Final Report - Migration To GST

FISCAL POLICY INSTITUTE
PROJECT REPORT
Migration to GST: Preparedness and

level of Knowledge, Understanding,
Application and Skills of Human
Resources in the Government and the
Industry
Submitted as part of summer internship

by
Shiva Raman S
Indian Institute of Management Lucknow
June 2010
Letter of Transmittal
June 12, 2010
Shri P. R. Devi Prasad,
Director,
Fiscal Policy Institute,
Finance Department,
Government of Karnataka,
Bangalore.
Dear Sir,
I am pleased to submit the report, Migration to GST: Preparedness and level of Knowledge,
Understanding, Application and Skills of Human Resources in the Government and the
Industry in partial fulfillment of the requirements for the degree of Post Graduate Diploma
in Management. I hereby declare that this is an original work done by me and the findings of
this work have not been previously submitted for any publication.
Please feel free to revert to me with any questions and/or comments regarding this report.
Sincerely
(Shiva Raman S)
Summer Intern
Indian Institute of Management
Enclosure: Final Report
Certificate
This is to certify that the project titled Migration to GST: Preparedness and level of
Knowledge, Understanding, Application and Skills of Human Resources in the
Government and the Industry submitted by Shri Shiva Raman S as a part of summer
internship is the result of the work done by him at Fiscal Policy Institute Bangalore, Finance
Department, Government of Karnataka, from April to June 2010 under our guidance.
Place: Bangalore
Place: Bangalore
Date:
Date:
Shri P.R. Devi Prasad IES
Smt Anita V. Nazare
Director
Special Officer
Fiscal Policy Institute
Fiscal Policy Institute
Finance Department
Finance Department
Government of Karnataka
ii
Acknowledgements
I am deeply indebted to Shri P.R. Devi Prasad, Director, Fiscal Policy Institute, Bangalore,
under whose guidance the present study was conducted. He has been giving valuable
suggestions, generous help and corrections during all the phases of the project, without which
the efforts could not have been completed successfully.
I would like to extend my indebtedness and gratitude to Smt. Anita V. Nazare, Special
Officer, FPI, for the invaluable guidance and feedback provided by her at every stage of the
project. She could always find time from her busy schedule to help in this study.
I am indebted to Shri Sameer Hassan MBA, Kum. Munawwara Shakila MBA, and Kum.
Veena N. H MBA, all Consultants at FPI, for their guidance and support from time to time.
I am indebted to Shri J Crasta, President, FKCCI, Shri B T Manohar, Chairman, State Taxes
Committee 2009-10, FKCCI, Shri Subramanyam, Head of Business Research Cell, FKCCI,
and Kum. Lillu Aswataiah, Deputy Secretary, FKCCI for their guidance and invaluable help
in getting responses from Trade and Industry.
I am indebted to the following officials for their guidance and invaluable help in getting
responses.
1. Shri Ajay Seth IAS, Secretary (B&R), FD, GoK
2. Shri Balamurugan K IRS, Additional Commissioner, Large Taxpayers Unit,
Bangalore
3. Shri H D Arun Kumar, J.C.C.T, GoK
4. Shri Pradeep Singh Kharola IAS, C.C.T, GoK
5. Shri Sriram IRS, Additional Director, National Academy of Central Excise and
Narcotics, Bangalore
6. Shri Vipual Bansal IAS, Deputy Secretary (B&R), Finance Department, GoK
I am deeply thankful to my fellow interns, Shri Samar Sinh and Shri Laxmikant Jhawar for
their enormous support, guidance and help at every juncture through exchange of ideas and
views on the study.
I am thankful to Officers and Staff at FPI and FPAC who have shown tremendous
cooperation and support throughout the course of study.
iii
I would also like to thank Shri B K Bhattacharya ex-IAS, Chairman, Expenditure Reforms
Commission, Government of Karnataka for his support and encouragement.
I would also like to thank Government of Karnataka for giving me an opportunity to work on
this project at FPI.
I would also like to thank all the respondents for giving their time and invaluable responses
for this study.
I would like to thank Dr. D. Tripati Rao, Professor, IIM Lucknow, for his support and
encouragement.
The author alone is responsible for any errors and omissions.
Shiva Raman S
Summer Intern
Indian Institute of Management
iv
Table of Contents
Letter of Transmittal ................................................................................................................................ i
Certificate................................................................................................................................................ ii
Acknowledgements ................................................................................................................................ iii
Table of Contents .................................................................................................................................... v
List of Figures ....................................................................................................................................... vii
List of Tables ....................................................................................................................................... viii
Abbreviations ......................................................................................................................................... ix
1
Introduction ..................................................................................................................................... 1
1.1 Objectives of GST ...................................................................................................................... 1
1.2 Recent progress in implementation of GST ............................................................................... 2
1.2.1
IT Infrastructure .............................................................................................................. 3
1.3 Problem Statement ..................................................................................................................... 4

1.4 Purpose of the Study .................................................................................................................. 5
1.5 Significance of the Study ........................................................................................................... 5
1.6 Definitions
2
GST in Other Countries .................................................................................................................. 7

2.1 GST in Canada ........................................................................................................................... 7
2.1.1
The Quebec Sales Tax..................................................................................................... 9
2.2 GST in Australia ...................................................................................................................... 10

2.2.1
3
How Australia prepared trade and industry for GST .................................................... 11
Methodology ................................................................................................................................. 14
3.1 Research Design ....................................................................................................................... 14
3.1.1
Exploratory Research .................................................................................................... 14
3.1.2
Descriptive Research..................................................................................................... 14
3.2 Tools of the Study .................................................................................................................... 15

3.2.1
Interview ....................................................................................................................... 15
3.2.2
Questionnaire ................................................................................................................ 15
3.3 Sample of the Study ................................................................................................................. 16

3.4 Collection of Research Data..................................................................................................... 18
3.5 Statistical Techniques............................................................................................................... 18
3.6 Limitations of the Study ........................................................................................................... 19
4
Analysis and Interpretation of Results .......................................................................................... 20

4.1 PART - I
.......................................................................................................................... 21
v
4.1.1
Top Officials of the Centre and the State governments ................................................ 21
4.1.2
Middle Level Tax Officials ........................................................................................... 31
4.1.3
Tax Department Staff .................................................................................................... 35
4.1.4
Trade and Industry ........................................................................................................ 40
4.1.5
Professionals ................................................................................................................. 45
4.1.6
General Public ............................................................................................................... 50
4.2 PART II
53
4.2.1
Hypothesis 1.................................................................................................................. 53
4.2.2
Hypothesis 2.................................................................................................................. 54
Findings and Recommendations ................................................................................................... 55

5.1 Major Findings ......................................................................................................................... 56
5.2 Recommendations .................................................................................................................... 58
5.3 Scope for Further Research ...................................................................................................... 60
Bibliography ................................................................................................................................. 61
Appendix ....................................................................................................................................... 62
7.1 Appendix 1: Interview questions for top officials .................................................................... 62
7.2 Appendix 2: Questionnaire for middle level tax officials ........................................................ 64
7.3 Appendix 3: Questionnaire for tax department staff ................................................................ 69
7.4 Appendix 4: Questionnaire for Trade and Industry ................................................................. 71
7.5 Appendix 5: Questionnaire for professionals ........................................................................... 75
7.6 Appendix 6: Questionnaire for general public ......................................................................... 79
7.7 Appendix 7: Timeline for implementation of GST, suggested by Thirteenth Finance
Commission Task Force for introduction of GST on October 1, 2010. ............ 81
7.8 Appendix 8: Responsibility and Accountability of various activities relating to
implementation of GST, suggested by Thirteenth Finance Commission Task
Force. ................................................................................................................ 82
7.9 Appendix 9: Details of tax revenue realised during the period from 2004-05 to 2008-09....... 83
7.10 Appendix 10: Percentage of dealers taken up for tax audit...................................................... 84
7.11 Appendix 11: Data gathered from general public on awareness and understanding of VAT and
GST ................................................................................................................... 85
7.12 Appendix 12: Some Useful Links ............................................................................................ 86
vi
List of Figures
Figure 1: Main source of understanding GST for middle level tax officials ........................................ 33
Figure 2: Percentage of respondents from Central Excise and Customs who have received/ not
received training on GST....................................................................................................... 36
Figure 3: Main source of understanding GST for Tax Department Staff of Central Excise and Customs
.............................................................................................................................................................. 37
Figure 4: Main source of understanding GST for Inspectors and Superintendents of the Commercial
Taxes Department .................................................................................................................. 39
Figure 5: Percentage of respondents from trade and industry who have attended seminars or
workshops on GST ................................................................................................................ 42
Figure 6: Main source of understanding GST for trade and industry ................................................... 43
Figure 7: Percentage of respondents from the professionals group who have attended
seminars/workshops on GST ................................................................................................. 47
Figure 8: Main source of understanding GST for respondents from the professionals group .............. 48
Figure 9: Percentage of respondents from general public who claim to be aware of GST ................... 50
Figure 10: Percentage of respondents from general public who claim to be aware of VAT ................ 51
Figure 11: Percentage of respondents from general public who claim to be aware of the proposed date
for implementation of GST ................................................................................................. 51
Figure 12: Percentage of respondents from general public who claim to understand the concept of
GST ..................................................................................................................................... 52
Figure 13: Percentage of respondents from general public who claim to understand the concept of
VAT .................................................................................................................................... 52
vii
List of Tables
Table 1: Level of agreement to statements for which positive response/agreement was expected from
middle level tax officials ....................................................................................................... 31
Table 2: Level of agreement to statements for which negative response/disagreement was expected
from middle level tax officials............................................................................................... 32
Central Excise and Customs Department staff ...................................................................... 35
from Central Excise and Customs Department staff ............................................................. 36
CTD staff ............................................................................................................................... 38
from CTD staff ...................................................................................................................... 38
Trade and Industry................................................................................................................. 40
from Trade and Industry ........................................................................................................ 41
Professionals .......................................................................................................................... 45
from Professionals .............................................................................................................. 46
general public ...................................................................................................................... 50
Table 12: T-Test results for Hypothesis 1 ............................................................................................. 53
Table 13: T-Test results for Hypothesis 2 ............................................................................................. 54
Table 14: Data gathered from general public on awareness and understanding of VAT and GST ...... 85
viii
Abbreviations
ACCT
Addl. CCT
ATO
BAS
CBDT
CBEC
CBIT
CCT
CENVAT
CGST
CRA
CST
CTD
CTO
DCCT
EC
GoI
GoK
GST
GSTSAO
HST
IGST
ITD
JCCT
KUAS
LTU
MODVAT
PAYG
PST
QST
RQ
SGST
TINXSYS
TRPS
VAT
Assistant Commissioner of Commercial Taxes

Additional Commissioner of Commercial Taxes
Australia Taxation Office
Business Activity Statement
Central Board of Direct Taxes
Central Board of Excise and Customs
Central Board of Indirect Taxes
Commissioner of Commercial Taxes
Central Value Added Tax
Central Goods and Services Tax
Canada Revenue Agency
Central Sales Tax
Commercial Taxes Department
Commercial Taxes Officer
Deputy Commissioner of Commercial Taxes
Empowered Committee
Government of India
Goods and Services Tax
GST Start-Up Assistance Office
Harmonised Sales Tax
Integrated Goods and Services Tax
Income Tax Department
Joint Commissioner of Commercial Taxes
Knowledge, Understanding, Application and Skills
Large Taxpayers Unit
Modified Value Added Tax
Pay-As-You-Go
Provincial Sales Tax
Quebec Sales Tax
Revenue Quebec
State Goods and Services Tax
Tax Information Exchange System
Tax Return Preparers Scheme
Value Added Tax
ix
1 Introduction
In the Union budget 2007-08, the then finance minister proposed that India should move
towards a national level GST, with the Centre and the States sharing revenue. He had further
proposed to set April 1, 2010 as the date for introducing GST1. There was much
disappointment for everyone who expected Budget 2010 to lay out the plan for goods and
services tax (GST) rollout. GST was postponed to April 1, 2010. The earlier deadline of April
1, 2010 was missed because of disagreement between the Centre and the states on many areas
of GST. Some of the areas of differences include threshold limit, exemption list, revenueneutral rate and constitutional amendments. In his budget speech (2010), the Union Finance
Minister said that the indirect tax administrations at the Centre and the States needed to
revamp their internal work processes based on the use of Information Technology.
The existing VAT system was implemented by the States beginning April 1, 2003 replacing
the State Sales Tax system. The VAT system removed the problem on tax on tax and the
burden of cascading effect. Since set-offs benefits can be availed only if tax is paid on the
inputs and previous purchase, this created a built-in check in the VAT system which resulted
in transparency and reduction in tax evasion. VAT reduced the heterogeneity in the tax
structure across States which other-wise resulted in distortion and shifting of trade from one
State to another.
Still the VAT structure at the Centre and the State had deficiencies2. The CENVAT does not
include several central taxes such as surcharges, additional excise duty, etc. It also does not
capture the value-additions in the distributive trade below the manufacturing level. The State
level VAT does not include several taxes such as luxury tax, entertainment tax, etc. Further
the load on CENVAT is included in the value of goods to be taxed under State VAT.
1.1 Objectives of GST

