Through this blog, we shall be highlighting a new but very important topic in the taxation world : GST or Goods and Services Tax : Impact of GST on Indian economy.
GST or Goods and Services tax, hailed to be the biggest indirect tax reform in India is all set to be introduced, most probably from 1st July,2017. You must get ready to embrace and welcome this new tax reform in India. But,before doing that you need to be aware about GST and its impact on Indian economy.
Once a new tax is rolled over, it brings with it new implications and effects. Starting from individuals to small businesses to big industries and companies,nobody shall be left untouched by the implications of GST.
GST : Impact of GST on Indian Economy
An economy of a country can grow only if its people and their businesses grow and there is an increase in the Government revenue in the long run.
So,here we have shortlisted few of the points covering the GST impact on economy that shall help you understand it in a better way.
1. GST or Goods and Services Tax is a destination based indirect tax that will remove the cascading effect of taxes. GST that will replace a number of indirect taxes like Service tax, excise duty, Value Added Tax (VAT), Counter Vailing Duty (CAD), Special Additional Duty of Customs (SAD), Central Sales Tax (CST) etc.
2. GST shall ease the way for doing business by removing a plethora of indirect taxes.
3. GST shall potentially have its impact on both the manufacturing as well as the services sector. Though the common man may hesitate initially but the after effects of GST shall sound really beneficial.
4. Businesses may it be small or big shall be engaged in the transition from the earlier taxation system to the new GST system. However, it may take some time to adjust,but slowly and gradually as they get used to this new taxation system,things will get simplified.
5. GST shall reduce the overall transaction cost of businesses like the warehousing and logistics cost shall see a decreasing trend and businesses shall benefit from it.
6. GST shall enforce free flow of goods and services as well as seamless flow of credit. This shall directly or indirectly lay a positive impact on economy and foster growth through increased production of goods.
7. If the actual benefit of GST gets passed on to the consumers, we can see a reduction in the cost of different goods.This will further enhance demand of products and boost their sales thereby benefiting the overall economy.
8. The perfect example of positive impact of GST on Indian economy shall be seen through a boost for the “Make in India” programme as manufacturers shall be entitled for input tax credit for capital goods.
9. The enhanced production means reduction in the unemployment rate.If more employment is generated in the country, this leads to high demand.This vicious circle of Demand-Production-Employment-Demand implies that the GDP of the country can see an increasing trend.
10. The Indian products shall become more competitive at the domestic as well as the international levels.
11. The new GST or Goods and Services Tax shall pave the way for a common national market wherein a common tax known as GST shall be apply.Although,there are 4 GST slabs i.e.5%, 12%,18% and 28% that have been finalised for different category of goods and services.
12. GST shall add to the Government revenue by widening the tax horizon and bringing even smaller businesses in its ambit. Initially, the production states i.e.the ones where production takes place may loose revenue which the centre shall compensate.
But, as time passes by the improved tax compliance under the GST system shall add to the revenue of Government. Small business must now be prepared to take up a significant compliance burden as there is no scope of escapism of any kind.
13. The proposed GST rate on services i.e.18% from the present service tax rate of 15% shall also lead to an increased revenue.
14. Certain exemptions leading to revenue foregone are likely to be removed to further widen the tax base under GST.
15. Some experts believe that there can be a rise in inflation after the implementation of GST.However,this impact of inflation is expected to subside slowly and gradually.
So, with the revised changes rightly implemented and the combined impact of all the above factors, GST can act as a great stimulant for the economic growth of the country in the near future.
To grab further details on GST, do have a look at one of our popular posts : What is the impact of GST on Common man ?
In the years to come, GST can help the Indian economy to grow by widening the tax base and having greater transparency and participation in the formal economy. Now,whether the passing of actual benefits really happens is a matter of considerable speculation.
But,if it does happen, the combined effect of the above positive stimulants shall help businesses grow, maximise sales, increase revenue,reduce unemployment,rise in demand of goods etc. that shall ultimately lead to increase in Gross Domestic Product or GDP of the country.Increase in GDP itself means that the economy is moving towards a brighter and progressive side, this is what we as an Indian citizen want.
So, GST is expected to positively benefit the two important pillars of a growing economy i.e. India’s business climate as well as the financial system of the country.Both of them play a crucial role in shaping the economy of any country.
GST or Goods and Services tax being a completely new reform for a developing nation like India is bound to have some teething problems, especially at the initial stage.You can add to your GST knowledge through various GST Courses being offered to simplify things.
Later on, as and when people get accustomed to it and overcome the transition stage i.e.from the multiple indirect taxation system to the new GST regime, they are more likely to benefit from it.
What are your views on the GST or Goods and Services tax ? Do you want to add any further impact of GST on Indian economy, that we forgot to mention. Please feel free to share your valuable comments below !
As an individual thinking about managing your finances, don’t miss to checkout some of our popular posts : Tax Deduction under Section 80C and 10 Best Credit Cards in India !