IMPLICATIONS OF GST ON INDIAN ECONOMY

GST

The GST is an improvement towards comprehensive tax reforms in the country that would give India a world class taxation system which would improve tax collection by integration of goods and services taxation. It would end differential treatments of manufacturing and services sector. It will replace various taxes such as Octroi, Central Sales Tax, State level Sales Tax, Entry Tax, Stamp Duty, telecom license fees, turnover tax, tax on consumption or sale of electricity, etc. GST is expected to create a business friendly environment by stabilizing price levels. Inflation rates would also come down overtime as a uniform tax rate is applied. It will also improve government's fiscal health as the tax collection system would become more transparent, making tax evasion difficult. The GST at the central and at the state level will thus give more relief to the industry, trade, agriculture and consumers through a more comprehensive and wider coverage of input tax set off and service tax set off. Also inclusion of several taxes in the GST and phasing out of CST will help remove the shortcomings of VAT.

Short Term Perspectives

1.   Consumers will be required to pay more taxes on the goods consumed or services availed by them as the GST has been levied on the daily necessities as well, though the rate of tax aries.

2.   Small Traders are protesting against the application of Goods and Services Tax because it would increase the compliance cost for them resulting in increase in the prices of goods and services for consumers.

Long Term Perspectives

1.  The impact of GST on macroeconomic indicators are expected to be positive, Inflation Rate would go down as cascading effect of tax would be removed.

2.   Implementation of GST would result in decrease in the value of goods and services over a period of time which will make our exports more competitive in the world economy and it will also result in increased FDI inflow in the country.

3.   It will make the taxation system more transparent and simple and easy to understand.

4.   Since GST is not levied on goods and services which are exported so it provides an incentive to EOUs, SEZs and EPZs to export more. And as far as imports are concerned, GST will be levied on goods or services imported into the country with destination principle where the imported goods or services are consumed that state will enjoy the tax revenue.

5.   The normal taxation rate on organizations will fall which will decrease the overall cost of Indian goods and services and make them competitive in the global market and ultimately boost GDP.

Ms. Bhawna Manyal

Assistant Professor

Dept. of Management Studies