GST will be an improvement over the existing Value Added Tax (VAT) system. Introduction
of GST will remove the cascading effect on CENVAT and also subsume several taxes. GST
will provide more support to trade and industry through wider coverage of input tax credit,
subsuming of several taxes and phasing out of CST. Though increase is revenue is not an
1
First Discussion Paper on GST, section 1.2

The primary deficiencies can be found in GST Reforms and Intergovernmental Considerations in India
section 2
2
objective, GST can increase revenue for both Centre and State through widening of tax base
and increase in tax compliance. Both the industry and the government can benefit from GST.
The objectives of GST3 are given below:
The incidence of tax should fall only on domestic consumption
To optimize efficiency and equity of the system
There should be no export of taxes across taxing jurisdictions
The Indian market should be integrated into a common market
To enhance the cause of cooperative federalism
1.2 Recent progress in implementation of GST

In January 2010, the discussion on GST between the Centre and the States was inconclusive
on compensation. The States have been insisting for compensation from GoI to offset any
loss in revenue during the initial stages. Though the States will gain from levy of service
taxes, they will lose revenue mainly because of removal of the cascading effect, payment of
input tax credit and phasing out of CST4. States also fear that the proposed constitutional
amendments to create a common market across India in GST may take away their fiscal
autonomy. Even with revenue neutral rates, it will be difficult to estimate the exact gain or
loss in revenue for each and every state because of GST. The introduction of GST will
require constitutional amendments because both the Centre and the State will have a common
tax base without any demarcation that currently exists. For this an absolute consensus has to
be reached between the Centre and the States. States also fear that the proposed constitutional
amendments to create a common market across India in GST may take away their fiscal
autonomy.
On May 12, 2010, finance minister Mr. Pranab Mukherjee reached out to states to restart
negotiations on GST. On May 21, 2010, the Empowered Committee met the finance ministry
officials. This was the first meeting after the Budget was presented in February. All relevant
matters for the implementation of GST were discussed. Mr. Mukherjee assured the States that
he was prepared to go beyond the Rs.50,000 crore compensation package over the next five
years recommended by the 13th Finance Commission to incentivise States to migrate to GST.
Mr. Asim Dasgupta, West Bengal finance minister and chairman of the empowered
3
Objectives given in 13th Finance Commission Task Force Report (section 2.1)
The CST, imposed on inter-state movement of goods, was reduced from 4 percent to 3 percent in 2007-08 and
later to 2 percent in 2008-09.
committee said, April 1, 2011 is our target and we will make all efforts to meet it. We are
confident. Mr. Dasgupta also said that the draft of the proposed constitutional amendments
required for GST implementation would be sent to state finance ministers over the fortnight
by the law ministry. However, no such amendments are available in public domain.
The empowered committee, in its first discussion paper on GST, had suggested that
businesses below a gross annual turnover of Rs 1.5 crore will be subjected to GST only by
the state and not by the Centre. The Centre, however, is strongly opposed to the idea as it
would result in a substantial revenue loss, and said there should be a common threshold of Rs
10 lakh. The Centre has also said that it wants a common exemption list for both the Centre
and the State, and an acceptable level of GST rate, against the States demand of 18-20
percent.
The activities and their duration mentioned in the timeline5 for implementation of GST
suggested in 13th Finance Commission Task Force report show that still lot more is required
to be done before introduction of GST. With less than ten months left to meet the revised
target date of April 1, 2011 one will have to wait and see if the country can prepare enough to
migrate to GST within the time available.
1.2.1
IT Infrastructure
IT infrastructure for GST rollout is being looked into by a Committee, comprising the Unique
Identification Authority Chairman Mr. Nandan Nilekani. On June 1, 2010, Mr. Nilekani after
his interaction with officials of the CBEC has said that the Central and the State governments
could not work in isolation on IT infrastructure for GST and that the system must be
taxpayer-friendly to increase compliance6. He said there should be a platform where the
states IT team and the Centres IT team interact with each other and meet on a regular basis
to share their views.
IT infrastructure will play a major role in implementation of GST. The dependable IT
systems have to be developed simultaneously and uniformly in all the states, unlike in the
case of IT structure for value-added tax. The Centre has a broad IT infrastructure in place, but
it is a major issue with states which have varying capacity. The Centres online tax payment
The timeline (suggested introduction date: 1st October 2010) suggested by the empowered committee along
with activities relating to implementation of GST is available in Appendix. Accountability and responsibility of
activites to be carried by the Centre, the State and the Empowered Committee are also given.
6
Source of news: http://www.business-standard.com/india/storypage.php?autono=396671
application ACES7 (Automation of Central Excise and Service Tax) will be suitably upgraded to
take care of the GST but computerization of states is the biggest concern. Maharashtra,
Gujarat and Tamil Nadu are even ahead of the Centre, but a large number of states do not
have the infrastructure.
1.3 Problem Statement

For a smooth transition, the difficulties related to implementation of GST have to be
realistically considered. Some of the key factors that need to be considered are given below:
Infrastructure for tax administration

o Up-gradation of the current system
o Data transition from the old system to the new system
o Processing of tax payments, audits and appeals
o Seamless integration of the tax system of the Centre and the States
Changes in the Legal framework

o Constitutional amendments that will be required
o Dispute resolution processes
o Disposal of pending cases related to the old system
Design of the tax structure

o Clear definitions of taxable events and classification of taxes
o Tax rates
o Revenue sharing between the Centre and the States
Road map for migration to the new system
Training of staff of the tax departments of both the Centre and the States
o Awareness about the Acts, Rules and provisions
o Awareness of administration of service tax in states
Promoting awareness and understanding of GST among the public and professionals
o Collaborating with various professionals like accountants, tax consultants, etc
o Change in business processes, pricing by companies
o Integration with other future projects like the Unique Identification Number
o Educating the residents and citizens about the benefits of the new system
E-governance portal of CBEC for Central Excise & Service Tax Assesees: http://www.aces.gov.in/. Details
about ACES can be seen at http://www.centralexciseaurangabad.gov.in/htmldocs/ACES.pdf
All stakeholders which would include Central government, State governments, tax
administration, trade and industry, professionals who act as facilitators and consumers who
are tax payers have to be well prepared. Understanding the concerns of the stakeholders will
help in better implementation of GST. A hasty implementation of GST without adequate and
timely preparation will hamper the progress of the tax structure and could lead to confusion
among tax department staff and taxpayers, which would have adverse impact on revenue
collection.
1.4 Purpose of the Study

The purpose of the study is given below:
To quickly asses the current preparation level of the government and the industry for
rollout of GST on following aspects
o Infrastructure for tax administration
o Knowledge, Understanding, Application and Skills (KUAS) of man power in
the Government and the Industry required for implementation of GST
To identify problems that can hinder the smooth transition to GST.
To propose some measures to be taken to enable a smooth transition from the current
tax system to the GST system
To Compare the proposed GST system in India with international best practises
1.5 Significance of the Study

This study gives an understanding of some issues of GST from the perspective of various
stakeholders. A important factor is the process of implementation both in allowing effective
prior consultation to identify possible problems and improvements as well as preparing the
taxpaying public for change8. Incorporating the views of the trade and industry will be
helpful for laying a clear roadmap and better implementation of GST. This will help the State
in identifying critical areas to be considered during the transition phase.
Successful tax reform: the experience of value added tax in the United Kingdom and goods and services tax in
New Zealand by James, Simon and Alley, Clinton of University of Exeter Business School, July 2008
1.6 Definitions
Knowledge
Knowledge is information about a subject which has been obtained by experience or study,
and which is either in a person's mind or possessed by people generally9. In this report,
Knowledge refers to information about GST. Questions pertaining to what of GST were
classified as knowledge related questions.
Understanding
Understanding is to know why or how something happens or works. In this report, refers to
the implications and purpose of GST. Questions pertaining to why GST were classified as
Understanding related questions.
Application
Application is to make use of something or use it for a practical purpose. In this report,
Application refers to the activities related to implementation and operationalization of GST.
Questions pertaining to how and when to implement GST were classified as Application
related questions.
Skill
A skill is an ability to do an activity or job well, especially because you have practiced it. In
this report, Skills refers to the practice or training required for knowing, understanding and
applying GST. Questions pertaining to training needs were classified as Skill related
questions.
General definitions of Knowledge, Understanding, Application and Skills have been taken from the Cambridge
Dictionary
2 GST in Other Countries

VAT is a multi-stage tax levied at each stage of the value addition chain, with a provision to
allow input tax credit (ITC) on tax paid at an earlier stage, which can be appropriated against
the VAT liability on subsequent sale10.
Presently VAT is followed in over 160 countries. In some countries this VAT is known as
goods and services tax or GST. The proposed GST structure in India is similar to that of
Canada. Some of the problems that they faced during implementation of GST are discussed
here. Besides, experience of Australia has also been covered.
2.1 GST in Canada

In Canada, a federal level VAT (GST) was introduced in 199111. At the sub-national level,
there are two types of VATs. These are given below:
1
The Quebec Sales Tax (QST), a tax imposed on essentially the same base as Canadas
federal VAT (GST) but administered by the provincial government, and
The Harmonized Sales Tax (HST), essentially a provincial VAT imposed on the same
base as the federal GST and administered by the federal government
In some provinces, Provincial Sales Tax or Retail Sales Tax continues to exist.
The existence of these two different forms of provincial VAT has not resulted in technical or
economic problems for the federal VAT. On the other hand, the existence of a federal VAT
has apparently spared Canada from many of the VAT evasion problems, to which so much
attention is paid in the European Union (EU). In EU, there is no Union-wide VAT.
Quebec has its own VAT (QST) on a base that consists of both goods and services and that is
largely harmonized with the federal GST. Both taxes are administered by the revenue
authorities of Quebec. Quebec was compensated by the federal government for the costs it
incurred in implementation of GST. Audit of tax returns is undertaken in close collaboration
between the two governments.
10
A brief on VAT (Value Added Tax), from CTD website

Source: SALES TAXES IN CANADA: THE GST-HST-QST-RST SYSTEM by Richard M. Bird and
Pierre-Pascal Gendron
11
Under the HST model, the provincial VATs are completely harmonized with the federal
VAT. The two taxes are levied at a single composite rate, and administered by the federal
government. Revenue from the tax are redistributed to the participating governments on the
basis of the tax base.
The Canadian experience has demonstrated that a federal VAT can work perfectly well in a
country in which some sub-national units have their own VATs, some have their own retail
sales taxes (RSTs), and some have no sales tax at all.
When GST was introduced, the high visibility of the GST meant that most Canadians thought
of it as a "new" tax. The previous federal sales tax was invisible. The GST law allowed
registered firms to quote either tax exclusive or tax inclusive prices. However, in virtually
every case retailers treated the new GST exactly like the existing RST by adding it onto the
price at the cash register. Now, however, Canadians got the bad news every time they had to
dig into their pockets to pay the highly visible GST. Moreover, they had to pay the GST not
only on goods but also on many services that were exempt from provincial RSTs. Politically,
it was clear that something had to be done to avoid the appearance of increasing taxes on the
poor. This led to many special treatments to different sectors and activities.
The unreasonable delay in passing the legislation and the major last-minute changes made in
some key elements of the tax, before the legislation was passed made it impossible to
implement the educational campaign as planned and intended. While some of the initial
difficulties encountered were overcome with time, almost a decade after the introduction of
the GST the Auditor-General of Canada was still pointing out serious flaws in GST
administration, particularly with respect to audit.
A major risk analysis program with respect to GST was launched in 2000 (though not fully
implemented nationally until 2004) was focused, in part, on the possibility of fraudulent
refund claims. For the three fiscal years ending in 2003, about 1,300 GST returns with
fraudulent refund claims (totalling C$9 million) were detected. The estimated noncompliance rate fell from over 9 percent in 1998-99 to less than 4 percent in 2003-04.
The dual GST (CGST-SGST) model proposed in India is similar to the GST-QST model
implemented the province of Quebec. The next section looks into the GST-QST model in
some detail.
2.1.1
The Quebec Sales Tax
The QST is a destination-based credit-invoice VAT that subjects most goods and services
consumed in Qubec to tax at a statutory rate. But QST is not free of cascading effect. It is
applied on the federal GST inclusive prices of goods and services. Both GST and QST are
collected at the point of sale, and their amounts are shown separately on the invoice. The
QST base is not completely harmonized with the GST base.
Revenue Qubec (RQ) administers the GST on behalf of the federal government on Qubecs
territory, in addition to the QST. Under the terms of the agreement, RQ receives and
processes applications for registration under the GST/HST system from all persons carrying
on commercial activities in Qubec. (Businesses registered for the GST are automatically
registered for the HST, and GST registration covers the activities of any business in all 10
provinces.) After registration, all taxable persons continue to deal with RQ for all GST/HSTrelated matters including returns, remittances, rebate applications, audits, and investigations,
interpretations of laws and regulations, notices of objection, tax collection, and unfilled
returns.
The quality of RQ as a tax administration and its detailed knowledge of its taxpayer
population, when added to the economies of scale from collecting two taxes together rather
than separately, made the package an attractive one. With good information exchange,
combining the QST to the GST may well have helped both governments protect their
revenues. The CRA pays RQ a fee for collecting, administering and remitting the GST to the
federal government.
In addition to exchanging tax information with the CRA for the purposes of administering
both taxes in Qubec, RQ maintains an up-to-date, bilingual, and generally user friendly
Internet site to assist with administration, enforcement, and taxpayer education. Many guides
and forms are easily accessible from the site. Forms contain information that allows RQ to
track information and tax across the GST/HST-QST system.
One unusual feature found on the site is a list of QST cheaters, with name, trade name,
address, type of business, and fraud amount revealed for all to see. Businesses in the
restaurant, construction and home renovation, and services sectors consistently get top
billing. While one may question the appropriateness of this practice from a privacy
9
perspective, it appears to be effective. The practice is tied to a public fairness campaign

