Impact of GST

Goods and Service Tax

Photo Courtesy : Google Photos

Goods and Service Tax aka GST is considered as the biggest post-independence tax/economic reform in India which would not only affect businesses but also to the common man. GST expresses the principle of “One Nation, One Market, One Tax” country. Also, it has converted India into a unified market of 1.3 billion citizens and 2.4 trillion USD market in to a common market of the nation. The main concept behind the implementation of GST is to offer a ‘Win-Win’ situation for everyone i.e. manufactures and traders will have to deal with fewer tax fillings, consumers would be paying less for the goods and services and the government will generate more revenues as leaks would be plugged because of GST. It also creates transparent rules in front of the nation, for the nation at once. But is this the reality? Is this really happening? Are people or to be more precise, layman, happy with this change just after the recent change before few months which was demonetization? Are all the things stated while implementing the GST Bill being satisfied? Has GST really impacted India on a positive side or in a complete opposite way?

Under GST, goods and services fall under 5 tax slabs; 0%, 5%, 12%, 18%, 28%. If we talk about the short-term view and long-term view, then a lot of difference can be seen because of GST. Consumers now must pay more tax for most of the goods as some of the products and items now have slightly higher rate of tax than the old ones. Also, if we talk about it, GST execution has a cost of agreement to it too. It may be possible that this cost of agreement may be higher for small scale manufactures and traders which would directly result into the increment of the rates of that product or item. But if we talk about the long-term view, it seems that GST won’t be only reducing tax rates but also the tax slabs which are currently present in the system. It is also said that because of GST implementation, exports would grow and because of which, Foreign Direct Investment would directly get affected in a positive way. Not only FDI but also the GDP of nation would increase if seen in a long-term view. Inflation, tax avoidance etc would also be reduced because of GST. It is known in a good sense for enhancing the business and making it smooth when compared to earlier situation.

Photo Courtesy : Google Photos

Currently, in India, there are 3 types in which tax rates are divided; Integrated Rate, Central Rate, State Rate and apart from this cess is also collected. If we see examples of other countries who have settled down after implying GST, it has helped in reforming economy by applying only 2 or somewhere 3 rates; Mean Rate, Lower Rate for Essential Commodities and a Higher Rate for Luxurious Commodities. By this example we can say that what difference can be seen in the near-future of nation. It is true that the implementation has caused little bit of inconvenience in the society, but it is also said that this inconvenience is for short term and that everything would be normal soon enough. However, there have been controversaries on the GST that the tax rates applied on few products have been wrongly applied and should be changed as soon as possible. For example, GST that is applied on sanitary napkins. Earlier the tax rate was 13.5% and after GST, it turned out to be in the slab of 12% against which people have demanded to lower the tax rate on sanitary napkins as it don’t stand in luxurious items but a necessity and nothing else. 

GST is expected to bring positive results in future irrespective of today’s scenario of problems and tension. People are waiting for these short-term problems to get solved and eagerly waiting for the reforms to happen at a huge level. Wait is all that people can do for now as implementation has been done but expected results are still awaited.