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EFFECT OF GOODS AND SERVICE TAX (GST) ON

INDIAN ECONOMY
MOHAMMAD DANISH AHMAD

TYBA (SPECIAL ECONOMICS)

POONA COLLEGE OF ARTS SCIENCE AND COMMERCE

INTRODUCTION
Goods and service tax (GST) IS a full tax charge on manufacture, sales and
expenditure of goods and commerce, fundamental aim of GST is to make uniform
the scattered indirect tax system in India and avoid the cascading effect in
taxation. GST is termed as biggest tax reform in Indian tax structure. It will not be
an additional tax, it will include central excise duty, service tax additional duties
of customers at the central level, VAT , central sales tax entertainment tax, state
surcharge, luxury tax, lottery tax and other surcharge on supply of goods and
services. The purpose of GST is to replace all these taxes within single
comprehensive tax, bringing it all in single umbrella.

IMPACT OF GST
1. Increases competitiveness

The retail price of manufactured goods and services in India reveals that the total
tax component is around 25 to 30% of the cost of the product. After the
implementation of GST the prices have gone down, the burden of tax has been
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reduced to the final consumer. There is a scope to increase production so

competition increases.

2. Simple tax structure

Calculation of taxes under GST is simpler. Instead of multiple taxation under

different stages of supply chain, GST is one single tax. This saves money and time.

3. Economic union of India

There is freedom transportation of goods and services from one state to another
after GST. Goods can be easily transported in all over the country, which is benefit
to all business. This encourages increase in production and for businesses to focus
on PAN-India operations.

4. Greater tax revenue

A simple tax structure can bring about greater compliance, this increase the no. of
tax payers and in turn the tax revenues collected for the government. By
simplifying structures, GST would encourage compliance, which is also expected
to widen tax base.

5. Increase in exports

There has been a fall in the cost of production in the domestic market after the
introduction of GST, which is a positive influence to increase a competitiveness
towards the international market.

BENEFITS AND CHALLENGES TO GST

BENEFITS

Removal of multiple taxation.

Removal of cascading tax effect, i.e. tax on tax.

Increase in the production of goods and services.

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Increase in the demand and supply of goods and services.

Due to lower burden of taxes, there is reduction in all over cost.

Burden has been decreased to the final tax payers

CHALLENGES

Impact on pricing of goods and services due to subsumed taxes.

To keep a check on the rates of GST. If the rates of GST are over 15%, then the
goods would be costlier.
A separate law must be drafted.
Constitutional amendments to enable levy of GST on imports.

CONCLUSION

Implementation of GST is one of the best decision taken by the Indian

government. For the same reason, July 1 was celebrated as Financial
Independence day in India when all the Members of Parliament attended the
function in Parliament House. The transition to the GST regime which is accepted
by 159 countries would not be easy. Confusions and complexities were expected
and will happen. India, at some point, had to comply with such regime. Though
the structure might not be a perfect one but once in place, such a tax structure
will make India a better economy favorable for foreign investments. Until now
India was a union of 29 small tax economies and 7 union territories with different
levies unique to each state. It is a much accepted and appreciated regime because
it does away with multiple tax rates by Centre and States.
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REFERENCE:

https://www.hrblock.in/earlygst/impact-gst-indian-economy/