conducted by the Qubec government under which tax evasion is portrayed as undermining
fairness for all and hence to be discouraged on that basis rather than on the basis of revenue
losses and the accompanying economic inefficiency. RQ has a direct incentive to collect and
enforce the GST since the QST base grows when GST collections grow. This benefits both
parties.
RQ uses a target system to track administrative performance. In that respect, activities in
audit and non-filers yielded higher than expected revenue recoveries, although again we are
unable to break out data for the QST alone.
One of the reasons that the QST-GST model works out well is because RQ has harmonized
its management systems fully with the new GST management system used by the CRA. This
effort began in 2002 and was completed in April 2007.
The Quebec experience demonstrates that the dual GST model proposed for implementation
of GST in India can be made mutually benefit to both the Centre and the State.
2.2 GST in Australia

In Australia, GST is a broad sales tax of 10 percent on most goods and services transactions.
It is a value added tax, not a sales tax, in that it is refunded to all parties in the chain of
production other than the final consumer.
It was introduced on 1 July 2000, replacing the previous Federal wholesale sales tax system
and designed to phase out a number of various State and Territory Government taxes, duties
and levies such as banking taxes and stamp duty.
In 1999, an agreement was enacted with the state and territory governments of Australia that
their various duties, levies and taxes on consumption would be removed gradually over time,
with the budget shortfall being replaced by GST income from the Commonwealth Grants
Commission. Furthermore, (federally levied) personal income tax and company tax was
reduced to offset the GST.
10
2.2.1
How Australia prepared trade and industry for GST
On 13 August 1999, the GST Start-Up Assistance Office (GSTSAO)12 was established within
the Department of Treasury to administer the $500 million assistance set aside by the
Government to assist Small and Medium Enterprises, the Community sector and Education
(SMECEs) institutions get ready for the GST. The GSTSAO administered these funds in
consultation with The New Tax System Advisory Board, the Business Advisory Panel and
the Community Sector Advisory Panel.
The GST Start-Up Assistance Office delivered programs until 28 February 2001, and closed
on 30 June 2001, one year after implementation of GST.
The assistance funds were used to deliver four programs described below:
1. Organisation Delivered Assistance (ODA) Programme: The objective of the ODA
programme was to deliver GST business skills seminars and material to small and
medium enterprises, the community sector and educational institutions (SMECEs)
through the peak body representing each industry sector. Peak bodies were invited to
submit proposals for funding that described how they would deliver the assistance and
the proposed cost. Contracts were negotiated with peak bodies after an assessment of
the proposals against benchmarks. The GSTSAO arranged contracts with some peak
bodies that were required to coordinate delivery to a number of related peak bodies
under a consortium arrangement. This ensured good coverage and value for money.
2. Advisor Education Programme13: The objective of the programme was to provide
GST education to a large network of geographically accessible informal advisors who
in turn could pass the information to the end target group. Courses were held in over
70 locations Australia-wide on the following topics:
Introduction to the GST and Registration Options;
GST and Your Systems and Records; and
Frequently Asked Questions; and
How to complete your BAS and PAYG; and
Combined course of all of the above.
12
http://www.gststartup.gov.au/
Course material can be found at
http://www.gststartup.gov.au/index.asp?file=educational/aep/AEO_EDUdown.html
13
11
3. Business Skills Education Programme: The GST Assist Helpline was launched on
11 October 1999 to provide a complete GST business skills information service
targeting SMECEs. The service was operated under contracts with The Institute of
Chartered Accountants (ICAA) and the Society of Certified Practising Accountants of
Australia (SCPAA) who provided answers to callers from small business, and the
community and education sector respectively. GST Assist operated until 28 February
2001. During the lifespan of the helpline, information was provided to more than 1
million callers.
Publications
The Office arranged for the production and distribution of around 20 million
publications on business skills, the GST, BAS and PAYG (including booklets, videos
and CD ROMs). In addition, electronic versions of the products were available on
GST start-up website: www.gststartup.gov.au.
Websites
Two websites provided information about the GST assistance programmes:
www.gststartup.gov.au - provided information about the programmes, access to

products online including media releases and other GSTSAO publications.
www.gstassist.gov.au - provided access to registered supplier applications and

information about registered suppliers.
Assistance for Constituents from a Non English Speaking Background

The programme initially provided GST education to ethnic business and community
leaders and media. This was supported by presentations by GSTSAO and ATO
officers, the distribution of information kits (in 24 languages), containing publications
developed by the GSTSAO.
4. Direct Assistance Programme: The objective of the direct assistance programme
was to deliver a $200 certificate to small business and community groups that
registered for GST by 31 May 2000. The certificate was to be redeemed with a
registered supplier for goods or services that would assist the GST registrant to
prepare for the GST. This included computer hardware, computer software,
stationary, training courses, and financial advice. The certificates were available for
use until 11 November 2000.
12
Over 19,00,000 certificates were issued.
Over 14,000 suppliers were registered to supply goods and services under this
programme.
13
3 Methodology
In this chapter, the methodology adopted for this study is outlined. The research design, tools
of the study, sample of the study, statistical techniques and limitations of the study are
discussed.
3.1 Research Design

The following research techniques were used in this study.
3.1.1
Exploratory Research
Exploratory research has the goal of formulating problems more precisely, clarifying
concepts, gathering explanations, gaining insight, eliminating impractical ideas, and forming
hypotheses. It provides insights into and comprehension of an issue or situation14.The initial
phase of the project demanded an exploratory research to capture the knowledge,
understanding, application and skills relating to migration to GST. The problems and risks in
implementation of GST, and suggestions to mitigate the same were also gathered.
3.1.2
Descriptive Research
Descriptive research defines questions and finds answers to these questions using statistical
techniques on the data gathered. The following null hypotheses have been tested using the
collected data.
Tax department staffs with an experience of more than 20 years do not differ
significantly from staffs with an experience of 20 years or less in their agreement to
use of information technology for greater transparency in administration of GST.
Trade and Industry agree to the dual structure of GST, i.e. separate GSTs of the
Centre and the State.
3.1.2.1 Variables used in the Study
The following variables were used in the study:

1. Work experience of respondents
2. Group of target audience, i.e. top officials, middle level tax officials, tax department
staff, trade and industry, professionals and general public.
14
Types of research techniques, their objective and application can be seen at

http://en.wikipedia.org/wiki/Exploratory_research
14
3.2 Tools of the Study

Interviews were conducted to collect data from top officials. Questionnaires were used to
collect data from middle level tax officials, tax department staff, trade and industry,
professionals and general public.
3.2.1
Interview
Interviews were designed after studying secondary information and in consultation with
experts. The following information was gathered:
Impact of GST on efficiency and effectiveness of the revenue system
Opinion on tax rates and tax base of GST
Current status of KUAS of tax officials of the infrastructure, changes in legal

framework, design of the tax structure and roadmap for implementation of GST
Man power requirement for implementation of GST
Training needs
Modes of Training
Creation of awareness among the stakeholders
Co-ordination and information sharing between the Centre and the States
Risks and Constraints in implementation of GST
Suggestions to mitigate risks and overcome constraints
3.2.2
Questionnaire
Questionnaires were designed separately for different groups of target audience. To begin
with an exhaustive list of questions were prepared. Then these questions were segregated
under five different questionnaires. The segregation of questions was based on the group of
target audience that would be appropriate to answer a particular question. After consultation
with experts, the questionnaires were refined.
The questionnaire consisted of both open ended and closed ended questions. Open ended
questions were used to gather data on training needs, problems foreseen during transition and
suggestion to mitigate the same. Closed ended questions were used to gather data on sources
for understanding GST and to know whether the respondents have attended any training
programs in GST. The questionnaires also had an opinionnaire section that was used to
capture the degree of agreement on the following aspects.
15
Objectives of GST
Impact on processes in tax administration and businesses
Difficulties in tax administration and compliance
An opinionnaire is devised with a view to probe into the minds of the respondents15. It
generally employs the techniques by which the degree of the agreement to a matter can be
traced.
3.2.2.1 Scaling Techniques
The Likert scale was used to measure the degree of agreement to statements in the
opinionnaire. The scale values are given below:
Option
Value
Strongly Disagree
Disagree
Neutral (Neither agree nor disagree)
Disagree
-1
Strongly agree
-2
3.3 Sample of the Study

The sampling technique used for the study is stratified sampling. Stratified sampling16 is used
where the population embraces a number of distinct categories, the frame can be organized
by these categories into separate "strata." Each stratum is then sampled as an independent
sub-population, out of which individual elements can be randomly selected.
The details of the sample of the study are given below. The target audience selected for this
study are the stakeholders of implementation of GST. Basically, two groups were formed,
namely the Government and the non-Government. The respondent in the Government were
further categorised into top officials, middle level tax officials and tax department staff. The
15
Opinionnaires are used to measure the attitude and the belief of the respondents. It is also a type of
information form, also known as attitude scale. Researchers analyze the responses and reach to a conclusion
about the beliefs or attitude pattern of the respondents. The expressed reactions to a statement show their
attitude towards the matter in the question. Source:
http://www.researchcompanion.com/designing_opinionnaires.html
16
The types of sampling techniques and their advantages can be seen at
http://en.wikipedia.org/wiki/Sampling_(statistics)
16
non-Government section was categorised into trade and industry, professionals (chartered
accountants and tax professionals) and general public. The responses have been collected
based on the availability of the respondents in the limited time that was available for data
collection.
Number of
Duration
Categories
Details
Top level officials
Commissioner,
10 (8 State + 2
40 minutes
Additional Commissioners,
Centre)
to 120
Respondents
And Joint Commissioners of
minutes
Commercial Taxes Department and

Large Taxpayers unit.
Secretary and Deputy Secretary of
Finance Department, Government
of Karnataka.
Middle level
Deputy Commissioners,
5 ( 4 State + 1
20 minutes
officials
Assistant Commissioners
Centre)
to 30
And Commercial Tax Officers of
minutes
Commercial Taxes Department and

Large Taxpayer unit.
Tax department
Inspectors and Superintendents of
52 (10 State + 42 10 minutes
staff
Commercial Taxes Department
Centre)
Karnataka and Central Excise and
to 15
minutes
Customs
Trade and Industry
Representatives of FKCCI, retailers, 24
20 minutes
wholesalers and manufacturers
to 30
minutes
Professionals
Chartered Accountants and Tax
11
Consultants
20 minutes
to 30
minutes
General Public
Post Graduate Students,
15
Government Officials and Software
2 minutes to
5 minutes
Engineers
Total
117
17
3.4 Collection of Research Data

The interview questions were e-mailed to the respondents with a briefing on the objective of
the study and appointments were taken accordingly. The researcher personally visited the
offices of the respondents to gather their responses. The conditions for administering the
interview were fulfilled.
In some cases online questionnaires were used to gather responses through the internet.
Otherwise, copies of questionnaires were distributed to the respondents in their offices and
data was collected. The respondents were briefed about the objective of the study before
starting to answer the questionnaire.
The qualitative data collected was tabulated and used to perform statistical analysis.
3.5 Statistical Techniques

The data collected were scored on a 5 point scale from 2 to -2. Simple averages were used to
interpret the level of agreement to statements on GST. To test the hypotheses framed, one
sample t-test17 and independent sample t-test were used.
In one-sample t-test, the observed mean (from a single sample) is compared to an expected
(or reference) mean of the population (e.g., some theoretical mean), and the variation in the
population is estimated based on the variation in the observed sample.
The independent sample t-test is the most commonly used method to evaluate the differences
in means between two independent groups. Theoretically, the t-test can be used even if the
sample sizes are very small (e.g., as small as 10; some researchers claim that even smaller
sample sizes are possible), as long as the variables are approximately normally distributed
and the variation of scores in the two groups is not reliably different.
17
Refer to http://www.statsoft.com/textbook/statistics-glossary/t/button/t/ for concepts and usage of t-test
18
3.6 Limitations of the Study

The study has the following limitations:
The sample sizes of the six groups of target audience were limited because of time
constraints. The maximum possible responses were gathered in the time available for
data collection.
The first discussion paper on GST from EC and the Finance Commission Task Force
report on GST were used for designing the questionnaires. Since the draft of the
proposed constitutional amendments required for GST is yet to be released, the exact
details of GST may differ from the referred reports/papers.
The awareness of GST among the tax department staff was poor. Therefore the
training needs mentioned by this group were not specific.
Data has only been collected in Bangalore. The commercial tax offices in other
districts of Karnataka have not been covered.
Analysis of the level of agreement to statements on GST has been done separately for
each statement only. Analysis of total of averages was not done because of difficulty
in estimating the weights for individual statements.
19
4 Analysis and Interpretation of Results

In this chapter, the analysis and the interpretation of results are given in detail. The responses
collected through interviews and questionnaires constitute raw data for the study. The data
was further subjected to organisation and tabulation. For methodical presentation, the
analysis of the data and corresponding results are given in two parts.
Part I deals with analysis and interpretation of data pertaining to the following:
1. Opinion on critical aspects of design and implementation of GST. Section 1.2.1 gives
details of the topics discussed with top officials in the interviews.
2. Level of agreement to statements on GST. The statements are analysed in two groups.
The first group consists of statements for which a positive response/agreement was
expected, and the second group consists of statements for which a negative
response/disagreement was expected.
3.
Whether the respondents received training or attended seminars/workshops on GST.
4. The main source of understanding GST.

