IMPACT OF GOODS AND SERVICES TAX (GST) ON INDIAN ECONOMY
India’s biggest tax reform since independence – the Goods and Services Tax (GST) has finally arrived. The milestone GST has been implemented from July 1, 2017. GST is a comprehensive value added tax levied on the supply and consumption of goods and services in an economy. It is an indirect, multistage and destination based tax. GST was introduced with the aim of ‘one nation, one tax, one market.’
GST has subsumed several taxes and levies such as excise duty, services tax and additional customs duty. State level VAT, surcharges and octroi also come under GST. The primary objective behind the introduction of GST was to remove the cascading effect of taxes and to bring more transparency into the Indian taxation system. GST is currently levied on every product except petroleum, alcohol and stamp duty on real estate. Most of the articles that are used daily have zero GST. The imposition of the taxes takes place on the recommendation of GST council.
GST by subsuming an array of indirect taxes has simplified tax administration. It has brought uniformity of tax rates and structures across the country. The robust IT infrastructure created under GST regime has resulted in better tax compliance by curbing leakages which will go a long way in reducing corruption. Now there are no hidden taxes which will in turn lower the cost of production. Introduction of GST is making Indian products more competitive in the domestic and international markets. It has resulted in widening of the tax base with significant increase in number of registered taxpayers and formalization of economy. It has reduced the incentive for tax evasion. The average monthly GST collections have started rising. So GST has increased the government revenues by extending the tax base.
In conclusion, GST is one of the biggest tax reforms of our country. By bringing the excluded items under the GST network and providing relief to some of the sectors bearing the brunt of higher taxes, it is expected to generate more positive impact on the economy.