Finally,
encouraging cooperation between the government, corporate leaders, and industry experts can
result in creative ideas and guarantee a more efficient, transparent, and inclusive tax system that
promotes India’s economic progress.
CONCLUSION
In conclusion, India’s transformation from the previous indirect tax system, to the Goods and
Services Tax (GST) is a historic and audacious step towards an integrated tax framework.
Indirect tax receipts have increased, indicating that the economy has fared well despite overcome
obstacles during the launch phase. A praiseworthy reform trajectory is indicated by the positive
link between related indicators, such as GST collections, the addition of taxpayers, and actual
return files.
The research’s data and conclusions consistently corroborate the theory that the Goods and
Services Tax (GST) has increased acceptance and compliance among taxpayers in India since it
was implemented. Positive trends are shown by the noteworthy increase in indirect tax
collections, as well as an increase in the number of taxpayers and returns submitted under the
GST laws. All of these major signs point to a greater readiness on the part of firms and
individuals to comply with the new tax system as they adjust to the GST framework. The
hypothesis and the observed outcomes are in line, which supports the idea that the Indian
taxpayer community has successfully embraced GST and is now more compliant.
Undoubtedly, GST gives India a transparent and easy-to-understand tax system; nevertheless, as
this paper explains, there are a number of challenges in its current path. The current challenges
underscore the necessity for additional analytically grounded study to guarantee the effective
execution of GST in the current context. To address the issues that have been identified, improve
the implementation plan, and facilitate a more seamless transition to a more effective and
efficient taxing system, ongoing research and analysis are essential.
NAME: SHIVANSH GUPTA
COLLEGE: CHRIST ACADEMY INSTITUTE OF LAW