5. Training needs.
6. Risks and constraints in implementation of GST.
7. Suggestions to mitigate risks in implementation of GST.
Part II deals with the testing of the hypotheses given below:

1. Tax department staffs with an experience of more than 20 years do not differ
significantly from staffs with an experience of 20 years or less in their agreement to
2. Trade and Industry agree to the dual structure of GST, i.e. separate GSTs of the
Centre and the State.
20
4.1 PART - I
The analysis of data and interpretation has been done separately for each group of target
audience. It is presented in the following order (1) top officials, (2) middle level tax officials,
(3) tax department staff, (4) trade and industry, (5) professionals, and (6) general public18.
4.1.1
Top Officials of the Centre and the State governments
The information gathered from 10 officials of CTD, FD, NACEN and LTU on some aspects
of GST are given below:
Impact of GST on effectiveness and efficiency of the revenue system
The general view was that GST will enhance the effectiveness and efficiency of the revenue
system in the long run. Majority of respondents estimated the time required for this change to
be between 3 to 5 years. Some officers think it may take more than 5 years to stabilise the
new system. Information Technology systems will be used extensively to track transactions at
every step of a supply chain which is currently not the case. GST is expected to widen the tax
base. For this tracking of transactions is essential. Any discontinuity in the tracking system
will have a detrimental effect on the effectiveness of the tax system. Taxpayers try to avoid
taxes by taking advantage of the differences in rates in different region, and the exemptions
provided by the government. By developing a uniform tax system across the country and by
tracking every transaction, effectiveness of the system will be enhanced. Also, the Centre and
the State will be administering a common base. This double check is expected to make the
system effective. The efficiency of the system is expected to increase through simplification
of procedures and eliminating unnecessary steps. IT systems will reduce the cost and time
involved in administration. At the same time, compliance costs will come down for the
dealers. This will create a win-win situation for the Government and the Industry.
Implementing faster means for dispute resolution will also enhance the efficiency of the
system.
18
As a result of this arrangement some suggestions appear to be repeated but they are meant for a particular
group.
21
Opinion on rates and tax base of GST
Tax Rates Dual GST: Centre GST and State GST

Dual GST is the form of GST that is applicable to the federal setup in India with
powers to administer tax given to both the State and the Centre. Other forms of GST
are: Harmonized national GST and only State GSTs. Though a single harmonized
national GST would be the ideal solution to create a nationwide common market, this
kind of system will shake the federal structure and would not be applicable to India.
No clear opinions were given on the tax rates, since the exact revenue neutral rates
have still not been finalized. The combined revenue neutral rate estimated by the
Finance Commission Task Force of 12 percent was not well accepted. The state tax
department is clearly of the view that 100 percent compensation should be provided
for any revenue loss.
Food items
For the poor, the proportion of expenditure on food to income is far higher than the
average. In 2005, on average, food accounted for one-third of total private consumer
expenditure19. Therefore taxing food will have a major impact on the poor. All
respondents were of the opinion that unprocessed food that is a major component of
food consumed by the poor should be exempted. If not exempted, it should be taxed at
a lower rate.
Land and Real Property

There was a mixed opinion on land on real property as to whether this has to be
brought under GST or not. Majority of the respondents suggested that land and real
property should be left out of GST for the following reasons.
Land by its very nature does not fall under good or service as it is immovable.
But in Canada, New Zealand and Australia, housing and construction is
treated just like any other commodity.
19
Section 5.B, GST Reforms and Intergovernmental Consideration in India
22
It forms a major portion of the revenue for the State government20. Thus
bringing it under GST would be risky, especially considering the loss in
revenue that may occur. Moreover, in India States do not levy income tax
which is not the case in countries like Canada. It can be brought under GST
once the implementation is stabilized and there is more clarity in the system.
Non-profit Sector and Public Bodies

There was a mixed opinion on whether non-profit sectors like NGOs should be taxed
or not. Majority were of the view that all activities irrespective of the intention should
be taxed. Exemptions and reduced rates of taxes cause distortion and are source to
disputes. Moreover, taxing all activities will ensure transparency in the activities
carried out by these. It will also discourage organization to project themselves as nonprofit organizations to avoid taxes.
A minority felt that tracking these activities will be a difficult task, and only
commercial activities should be taxed.
Financial Services
Every respondent was of the view that taxing financial services is a difficult task. The
explicit service charges that are charged by the service providers will be taxed, but
taxing the implicit benefits21 that the financial services get cannot be ascertained.
Current status of KUAS of tax officials on the following

The current infrastructure is not adequate for the implementation of GST. The
database needs to be updated to capture more information. Building the software
applications will not be problem, but meeting the hardware requirements will be a
challenging task. In the Commercial Taxes Department, computers and hardware
backup system like UPS (uninterrupted power supply) need to be upgraded to take
advantage of technological advancements. Due to inadequate backup systems, servers
go down during power cuts.
20
Audit Report (Revenue), Karnataka (2008-09): In 2008-2009, Stamps and Registration fees along with land
revenue accounted for Rs. 3182.37 crores. This is 11.5 percent of the total tax revenue of Rs. 27,645.66 crores
21
The excess of interest rate on the loan over the rate of interest or cost of funds to the bank for that loan is the
implicit income for the bank.
23
How data will be shared on real time basis between the States and the Centre is an
area that needs investigation.

GST will require changes to the legal framework of the tax system. Amendments will
be required to allow the Centre and the State on a common base.
An understanding of the law is required for every officer from the level of
Commercial Tax Officer (CTO) and above. Superintendent and Inspectors should also
be updated when they are promoted to the post of CTO.
The law should be simple and unambiguous with minimal deviation from flawless
GST. Officials expressed concerns about the amendments being approved in the
parliament with a super majority (two-thirds of the house). Firstly, with different
parties ruling different states, getting to a consensus on the amendments required may
not be all that easy.
Coming up with a draft bill and freezing the law should be of the utmost importance.
This is the first step in preparation for implementation of GST. On June 7, 2010, Mr.
Dasgupta said that the monsoon session is being targeted for bringing the
constitutional amendments bill (for introduction of GST) in India. This should set the
stone rolling for implementation of GST.

The design suggested by the Finance Commission Task Force was well accepted by
the officials. There were concerns about the combined revenue neutral rates being
estimated at 12 percent (5 percent CGST and 7 percent SGST). The current VAT rate
in Karnataka is 13.5 percent. Even though States will be allowed to levy services tax,
a 7 percent SGST rate was not accepted.
There were concerns raised regarding uniformity in the tax structure. Importance of
certain commodities is more in a particular place. Importance of certain commodities
is more for the poorer sections of the country. The social and economic impact should
be considered before designing a national level uniform tax structure.
24
On compensation of revenue loss for the States, there was demand for 100 percent
compensation. This will give the confidence to the States to move forward with GST
without any worries. Some states are increasing their VAT rates in order to seek a
higher compensation from the Centre. This kind of behavior by the States will hinder
the progress in implementation of GST.
Road map or a transition plan to move to the new system

A clear roadmap should be developed by the States with a base given by the Centre to
maintain uniformity of milestones and deadlines. The timeline for implementation of
GST22 given by the Thirteenth Finance Commission Task Force should be followed
with a revised schedule. The officers demanded more urgency to be shown by the
Empowered Committee and the Union government to arrive at consensus on the
compensation package. As the first task, the GST legislation should be passed as
earlier as possible leaving enough time for preparation.
Man power requirement for implementation of GST

GST will increase the tax base by increasing the number of points of taxation. The number of
points of taxation itself may not increase the number of assesees. But the number of assesees
is expected to increase because of the inclusion of services under the State GST. This
increase can be taken care by effective use of Information Technology systems. It is expected
that the role of man power should be drastically reduced. There might even be a case of
reducing man power.
Orientation of man power to the GST system

The change from the State Sales Tax regime to the State Value Added Tax regime
was a bigger change than the current change required from VAT to GST.
Conceptually, GST is based on VAT. So at the State level, there should not be any
difficulty is orienting the staff to the GST system. But the current change will be a
bigger change at the Centre level. Centre might face issues which States faced during
transition to the VAT regime.
22
See Appendix for timeline for implementation of GST
25
Modes of training
The modes of training that can be adopted will depend on the time left to prepare for GST. It
will also depend on training capacity, i.e., the number of officials/staff members that can be
trained per day. With enough time for preparation, of about a year, both formal and hands
on training modes can be used. Formal training should be adopted to educate the employees
about the objectives, benefits, expected problems, acts and rules. This should be followed by
a hand on training that would be more specific to the role of the employee within the
department. Different sections of the department should be trained on the procedures, rules
and scope of their job. A realistic environment should be simulated for trainees to have a
practical experience before the actual implementation of GST. This will improve the
confidence of the tax department as well as that of the Industry.
Issues in training programs during transition to VAT
In August 2001, the Government of Karnataka appointed Crown Agents23 (technical
consultants) to provide technical assistance to the CTD at a total cost of Rs. 20.33 crores, to
assist in transition from the then Sales tax regime to the VAT regime. Crown Agents of UK
conducted training of trainers (ToT), developed the application software and supported the
communication processes, basically holding the departments hands till the VAT program
was up and running. The feedback received from the tax department officials and staff on the
training is not satisfactory. The reasons for dissatisfaction are given below:
Time gap between the training programs and introduction of VAT: The department
imparted training to its staff between November 2001 and July 200324 on VAT
implementation and administration covering the modules relating to registration,
returns and payment, refunds, input tax credits, debt management and audit. But VAT
for introduced on April 1, 2005.
Lack of adequate hands on training: There were differences in actual implementation

and the training imparted to the officials and staff.
23
Crown Agents (Crown Agents for Oversea Governments and Administrations Limited) is an international
development company delivering capacity-building and institutional development consultancy services in public
sector transformation, particularly in revenue enhancement and expenditure management, banking, public
finance, training and procurement. Crown Agents works with the public and private sectors in more than one
hundred countries, and for international development agencies and institutions.
24
CAG report 2008-2009 (Section 2.2.7.6)
26
Lack of synchronization between trainee and trainer: The trainees were not
comfortable with the trainers. There were communication problems between CTD
employees and the trainers.
Attitude of staff towards training was not positive: Attitude is a major concern cited
by all most all the officials. Aligning the employees to achieve the objectives of GST
is one of the most challenging tasks during the transition. Officials are more
concerned about the attitude of grass root level staffs that are ignorant and reluctant
towards training programs.
Creating awareness among the stakeholders

