Impact of GST on Indian Economy


This article explains what are Goods and Service Tax (GST), need of GST and its positive and negative impact on Indian Economy in the view of upcoming GST implementation in India from July 1st, 2017 onwards.

What is Goods and Service Tax (GST)?

Goods and service tax, better known as GST in India is the tax levied on Sales, Manufacturing, and consumption of goods and services. The constitution amendment bill on GST has already been passed. The GST Council chaired by Arun Jaitley has finalized the four-tiered tax structure of 5%, 12% 18% and 28%. The lower taxes are levied on essential goods and the higher taxes are levied on luxury and de-merit goods like luxury cars and tobacco products. An additional cess is levied on these products. To control inflation, the essential items including food, which is around 50% of the inflation basket, will be taxed zero.

What is the need for GST?

The need for GST in India is because under the current indirect tax structure the tax barriers are fragmented. The taxes vary from state to state and many states slash the rates to attract investors which reduce the tax revenue to the state and central government. The cascading effect of the value added taxes on cost sometimes made the product costlier than the international prices. Multiple taxes raised the cost of compliance as well.

Positive impact of GST on Indian Economy

Is GST the right solution for the constraints of the present tax system? Yes to some extent. Removal of tax barriers will lead to raising the investments and it also leads to the economies of scale and efficiency in supply chain. It also removes the cascading effect which helps to promote "Make in India". GST brings a uniform tax among all the states and the taxes are divided between center and state on basis of a pre-defined formula. GST helps to build a transparent tax system because of single tax should be levied throughout the country.

Negative impact of GST on Indian Economy

GST also has some negative impact on our economy. Three major tax revenue earning sectors petroleum products, alcohol and electricity do not fall under GST. The state government will levy the tax on these sectors. The inclusion of these sectors in GST would be done mostly on the basis of the tax revenue earned by the state governments from GST. Services sector like telecom, restaurants would have a negative impact created by a higher tax rate of 18% from present 15%.

However, the benefits from implementing GST would outcast the negatives. It is also a significant change that shows that we are focused on economic progress.


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Comments

Author: NK SHARMA08 Jun 2017 Member Level: Gold   Points : 4

Goods and Service Tax (GST) bill has been passed from both the houses of parliament. Now state legislative assemblies are discussing and passing the bill and sending to the center. It is to be passed a least by 19 states. It has been passed by 23 states till now. Kerala, TN, WB, karnataka and other congress ruled states have not passed. It will not affect the GST bill to convert into Act. After the signature of president it will become the Act and will be inforced from 1 st July onward.
GST has 3 components i.e. central GST, State GST. Interstate GST. Interstate GST will apply when the goods will go from one state to other state and it will be 1% extra in addition to GST. There is a long list of items which has been exempted from GST.

All the taxes will be removed such as VAT,Excise duty, sanvat, service tax, etc and only one tax will apply that is GST . This regime will simplify the tax process. Taxes will reduce on many items. cascading effect of tax will be removed. It will help in future in GDP improvement/ increase by 2%. Let us hope for the best.

Author: K Mohan12 Jun 2017 Member Level: Platinum   Points : 4

For the first time India is going to implement the Goods and services tax which would have uniform tax structure across the country for a product or service and thus there cannot be any adulteration or hoarding of goods. Earlier too when some Union territory having lesser tax are nearby, people would purchase the goods and services from UT and not the state and thus stood benefited. Even the petrol and diesel cost used to vary in every state and the truck drivers would know where to fill their truck. Now that confusions have gone. With one tax across the country, the end users would be benefited without overriding taxes that were imposed earlier. But what I feel that there are many items which are not touched by the GST committee and hence the people are not sure about the GST implementation from next month.

Author: Partha K.12 Jun 2017 Member Level: Platinum   Points : 0

Daily consumption items like milk, fruit and vegetables, jaggery or gur, foodgrain and cereals have been exempted from tax while others such as sugar, tea, coffee, edible oil, mithai, and newsprint have been placed in the lowest slab of 5 per cent under the new GST regime which is going come into force with effect from 1st July, 2017. Smartphones and small cars will also become cheaper in the new regime.

On the other hand,aerated drinks and consumer durables like televisions, air-conditioners, washing machines and refrigerators will cost more after 1st July.

However, clear picture in this regard (impact of GST on Indian economy) will emerge later. I thank the author for this informative and timely article on GST.

Author: Partha K.12 Jun 2017 Member Level: Platinum   Points : 5

Daily consumption items like milk, fruit and vegetables, jaggery or gur, foodgrain and cereals have been exempted from tax while others such as sugar, tea, coffee, edible oil, mithai (Sweets), and newsprint have been placed in the lowest slab of 5 per cent under the new GST regime which is going to come into force with effect from 1st July, 2017. Smartphones and small cars will also become cheaper in the new regime.

On the other hand, aerated drinks and consumer durable like televisions, air-conditioners, washing machines and refrigerators will cost more after 1st July.

However, clear picture in this regard (impact of GST on Indian economy) will emerge later. I thank the author for this informative and timely article on GST.



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