A major factor for success of VAT/GST in New Zealand is the effective prior consultation to
identify problems and improvements, and preparing the tax payer for the change, as part of
implementation.
In reality, the dealers help the Government in collecting tax from the consumers.
Professionals act as facilitators to help dealers in the process of remitting tax to the
government. Therefore it is imperative to take the dealers and professionals into confidence
for a hassle-free transition.
For the general public, introduction of VAT will make the tax system more transparent.
Under the current VAT regime all that the consumer sees in his bills is a VAT of 12.5+
percent in addition to the value of goods and services purchased. Under GST, both CGST and
SGST will be displayed separately. This will make the Centre component of the tax visible,
which so far was invisible to the consumer25. Though on the whole the consumer will be
paying lesser than what he/she is paying under the current VAT system, the perception of
amount of tax paid might change. This makes it imperative for the general public to be
educated on the changes, benefits and impact on GST.
Coordination between the Centre and the States
Coordination and sharing of information between the States and the Centre is the single most
important factor for the success of GST. Till now the State Taxes departments have worked
in compartments. The market was region based. Now the objective is to make India a
common market with a uniform tax system across the country. Moreover, tracking
25
See section 2.1 for Canadian experience in this regard
27
transactions at every level of supply chain arrangements is absolutely necessary to building

an efficient and effective system. This requires the infrastructure of all states to be upgraded.
It will be challenging task to upgrade IT systems in backward states.
Since both the Centre and the State will be levying tax on the same base, they need to work in
tandem for the advantage of one another. This will be very effective when there is perfect
coordination. For example in case of non-compliance cases, assessment error, penalties, raids,
etc., the procedures and mode of communication should be clearly defined.
The rules and roles regarding sharing of information should be clearly defined without any
ambiguity. IT system and network channels should be built for seamless and real time sharing
of information.
The practice of making revenue estimations just before the presentation of the Budget will
not be possible after implementation of GST. Preparation of the Union Budget and the State
Budget may not be a secret anymore as decision on tax rates cannot be made at a state level
or union level. A single rate of CGST and SGST will require the consensus of the Centre and
the States.
Risks and Challenges
Preparation of the Government and the trade and industry for GST. A hasty
implementation of GST without much preparation may lead to problems that may in
turn increase administration costs.
Changes in revenue level for the State as well as the Centre. Though GST is
accepted to be beneficial in the long run, whether these benefits will result in
increase in revenue in the short run is not certain.
Coordination and Integration of the State tax systems and the Central tax system.
Monitoring of inter-state transaction should be automated as much as possible. This

is absolutely necessary to track the entire supply chain to have a rich database of
information. By tracking every step the tax base will increase the tax rates will go
down for the end user. If this is not achieved, GST will be defeated.
28
Suggestions
Tax structure
The deviation from flawless GST should be kept to a minimum.
Preparation of the Government and the Industry

Sufficient time should be provided to the CTD and the Industry to prepare for GST.
Problems and improvement areas should be identified to make the system successful.
Simulated training programs should be used to train the CTD to build confidence in
the system
The capacity of facilitators like chartered accountants, tax consultants and even
computer assistants should be enhanced. Work load should be transferred from the
CTD and the Industry to these facilitators. The CTD can implement schemes like
TRPS (Tax Return Preparer Scheme)26 that was introduced by the Income Tax
Department in partnership with NIIT.
Computerization
Automate the manual tasks to enhance efficiency and transparency. The CTD staff,
especially staff at grass root level should be trained on computer skills.
Monitoring Inter-state Transaction

The capacity of Tax Information Exchange System (TINXSYS)27 has to be increased
to ensure that every transaction is tracked. Steps should be taken so that there is a
seamless flow of information in real time.
26
http://www.trpscheme.com: The Government of India Tax Return Preparers Scheme to train unemployed and
partially employed persons to assist small and medium taxpayers in preparing their returns of income has now
entered its Second Phase. During its launch year, on a pilot basis, close to 5,000 TRPs at 100 centers in around
80 cities across the country were trained. 3737 TRPs were certified by the Income Tax Department to act as Tax
Return Preparers, who assisted various people in filing their IT Returns. The Government has now decided to
increase their area of operations by including training on TDS returns and Service Tax returns to these TRPs.
27
http://www.tinxsys.com/: TINXSYS is a centralized exchange of all interstate dealers spread across the
various States and Union territories of India. TINXSYS is an exchange authored by the Empowered Committee
of State Finance Ministers (EC) as a repository of interstate transactions taking place among various States and
Union Territories. TINXSYS helps the Commercial Tax Departments of various States and Union Territories to
effectively monitor the interstate trade.
29
Transition of current data to new system

The data in the current system should be transferred to the new system so that there is
continuity of records. During the transition from Sales Tax system to VAT system
there were issues in data transition. The continuity of records of taxpayers was lost in
the transition. In some cases, dealers who had to pay arrears in the Sales tax system
were given refunds under the VAT system.
30
4.1.2
Middle Level Tax Officials
The information gathered from 5 officials (Joint Commissioners and Deputy Commissioners)
of CTD and LTU are analysed in this section. The responses gathered on the opinionnaire on
GST are tabulated below. The tables give the attribute (KUAS)28, the statement, and the
average level of agreement to the statement. The table below consists of statements for which
positive response/agreement was expected. (Agreement Scale: 2 = Strongly Agree;
1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree).
Table 1: Level of agreement to statements for which positive response/agreement was expected from middle level tax
officials
Sl. No
1
2
3
Attribute
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
28
K
K
K
K
K
K
U
U
A
A
A
A
A
A
Statement
GST can be integrated with Unique Identification Number (UID).
GST can be linked to PAN/TAN.
GST encourages voluntary compliance.
GST will result in increase in revenue for both Centre and State
through increase in tax compliance.
The awareness of GST among public needs to be improved.
The awareness of GST has increased since it was first announced
in 2007-2008.
The classification of taxes is clear in GST.
The definitions of taxable events are clear in GST.
The Inter-State transactions are defined in GST.
There is a need for public debate on GST.
GST enables effective audit.
GST minimizes tax evasion.
The jurisdiction for appeals is a cause for concern once GST is
implemented.
The nature of GST does not allow it to be rolled out like VAT.
The supply chain arrangement for manufacturing and distribution
becomes critical in GST.
There is a need to develop cross-border information systems in
the implementation of GST.
There should be uniformity in the tax system across the country.
Processing International transactions will be easier in GST.
Record keeping will be minimal in GST.
Tax based on final retail price of a product is easy to administer.
Tax payments in GST will be easier compared to other systems.
The capacity of staff needs to be enhanced to implement GST.
The current staff strength is sufficient to implement GST.
Use of Information technology will ensure greater transparency in
administration of GST.
Average
0.60
1.20
0.60
1.00
2.00
0.80
0.00
0.60
0.60
2.00
0.20
-0.40
0.20
1.00
1.20
1.60
2.00
0.20
0.00
0.60
1.20
1.20
-0.40
1.60
KUAS stands for Knowledge, Understanding, Application and Skills
31
25
With the introduction of GST, companies will have to relook at

1.00
their business processes.
The following statements were not agreed to as expected, i.e. the statements received an
average level of agreement of zero or less.
GST minimizes tax evasion.
The table below consists of statements for which a negative response/disagreement was
expected.
Table 2: Level of agreement to statements for which negative response/disagreement was expected from middle level
tax officials
Sl. No
Attribute
3
4
5
6
A
A
A
A
Statement
The current dispute resolution process is adequate for
implementation of GST.
The current procedures to prevent tax evasion are adequate even for
GST.
GST is not simple to administer.
Issue of refunds will be difficult in GST.
The current database is sufficient for implementation of GST.
The tax reporting period would vary with implementation of GST.
Average
-1.00
-0.60
0.20
-0.60
-1.40
-0.40
The statement GST is not simple to administer received an average level of agreement of
0.20. This shows that some officials have a perception that GST will not be simple to
administer.
32
Training Received
The respondent from LTU had received training on GST. The other four respondents from
CTD had not received training on GST.
Main Source of understanding GST
The main source of understanding GST has been the first discussion paper on GST released
by the Empowered committee or the Finance Commission Task Force Report on GST. The
figure below gives the number of respondents who used a particular source to understand
GST.
Figure 1: Main source of understanding GST for middle level tax officials
Main source of understanding GST

4
3
3
No. of
Respondents 2
(Total: 5)
1
0
0
Newspapers EC Discussion
and Magazines Paper or Task
Force Reports
Others:
Seminars/
Workshops/
Discussions
None
Training Needed
Use of ICT tools in the context of the following

o How data is captured into the system
o Analysis of the data
Inter-state Transactions
o How to ascertain tax payments in other states
o How to check authenticity of dealers of other states
Procedures and process involved in the implementation of GST
33
Demarcation of jurisdiction among officers administrating central and state GST.
Capacity building of officers of staff, especially the grass root level employees.
IT infrastructure is the backbone of implementation of GST. Since the proposed IGST

has to be dependent on e-registration, e-returns, e-payment and e-refund, IT
infrastructure has to be robust and strong.
o Integration of tax systems of the Centre and the States to build a uniform
market across the country.
o Common national level database of dealers.
o Fool proof verification of taxpayer details to allow input tax credit.
Suggestions
The problems in the current VAT system have to be investigated and steps should be
taken to eliminate these problems in GST.
o Process to select cases for re-assessment. The process currently followed is not
scientific.
o In KVAT 2005, the penalty provisions and interest provisions pursuant to reassessment are harsh as there is no discretion.
34
4.1.3
Tax Department Staff
Responses gathered from Inspectors and Superintendents of Central Excise and Customs and
the CTD are analysed in this section.
4.1.3.1 Central Excise and Customs
Responses were gathered from 42 Inspectors and Superintendents. The responses to the
opinionnaire on GST are tabulated below. The tables give the attribute (KUAS), the
statement, and the average level of agreement to the statement. (Agreement Scale:
2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
The table below consists of statements for which positive response/agreement was expected.
Table 3: Level of agreement to statements for which positive response/agreement was expected from Central Excise
and Customs Department staff
Sl. No
Attribute
3
4
Statement
The awareness of GST has increased since it was first announced in

2007-2008.
There is a need to develop cross-border information systems in the
Average
0.88
0.79
1.67
0.83
1.19
0.31
The statement, Record keeping will be minimal in GST received an average level of
agreement of 0.31. This shows that not many staffs think that paper work will be reduced
under GST. Officials pointed out that they will move towards creating paperless offices
through extensive use of IT.
35
The table below

ow consists of statements for which a negative response/disagreement was
expected.
Table 4: Level
evel of agreement to statements for which negative response/disagreement
response/disagreement was expected from Central
Excise and Customs Department staff
Sl. No
Type
Statement
Average
-0.12
The statement, Issue of refunds will be difficult in GST, received an average level of
agreement of -0.12.
0.12. Thus, it can be concluded that many disagree to this statement.
Training Received
Out of the 42 respondents, four respondents have received training on awareness of GST. The
figure below shows the percentage of respondents who have received/not received training on
GST.
Figure 2: Percentage off respondents from Central Excise and Customs who have received/ not received training on
GST
Training Received
10%
Yes
No
90%
36

The main source of understanding GST for the Inspectors and Superintendents of Central
Excise and Customs is newspaper and magazines. Ten respondents (25% percent) have
mentioned that the first discussion paper on GST or the Task Force Report has the main
source of understanding GST. The figure below gives the number of respondents who used a
particular source to understand GST.
Figure 3: Main source of understanding GST for Central Excise and Customs Department Staff

30
25
25
20
No. of
Respondents 15
(Total: 42)
10
10
5
0
0
Others:
and Magazines Paper or Task Trainings and
Force Reports Discussions
None
Training Needed
Benefits and justification of GST.
Difference between the current system and GST.

o Processing Inter-state transactions should be given priority due to change from
origin principle to destination principle.
o Changes in legal framework.
o Demarcation of roles and responsibilities of the Centre and the States.
o Channels of communication between the Centre and the State.
o Management of input tax credit facilities.
37
4.1.3.2 Commercial Taxes Department Karnataka
Responses were gathered from 10 Inspectors and Superintendents. The responses to the
opinionnaire on GST are tabulated below. The tables give the attribute (KUAS), the
statement, and the average level of agreement to the statement. (Agreement Scale:
2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
Table 5: Level of agreement to statements for which positive response/agreement was expected from CTD staff
Sl. No
Attribute
3
4
5
A
A
Statement
The awareness of GST has increased since it was first announced in

2007-2008.
Average
0.80
1.20
1.70
1.00
1.00
1.10
The level of agreement to the above statements was as expected.

expected.
Table 6: Level of agreement to statements for which negative response/disagreement was expected from CTD staff
Sl. No
Attribute
Statement
Average
0.10
Issue of refunds will be difficult in GST, received an average level of agreement of -0.12.
Thus, it can be concluded that not many disagree to this statement.
Training Received
Training on GST has not been conducted for CTD officials and staffs. Even if the legislation
on GST is not ready, the staff can be prepared for the change. Staff should be educated about
the objectives and benefits of GST. This will make the staff discuss the aspects of GST.
Effort should be made to keep the staff updated on the progress towards GST.
38

The main source of understanding GST for the Inspectors and Superintendents are the first
discussion paper on GST or the Task Force Report, and newspaper and magazines. Ten
respondents (25 percent) have mentioned that the first discussion paper on GST or the Task
Force Report was the main source of understanding GST. Two respondents (20 percent) have
not made any attempt to understand GST. The figure below gives the number of respondents
who used a particular source to understand GST.
Figure 4: Main source of understanding GST for CTD Staff

6
5
5
4
4
No. of
Respondents 3
(Total: 10)
2
2
1
1
0
Force Reports
Others:
Discussions
None
Training Needed
One respondent said, Department is totally not aware of GST. Training is required on all
aspects especially computerization and software skills. The training needs are given below:
Computerization and software skills.
Practical problems that may hinder the administration of GST and how to overcome
these problems.
Changes in acts and rules.
The general view is that a complete training is required on all aspects of GST. The needs
expressed by many respondents were not specific. This was probably because of lack of
awareness of GST.
39
4.1.4
Trade and Industry
Responses were gathered from 24 dealers. Their responses to the opinionnaire on GST are
tabulated below. The tables give the attribute (KUAS), the statement, and the average level of
agreement to the statement. (Agreement Scale: 2 = Strongly Agree; 1 = Agree; 0 = Neutral;
(-1) = Disagree; (-2) = Strongly Disagree)
Table 7: Level of agreement to statements for which positive response/agreement was expected from Trade and
Industry
Sl. No
Attribute
Statement
GST enhances the economic efficiency of the tax system.
1.04
Direct tax subsidy is a better option than exemptions.
0.88
6
7
U
U
The Centre and State must have separate GST.

The pricing of goods will be an issue in GST.
-1.08
-0.27
The pricing of services will be an issue in GST.
0.04
10
11
1.91
12
0.52
13
0.00
14
0.83
15
16
GST will provide more support to trade and industry through wider
coverage of input tax credit.
in 2007-2008.


With the introduction of GST, companies will have to relook at their
business processes.
Average
1.57
1.25
0.88
0.61
1.32
1.38
0.79
40
The following statements received an average level of agreement of less than 0.5:
This shows trade and industry clearly disagree to the dual structure of GST. Also, pricing of
goods and services should not be a major issue in the GST system. Respondents see no
change in recording keeping in GST compared to the current VAT system.
expected.
Table 8: Level of agreement to statements for which negative response/disagreement was expected from Trade and
Industry
Sl. No
1
2
Attribute
K
A
Statement
Exemptions benefit tax payers.
Average
0.14
0.13
Though on average the statement, Exemptions benefit tax payers has received a positive
response, it is very close to a neutral response. This shows respondents are neutral towards
exemptions.
41
Training Received
Fourteen out of the twenty four respondents have either attended seminars or workshops on
GST. The figure below shows the percentage of respondents who have attended/ not attended
seminars or workshops on GST.
Figure 5:: Percentage of respondents from trade and industry who have attended seminars or workshops on GST
Training Received
Yes
42%
No
58%
42

The main source of understanding GST for trade and industry are newspaper and magazines,
and the first discussion paper on GST or the Task Force Report. The figure below gives the
number of respondents who used a particular source to understand GST.
Figure 6: Main source of understanding GST for trade and industry

20
18
14
15
No. of Respondents
10
(Total: 24)
0
0
Newspapers and
Magazines
EC Discussion
Paper or Task
Force Reports
Others: Seminars
and Workshops
None
Training Needed
Regulatory requirements of GST on all business areas and at every level of business
from manufacturer to the final consumer.
Industry-wise analysis of impact on prices and mark ups.
Operational mode of GST systems and the hierarchy of administration.
Treatment of Entry Tax, Octroi, Cess in GST.
Time available for preparation to migrate to GST and infrastructure to sustain it.
Impact on volumes because of change in pricing of goods and services.
Complexity of language of legislation and ambiguity in definitions.
Developing a uniform tax system across the country.
Separate GST for the Centre and the State will make it no different from the current
VAT system.
ERP systems are used extensively to run businesses. Making necessary architectural
changes in ERP systems will take time.
43
Suggestions
Sufficient time should be provided to migrate to GST. Guidelines and practices

should be published well in advance for proper preparation and successful
implementation.
Invite participation from all stake holders. Discussions should be held outside the
walls of empowered committee to ensure that no question is left unanswered. Queries
from trade and industry should be invited to prepare FAQ on GST.
Government should think of conducting workshops /seminars on GST and IGST in

particular with lesser cost so that more number of people can participate in the
seminar in an organization.
The Government should support the Industry during the initial period of change to
GST.
The administrative mechanism should be proactive and trade facilitating rather than a
mere tax collecting body.
Objectives of VAT were also to create a uniform market. But this did not happen.
Proper steps should to be taken to avoid any deviations from the set objectives.
44
4.1.5
Professionals
Responses were gathered from 11 chartered accountants. Their responses to the opinionnaire
on GST are tabulated below. The tables give the attribute (KUAS), the statement, and the
average level of agreement to the statement. (Agreement Scale: 2 = Strongly Agree; 1 =
Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
Table 9: Level of agreement to statements for which positive response/agreement was expected from Professionals
Sl. No
Attribute
5
6
7
8
9
10
11
12
13
14
15
16
17
18
K
K
U
U
A
A
A
A
Statement
GST will provide more support to trade and industry through wider
coverage of input tax credit.
Pending cases related to the old system come in the way of
implementing GST.
The awareness of GST among public has to be improved.
in 2007-2008.
GST will be simple to administer.
With the introduction of GST, companies will have to relook at their
business processes.
Average
1.09
0.00
0.82
0.55
0.55
0.64
1.18
0.36
-0.36
0.09
1.00
1.55
0.45
0.64
0.09
0.91
1.00
0.91
The following statements received an average level of agreement of less than 0.5.
1. Pending cases related to the old system come in the way of implementing GST.
2. Direct tax subsidy is a better option than exemptions.
3. The Centre and State must have separate GST.
4. The supply chain arrangement for manufacturing and distribution becomes critical in
GST.
5. Record keeping will be minimal in GST.
45
Professionals, like trade and industry do not agree to the concept of dual structure of GST.
The agreement to Record keeping will be minimal in GST is close to neutral, which similar
to the response from tax department staff.
expected.
Table 10: Level of agreement to statements for which negative response/disagreement was expected from
Professionals
Sl. No
1
Attribute
Statement
The current procedures to prevent tax evasion are adequate even
for GST.
Average
0.91
0.09
Professionals agree that exemptions benefit tax payers. This is unlike the response from trade
and industry, which was neutral towards benefits from exemptions. Professionals are almost
neutral on the current procedures being adequate to prevent tax evasion. Thus procedures to
prevent tax evasion need to be improved.
46
Training Received
Two out of thee eleven respondents have either attended seminars or workshops on GST. The
figure below given shows the percentage of respondents that have attended/ not attended
seminars or workshops on GST.
Figure 7:: Percentage of respondents from
f
the professionals group who have attended seminars/workshops on GST
Training Received
18%
Yes
No
82%
47

The main sources of understanding GST for professionals are newspapers and professional
magazines. The figure below gives the number of respondents who used a particular source to
understand GST.
Figure 8: Main source of understanding GST for respondents from the professionals group
Main Source of understanding GST

8
7
6
5
No. of
Respondents 4
(Total: 11) 3
2
1
0
4
2
0
Force Reports
Others:
Seminars/
Workshops
None
Seminars/Workshops Needed
Justification of the proposed dual structure of GST.
The benefit and drawbacks of GST system in comparison to the current system.
Major differences between the current system and the new system.

A chartered accountant said, The staffs of the commercial taxes department are not
conversant with KVAT Act, 2003 and KVAT Rules, 2005 even after 5 years of experience in
VAT. The risks and constraints mentioned are given below:
Capacity of the Government staff.
Change in pricing of goods and services.
Time available for preparation after the legislation is passed on GST.
Capacity of the tax department is a concern. Adequate training should be given to the
staff and the objectives of GST should be clearly understood by them.
48
Suggestions
Government should conduct workshops and training programs in partnership with the
following institutions
o Institute of Chartered Accountants of India
o Chamber of Tax Consultants
o Bombay Chartered Accountant Society
o Other Trade and professional bodies
Building capacity of professionals should be taken up by ICAI with courses on GST
49
4.1.6
General Public
The data gathered from 15 people from the general public are analysed in this section.
Responses were collected from post graduate students, government employees and software
engineers, etc. Their responses to the opinionnaire on GST
GST are tabulated below. The tables
give the attribute (KUAS),
KUAS), the statement, and the average level of agreement to the statement.
(Agreement Scale: 2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1)
( 1) = Disagree;
(-2) =
Strongly Disagree)
The table below consists
ists of statements for which positive response/agreement was expected.
Table 11: Level of agreement
ent to statements for which positive response/agreement
response/
was expected from general public
Sl. No
1
2
Attribute
K
K
Statement
The awareness
areness of GST has increased since it was first announced
in 2007-2008.
2008.
Average
0.06
0.71
The general public on average agrees that awareness on GST has increased very slightly since
2007-2008.
2008. And they also see the need for public debate on GST.
Awareness of GST and VAT
The graph below shows the percentage of the respondents from general public who claim to
be aware/not aware of GST.. Seventy three percent claim that they are aware of GST. This
may be attributed to reports
eports and news articles about the progress on GST by media.
Figure 9:: Percentage of respondents from general public who claim to be aware of GST
Awareness of GST
27%
Yes
No
73%
50
be aware/not aware of VAT.. Ninety three percent claim that they are aware of VAT. After
five years of implementation of VAT in the State, this was expected.
Figure 10: Percentage
centage of respondents from general
gen
public who claim to be aware of VAT
Awareness of VAT
7%
Yes
No
93%
The
he graph below shows the percentage of the respondents from general public who claim to
be aware/not aware of the proposed date for implementation of GST (April 1, 2011).
2011) Only
thirteen percent claim to be aware of this. This shows that
that they are not following the progress
on GST.
Figure 11: Percentage
centage of respondents from general
gen
public who claim to be aware of the proposed date for
implementation of GST
Knowledge of proposed date for

implementaton of GST
13%
Yes
No
87%
51
Understanding of the concept of GST and VAT
The graph below

elow shows the percentage of the respondents from general public who claim to
understand/not understand the concept of GST.
Figure 12: Percentage of respondents from general public who claim to understand the concept of GST
Understanding of the concept of GST
33%
Yes
No
67%
understand/not understand the concept of VAT.
VAT Sixty seven percent said that they understand the
concept of VAT. And thirty three percent said that they understand the concept
concept of GST. This shows
that educating the public on GST will not be difficult.
Figure 13:: Percentage of respondents
responde
from general public who claim to understand the concept of VAT
Understanding the concept of VAT
Yes
No
67%
33%
52
4.2 PART II
The two hypotheses formed were tested and the results are given below:
4.2.1
Hypothesis 1
Null Hypothesis: Tax department staffs with an experience of more than 20 years do not
differ significantly from staffs with an experience of 20 years or less in their agreement to
Alternate Hypothesis: Tax department staffs with an experience of more than 20 years
differ significantly from staffs with an experience of 20 years or less in their agreement to
Table 12: T-Test results for Hypothesis 1
Group Statistics
Use of Information
Std. Error
Experience N
Mean
Std. Deviation
>= 20.00
18
1.06
1.11
0.26
< 20.00
20
1.40
0.68
0.15
Mean
technology will ensure

greater transparency in
administration of GST
t-test for Equality of Means

95% Confidence
t
-1.134
df
27.62
Sig. (2-
Mean
Std. Error
Interval of the
tailed)
Difference
Difference
Difference
0.27
-0.34
0.30
Lower
Upper
-0.96
0.28
The above table reveals that the p-value or the critical significance level of 0.265 is greater
than 0.05 (5 percent) level of significance. Thus the null hypothesis formed is accepted.
Therefore, staffs with 20 years experience or more do not differ significantly from staffs with
lesser than 20 years experience in their agreement to use of information technology for
greater transparency in administration of GST.
53
On the basis of the above test it can be concluded that years of work experience is not an
influencing factor for agreement to use of information technology.
4.2.2
Hypothesis 2
Null Hypothesis: Trade and Industry agree to the dual structure of GST, i.e. separate GSTs
of the Centre and the State.
Alternate Hypothesis: Trade and Industry do not agree to the dual structure of GST, i.e.
separate GSTs of the Centre and the State.
Table 13: T-Test results for Hypothesis 2
One-Sample Statistics
The Centre and State must

have separate GST
Mean
Std. Deviation
Std. Error Mean
24
-0.88
.90
.18
One-Sample Test
Test Value = 1
95% Confidence
t
The Centre and State must

have separate GST
-10.21
df
23
Interval of the
Sig. (2-
Mean
tailed)
Difference Difference
.00
-1.86
Lower
Upper
-2.26
-1.50
The above table reveals that the p-value or the critical significance level of .00 is lesser than
0.05 (5 percent) level of significance. Thus the null hypothesis formed is rejected and the
alternate hypothesis that Trade and Industry do not agree to the dual structure of GST is
accepted.
54
5 Findings and Recommendations

India has been moving towards a GST regime right from introduction of MODVAT in 1986
to the introduction of VAT in states. All these were steps taken to move to a VAT based GST
regime. Now we are at the last step of this big change. GST, basically a value added tax has
been beneficial to all countries that implemented it. Countries like New Zealand and the UK
have derived a lot of benefit from GST. Key factors contributing to the success of GST in
these countries are: (1) rectification of problems in their old tax system, and (2) preparing the
taxpayers for the change. Less than ten months are left for April 1, 2011, the proposed date
for implementation of GST in India. It will be a challenge to prepare all stakeholders for
migration to GST.
Learning should to be taken from experience of transition to VAT, and experience of other
countries that have implemented GST.
In Karnataka, the VAT regime has seen a lot of problems. Some of the highlights mentioned
in the CAG report29 on transition to VAT regime are given below:1. The average growth rate of revenue collection in post VAT period (2005-06 to 2007-08)
declined by 0.48 percent compared to average growth rate in pre VAT period (2002-03 to
2004-05).
2. The software that was developed for implementation of VAT was not found suitable by
the department. Also, the software was not tested before implementation nor was the
source code obtained.
3. Scrutiny of assessment records of VAT revealed several cases of non-observance of
provisions of Acts/Rules, non/short levy of tax, arithmetical inaccuracies, non-levy of
penalty, etc. amounting to Rs. 3.66 crores.
4. Non-levy of penalty for non-filing of annual statement by 3,145 dealers for the year 200607 and 3,304 dealers for the year 2007-08 amounted to Rs. 15.57 crores.
5. There was no provision under the KVAT Act for disallowing the input tax credit on
capital goods where the KVAT paid on capital goods is capitalised and depreciation
claimed30.
29
For the full report see http://www.cag.gov.in/html/cag_reports/karnataka/rep_2009/rev_chap2.pdf

Under the CENVAT Credit Rules, credit of duty paid on purchase of capital goods is allowed subject to the
condition that the manufacturer shall not claim depreciation on the part of the value of capital goods which
represent the amount of specified duty paid on such capital goods. However, there is no such provision under
the KVAT Act
30
55
6. The percentage of audit coverage which was mere 1.59 percent to 3.24 percent. Reasons
for not auditing all the cases selected for audit was not forthcoming.
The problems identified should be rectified in the GST system. Learning from the transition
to VAT should be used to reduce transition costs. With the experience of carrying out the
transition to VAT in 2005, officials are confident about a smooth transition. The transition
from VAT to GST is small when compared to the transition from Sales tax to VAT. But their
concern is preparing the staff for GST that is expected to depend more on information
technology.
The Central tax departments have started preparation by conducting workshops on creating
awareness of GST among their staff. But CTD Karnataka has not conducted any training on
GST to its staff. There are about 9000 employees in CTD. It was estimated that at least 6
months would be required for training. But this will depend on the training capacity and
facilities available.
Trade and Industry, and professionals have expressed their concerns about the capacity of the
CTD staff to handle GST. They have also raised concerns about the time that will be
available for preparation after the GST legislation is passed, if GST is to be implemented
from April 1, 2011.
5.1 Major Findings
The following four areas were identified as critical areas for successful
o IT Infrastructure
o Capacity building of CTD
o Coordination and Sharing Information between the Centre and the States
o Educating trade and industry about the changes. For this, CTD needs to be
ahead of trade and industry
The need to build extensive IT systems was emphasized by the stakeholders.
Forty two percent of respondents from trade and industry had attended seminars or
workshops on GST. But no awareness programs were conducted for CTD staff.
56
This shows that the government needs to build capacity quickly to handle queries
from trade and industry.
Trade and Industry, and professionals are not happy with the dual structure of GST.
They have on average disagreed to the dual structure of GST, which they feel is a
flaw in the structure.
Years of work experience of staff is not an influencing factor for agreement to use
of information technology.
Trade and Industry has not received any significant input on GST from the State
government.
57
5.2 Recommendations
Training Programs for CTD
The following recommendations are related to the training programs for educating the CTD
about GST.
Conduct an attitude building training so that the training programs for effective and
learning takes place. The officials of CTD are concerned about the attitude of the staff
towards training.
Officials and staff should be evaluated on improvements in KUAS (Knowledge,
Understanding, Application and Skills) after attending training programs.
Some trainers should be selected from pool of officials of CTD. This will ensure that
the trainers remain with the department and act as reference points for conducting
training programs in future.
Experts from trade and industry can also be invited to provide training to CTD. This
will enable the official and staff to understand the industry perspective.
CTD should start with awareness and sensitisation programs on GST for official and
staff. This can be done in a phased manner without any formal training. Open
discussion on aspects of GST on a weekly basis or fortnightly basis. Pamphlets with
information on GST should be distributed and put on notice boards. This will prepare
the officials and staff for the change. The change to GST should be justified, so as to
avoid any resistance during the transition.
Currently, CTD does not have a training institute dedicated to attend to its training
needs on revenue collection and taxation. CTD should be associated to a training
institute to attend to its training needs on a continuous basis.
During transition to VAT, Crown Agents from UK were appointed to conduct training
programs, but this is only a temporary solution. Training was not conducted after
implementation of GST. Training should be conducted regularly after implementation
of GST to keep the employees updated about the best practices and changes in the
system.
Any consultant hired to assist in implementation of GST should be an agency with the
following experience.
o Tracked the Indian tax system for at least 10 years
o Tracked the tax systems of other countries that have implemented GST during
their transition.
58
Coordination between the State and the Centre

Since the Centre and the State will be levying tax on a common base, coordination between
the two becomes essentials. To ensure efficient coordination, the following should be done.
Align the organizational structure of the Centre and the State tax departments.
Conduct common training programs on aspects of GST like inter-state transactions,

enforcements, audits, penalties etc., which requires coordination.
For economies of scale, a single agency, either the Centre or the State should be
appointed for tax collection in a particular State.
In the long term, the recruitment process, incentives, etc., should be aligned to avoid issues
relating to difference in treatment of employees of the State and the Centre.
Educating Trade and Industry, Professionals and Public
CTD should invite queries from all stakeholders CTD officials and staff, trade and
industry, professionals and public so that answers to FAQs can be prepared.
During the transition to VAT, CTD organised a number of workshops/seminars for

the industry. It also organised communication campaign through print and electronic
media. Location specific and trade specific seminars were also held.
Public should be educated on the dual structure and visibility of CGST which was till
now not visible. Canadian experience shows that consumers can view this as a new
tax on goods and services.
Others
The audit reports from CAG of the past years of VAT regime should be thoroughly studied to
identify problems and improvement areas.
Separate units should be setup to concentrate on large tax payers like the Large
Taxpayer Units. Since a big percent of taxes are paid by a small number of taxpayers,
it makes sense to concentrate on these major contributors. LTUs were setup with the
experience on the CBDT and the CBIT to provide single window facilitation to
taxpayers who pay direct and indirect taxes above a threshold limit.
Introduce schemes like TRPS (Tax Return Preparer Scheme) that was introduced by
the Income Tax Department in partnership with NIIT to build capacity of facilitators.
59
5.3 Scope for Further Research

Research can be conducted on the following topics related to implementation of GST.
The current study can be conducted with focus on a specific group with a larger
sample size.
Study of attitude of CTD employees towards training programs. This can be taken up
before and after an attitude building training is conducted.
The computers and backup systems need to be upgraded both in quality and quantity.
These IT systems should be studied. A study can be taken up to identify problems and
improvements required in IT infrastructure. An estimation of hardware requirements
can be one of the results of the study.
Identification of differences in organizational structures of the Centre and the State

tax departments. How the two organisations should be aligned for efficient
communication and coordination.
Study of the TRPS (Tax Return Preparer Scheme) that was introduced by the
Income Tax Department in partnership with NIIT. Develop a similar scheme for CTD
to build capacity outside the department to facilitate tax payments.
60
6 Bibliography
A brief on VAT. (n.d.). Retrieved April 2010, from GOK Commercial Tax Department:
http://164.100.80.121/ctax/what_vat/About%20vat%20nnew.pdf
Bagchi, A., & Poddar, S. (September 2006). GST for India: Some Basic Questions.
Bird, R. M., & Gendron, P.-P. (May 2009). Sales Taxes in Canada: The GST-HST-QST-RST
SYSTEM.
CAG. (n.d.). Audit Report (Revenue) Karnataka (2008-2009). Retrieved June 2010, from CAG:
http://www.cag.gov.in/html/cag_reports/karnataka/rep_2009/rev_chap2.pdf
Chellaih, R., Aggarwal, P., Purochit, M., & Roa, K. (2003). Primer on Value Added Tax. National
Institute of Public Finance and Policy.
Commercial Taxes Department. (n.d.). Retrieved April 2010, from GOK Commercial Taxes
Department: http://164.100.80.121/ctax/index.asp
Force, T. (December 2009). Report of the Task Force on Goods and Services Tax. Thirteenth Finance
Commission.
GST Start-up Assistance Office. (n.d.). Retrieved June 2010, from http://www.gststartup.gov.au/
James, S., & Alley, C. (2008, July). Successful tax reform: the experience of value added tax in the
United Kingdom and goods and services tax in New Zealand. Retrieved June 2010, from Munich
Personal RePEc Archive (MRPA): http://mpra.ub.uni-muenchen.de/19858/
Kothari, N. (2009, June). Proposed Indian GST and its impact on Industry.
Large Taxpayer Unit. (n.d.). Retrieved June 2010, from http://www.ltu.gov.in
Ministers, T. E. (November 2009). First discussion paper on Goods and Services Tax in India.
Poddar, S., & Ahmad, E. (March 2009). GST Reforms and International considerations in India.
Department of Economic Affairs, MoF, GoI.
Purohit, M. C. (June 2009). A Road Map for GST. Foundation for Public Economics and Policy
Research.
R, S. (n.d.). Tax Exemptions in GST - Principles and Practices. Retrieved June 2010, from The
Institute of Chartered Accountants in India (ICAI):
http://www.icai.org/resource_file/15963article_GST.pdf
Tax Return Preparers Scheme. (n.d.). Retrieved June 2010, from http://www.trpscheme.com/
Zanwar, M. (Jan 2010). Practical approach for implementation of GST. Bombay Chartered
Accountants Journal , 17-19.
61
7 Appendix
7.1 Appendix 1: Interview questions for Top Officials
Migration to GST
1. Do you consider that GST would enhance efficiency and effectiveness of revenue
collection in 0-1 year, 1-3 years, 3-5 years, not at all
2. How should GST be considered in the context of
Tax Rates Dual GST, National GST and State GST
Food items
Land and Real Property
Non-profit Sector and Public Bodies
Financial Services
3. What is the current status in terms of Knowledge, Understanding, Application and

Skills of GST among the tax officials with respect to
Road map or a transition plan to move to the new system
Acts, Rules and provisions
4. Will more man power be required to administer GST?

5. What are the approaches you would like to adopt for training of your officers and
staff?
Formal training
On job training
Distance mode training
Handholding
Mailing groups
62
6. How do you plan to source the Resource Persons?

7. How do you plan to create public awareness through trade and industry, professional
group, Government funded research/training institutions?
Seminars
Debates
Mass media
Discussions
8. How intensely / widely do you plan to use information technology for training
Create a peer group
Create a blog managed by the Department
Post FAQs on website and constantly upgrade/update
Other
9. How easy is it to reorient staff to new system within the first year itself?
10. What are the implementation/organizational constraints/risks you foresee in the
implement of GST?
11. What are the suggestions you wish to offer to mitigate these constraints?
12. According to you how long would it take to put in place the processes/HR systems to
be institutionalized?
13. How easy or difficult is it to co-ordinate and collaborate between the Centre and the
State governments.
14. What are the concerns of the State and the Centre in sharing information with other
agencies?
63
7.2 Appendix 2: Questionnaire for Middle Level Tax Officials

Migration to GST
Thank you for taking an interest in this questionnaire. Please go through the information
given below before you start.
This questionnaire is part of a project to capture the knowledge, understanding, application
and skills of the Government and the Industry relating to Migration to GST (Goods and
Services Tax). The conduct of this study is governed by Fiscal Policy Institute, Bangalore.
All your answers will remain confidential and no information reported will ever identify you
based on your answer.
We are keen to receive your answers to this questionnaire so please feel free to contact us
with any queries you may have. Contact Shiva Raman by email: shivaraman.s@iiml.org or
by mobile: +91-7760017180
Please mention your years of experience in the tax department.

Please rate your agreement with the statements below:
1: Strongly Agree 2: Agree 3: Neutral 4: Disagree 5: Strongly Disagree

The awareness of GST has increased since it was first announced in 2007-2008.
1
2
3
4
5
Strongly Agree
1
2
3
4
Strongly Agree
Strongly Disagree
5
Strongly Disagree
The current database is sufficient for implementation of GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree
Use of Information technology will ensure greater transparency in administration of GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree
The nature of GST does not allow it to be rolled out like VAT.
1
2
3
4
5
Strongly Agree
Strongly Disagree
64
GST will result in increase in revenue for both Centre and State through increase in tax
compliance.
1
2
3
4
5
Strongly Agree
Strongly Disagree
A tax payment in GST is easier compared to other systems.

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
GST enables effective audit.
1
2
3
Strongly Disagree
Strongly Agree
Strongly Disagree
The jurisdiction for appeals is a cause for concern once GST is implemented.
1
2
3
4
5
Strongly Agree
Strongly Disagree
The current dispute resolution process is adequate for implementation of GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
GST encourages voluntary compliance.

1
2
3
4
5
Strongly Agree
Strongly Disagree
65

1
2
3
4
5
Strongly Agree
Strongly Disagree
The tax reporting period would vary with implementation of GST.

1
2
3
4
5
Strongly Agree
GST minimises tax evasion.
1
2
3
Strongly Agree
Strongly Disagree
5
Strongly Disagree
There is a need to develop cross-border information systems in the implementation of GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
The capacity of staff needs to be enhanced to implement GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree
The awareness of GST among public needs to be improved.

1
2
3
4
5
Strongly Agree
Strongly Disagree
With the introduction of GST, companies will have to relook at their business processes.
1
2
3
4
5
Strongly Agree
Strongly Disagree
GST can be integrated with Unique Identification Number (UID).

1
2
3
4
5
Strongly Agree
Strongly Disagree
66
GST can be linked to PAN/TAN.

1
2
3
4
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
The supply chain arrangement for manufacturing and distribution becomes critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
The current procedures to prevent tax evasion are adequate even for GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
The Inter-State transactions are defined in GST.

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
What has been the main source for understanding GST?

Articles in newspapers and magazines
Reports from Empowered Committee, Finance Commission Task Force
Other:
67
Have you received any training on GST?

Yes
No
Do you see a need for more training programs for tax department officials and staff on GST?
Please mention aspects of GST on which training is required?
What are the implementation/organisational constraints/risks you foresee in the implement of

GST? Also, please mention your suggestions (if any) to overcome these constraints?
Personal Details
Please mention your name, designation and email address. This information will not be used
to reveal your identity. We may use this information to communicate with you on our future
assignments on GST. Providing this additional information is optional.
Name:
Designation:
Email Address:
68
7.3 Appendix 3: Questionnaire for Tax Department Staff

Migration to GST
by mobile: +91-7760017180
Please mention your years of experience in the tax department.

1: Strongly Agree 2: Agree 3: Neutral/Not Sure 4: Disagree 5: Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
There is a need to develop cross-border information systems for the implementation of GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
69

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

Other:
Have you received any training on GST?
Yes
No
Do you see a need for more training programs for tax department staff on GST? Please
mention aspects of GST on which training is required?
Personal Details
Please mention your name, designation and email address. This information will not be used
to reveal your identity. We may use this information to communicate with you on our future
assignments on GST. Providing this additional information is optional.
Name:
Designation:
Email Address:
70
7.4 Appendix 4: Questionnaire for Trade and Industry

Migration to GST
by mobile: +91-7760017180
1: Strongly Agree 2: Agree 3: Neutral/Not Sure 4: Disagree 5: Strongly Disagree

1
2
3
4
5
Strongly Agree
1
2
3
4
Strongly Agree
Strongly Disagree
5
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
GST will provide more support to trade and industry through wider coverage of input tax
credit.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
71

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
The supply chain arrangements for manufacturing and distribution become critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
72

1
2
3
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
GST enhances the economic efficiency of the tax system.

1
2
3
4
5
Strongly Agree
Strongly Disagree

Other:
Have you attended any seminars/workshops on GST?
Yes
No
Do you think the Government needs to conduct more workshops/seminars on GST for
professionals? Please mention aspects of GST that should be discussed in the
workshops/seminars?
What are the implementation/organisational constraints/risks you foresee in the implement of

GST? Please mention your suggestions to mitigate these constraints?
73
Personal Details
Please mention you name, designation, email address and work experience in years. This
information will not be used to reveal your identity. We may use this information to
communicate with you on our future assignments on GST. Providing this additional
information is optional.
Name:
Designation, Company:
Email Address:
Work experience in years:
74
7.5 Appendix 5: Questionnaire for Professionals

Migration to GST
by mobile: +91-7760017180

1
2
3
4
5
Strongly Agree
GST will be simple to administer.
1
2
3
4
Strongly Agree
Strongly Disagree
5
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
GST will provide more support to trade and industry through wider coverage of input tax
credit.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
75

1
2
3
4
5
Strongly Agree
Strongly Disagree
Pending cases related to the old system come in the way of implementing GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
The awareness of GST among public has to be improved.

1
2
3
4
5
Strongly Agree
Strongly Disagree
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
76
The supply chain arrangement for manufacturing and distribution becomes critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
The current procedures to prevent tax evasion are adequate even for GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
1
2
3
Strongly Disagree
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree

Other:
Have you attended any seminars/workshops on GST?
Yes
No
Do you think the Government needs to conduct more workshops/seminars on GST for
professionals? Please mentions aspects of GST that should be discussed in the
workshops/seminars?
77
Personal Details
Please mention your name, designation, email address and work experience in years. This
Name:
Designation, Company:
Email Address:
78
7.6 Appendix 6: Questionnaire for General Public

Migration to GST
by mobile: +91-7760017180
Are you aware of GST (Goods and Services Tax)?

Yes
No
Do you know the proposed date for introduction of GST in India?
Yes
No
What has been the main source for information on GST?
Other:
Do you understand the concept of GST?
Yes
No
Do you favour the implementation of GST?
Yes
No
Are you aware of VAT (Value Added Tax)?

Yes
No
79
Do you understand the concept of VAT?

Yes
No

1
2
3
4
5
Strongly Agree
Strongly Disagree

1
2
3
4
5
Strongly Agree
Strongly Disagree
Personal Information
Please mention you name, occupation, email address, age and work experience in years. This
Name:
Occupation:
Email Address:
Age:
80
7.7 Appendix 7: Timeline for implementation of GST, suggested by

Thirteenth Finance Commission Task Force for introduction of GST
on October 1, 2010.
81
7.8 Appendix 8: Responsibility and Accountability of various activities

relating to implementation of GST, suggested by Thirteenth Finance
Commission Task Force.
82
7.9 Appendix 9: Details of tax revenue realised during the period from
2004-05 to 2008-09
The following table presents the details of tax revenue realised during the period from 200405 to 2008-09 (Section 1.1, Audit Report (Revenue Receipts) Karnataka for the year ended
31 March 2009)
Sl.
No
Head of
revenue
Taxes on sales,
1 trade, etc.
2 State excise
2004-05
2005-06
2006-07
2007-08
2008-09
Percentage
change
in 2008-09
over
2007-08
8,700.07
2,805.53
9,869.54
3,396.79
11,761.72
4,495.48
13,893.99
4,766.57
14,622.73 (+) 5.25

5,749.57 (+) 20.62
1,759.84
2,212.20
3,205.80
3,408.83
2,926.72 (-) 14.14
982.99
1,105.45
1,374.50
1,650.13
1,681.16 (+) 1.88
Taxes on goods
5 and passengers
791.72
1,041.45
1,147.20
837.34
1,085.02 (+) 29.58
Taxes and duties

6 on electricity
339.023
277.09
388.57
449.5
370.59 (-) 17.56
277.93
330.25
392.58
451.37
538.79 (+) 19.37
295.28
117.76
280.66
116.5
425.05
108.76
380.68
145.31
406.15 (+) 6.69

255.65 (+) 75.93
117.76
16,072.32
116.5
18,631.55
108.76
23,301.03
145.31
25,986.76
Stamp and
3 registration fees
Taxes on
4 Vehicles
Other taxes on
income and
7 expenditure
Other taxes and
duties on
commodities
8 and services
9 Land revenue
Taxes on
agricultural
10 income
Total
255.65 (+) 205.26

27,645.66
6.38
83
7.10 Appendix 10: Percentage of dealers taken up for tax audit

The Empowered Committee envisaged that not more than 20 percent of the total dealer
population should be audited every year. However, minimum percentage of dealers to be
taken up for audit has not been prescribed. The total number of registered dealers, number of
cases selected for audit, actual number of cases audited and additional demand raised after
audit during the years 2005-06 to 2008-09 were as under:
Additional Demand
Number
Year
of
dealers
Number of
dealers
selected
for audit
Percentage
to number
of dealers
Number
of
dealers
audited
Percentage
of number
of dealers
raised in Audit
Number
Amount
of
(Rs.
Dealers
Lakh)
2005-06
3,54,721
9,646
2.72
5,882
1.66
2,783
3,121
2006-07
3,89,393
17,625
4.53
12,614
3.24
6,783
8,979
2007-08
4,31,029
16,029
3.72
11,029
2.56
7,065
13,328
2008-09
4,34,746
5,343
1.23
6,910
1.59
4,490
18,778
21,121
44,206
Total
48,643
36,435
It may be seen from the above table that in respect of 58 percent of the audited cases, the
department noticed underassessment of tax by the dealers. This also indicated that there was a
need to increase the percentage of audit coverage which was mere 1.59 percent to 3.24
percent. Reasons for not auditing all the cases selected for audit was not forthcoming.
84
7.11 Appendix 11: Data gathered from general public on awareness and
understanding of VAT and GST
Sl. No
Questions
Are you aware of GST (Goods and Services Tax)?
Do you understand the concept of GST?
Do you favour the implementation of GST?
Do you know the proposed date for introduction of GST in India?
5
6
Yes
No
11
10
12
13
Are you aware of VAT (Value Added Tax)?
14
Do you understand the concept of VAT?
10
Table 14: Data gathered from general public on awareness and understanding of VAT and GST
85
7.12 Appendix 12: Some Useful Links

Australian Taxation Office, Government of Australia: http://www.ato.gov.au/
Canada Revenue Agency, Government of Canada: http://www.cra-arc.gc.ca
Inland Revenue, Government of New Zealand: http://www.ird.govt.nz/
GST Start-up Assistance Office, Australian Government: http://www.gststartup.gov.au/
86

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FISCAL POLICY INSTITUTE

Migration to GST: Preparedness and

Submitted as part of summer internship

Enclosure: Final Report

Shri P.R. Devi Prasad IES

Smt Anita V. Nazare

Fiscal Policy Institute

Fiscal Policy Institute

The author alone is responsible for any errors and omissions.

1.3 Problem Statement ..................................................................................................................... 4

GST in Other Countries .................................................................................................................. 7

The Quebec Sales Tax..................................................................................................... 9

2.2 GST in Australia ...................................................................................................................... 10

How Australia prepared trade and industry for GST .................................................... 11

Exploratory Research .................................................................................................... 14

3.2 Tools of the Study .................................................................................................................... 15

3.3 Sample of the Study ................................................................................................................. 16

Analysis and Interpretation of Results .......................................................................................... 20

Top Officials of the Centre and the State governments ................................................ 21

Middle Level Tax Officials ........................................................................................... 31

Tax Department Staff .................................................................................................... 35

Trade and Industry ........................................................................................................ 40

General Public ............................................................................................................... 50

Findings and Recommendations ................................................................................................... 55

Assistant Commissioner of Commercial Taxes

1.1 Objectives of GST

First Discussion Paper on GST, section 1.2

The incidence of tax should fall only on domestic consumption

To optimize efficiency and equity of the system

There should be no export of taxes across taxing jurisdictions

The Indian market should be integrated into a common market

To enhance the cause of cooperative federalism

1.2 Recent progress in implementation of GST

1.3 Problem Statement

Infrastructure for tax administration

Changes in the Legal framework

Design of the tax structure

Road map for migration to the new system

1.4 Purpose of the Study

To identify problems that can hinder the smooth transition to GST.

1.5 Significance of the Study

2 GST in Other Countries

2.1 GST in Canada

A brief on VAT (Value Added Tax), from CTD website

The Quebec Sales Tax

perspective, it appears to be effective. The practice is tied to a public fairness campaign

2.2 GST in Australia

How Australia prepared trade and industry for GST

Introduction to the GST and Registration Options;

GST and Your Systems and Records; and

Frequently Asked Questions; and

How to complete your BAS and PAYG; and

Combined course of all of the above.

www.gststartup.gov.au - provided information about the programmes, access to

www.gstassist.gov.au - provided access to registered supplier applications and

Assistance for Constituents from a Non English Speaking Background

Over 19,00,000 certificates were issued.

3.1 Research Design

3.1.2.1 Variables used in the Study

The following variables were used in the study:

Types of research techniques, their objective and application can be seen at

3.2 Tools of the Study

Impact of GST on efficiency and effectiveness of the revenue system