Impact of Goods and Services Tax (GST) on the Indian Economy
The nation was trapped in the net of indirect taxes as well as the archaic taxation system and the economy needed a push for a simple, flat tax structure that would simplify the complicated tax policy. As the new taxation reform GST was introduced with the slogan of one tax one nation, economists hoped that it would iron out the wrinkles in the existing tax system.
While on one, the rollout of new tax reforms has renewed the hope of the nation’s fiscal reform program, eliminate the cascading effect of taxes and widening the economy, there are fears of slowing down the economy, disruptions, and shutting down of businesses on the other.
Still, there are some big questions – Would the hopes of tax stability triumph over uncertainty? Will the government be successful in making GST a good and simple tax? The government implemented GST to boost the economy in the long run with a single taxation system, but would this decision be a win-win situation for everyone?
The government claimed that businesses and industries would benefit from easy tax filings and transparent rules, even consumers would be paying correct and less amount for the goods and services, and it would collect more revenues for the government while leaks would be plugged. But what’s the ground reality behind the story.
So let’s take a look at how GST is impacting our nation, people, and even economy in the long and short term.
Short term pain & gain of Goods and Services Tax
If we consider the viewpoint of the consumer now they may pay more taxes for most of the goods and services they consume. As most of the consumables are kept in the same or a slightly higher rate of tax. In the new taxation system, it seems that this cost of compliance is prohibitive and high, especially for the small manufacturers and traders and they may end up pricing their goods at higher rates.
Future expectations from Goods and Services Tax
Talking about future expectations, it doesn’t mean only there is a lower tax rate but it also includes minimum tax slabs. Currently, in our country, there are 5 slabs, with 3 rates including an integrated rate, state rate, and a central rate. While the small shopkeepers and businesses bore taxes in the new regime, the government was also gambling on fewer or lower rates with the fear of losing out on revenue collection.
The implementation of GST has brought various changes including stability in inflation rates, the cascading effect of taxes and the increased revenue from the taxes for the government. Along with that, the fiscal deficit is under the checks, exports would be promoted and Foreign Direct Investment would also be increased. The completion in the Indian market has grown up which would promote more export businesses.
Keeping the hopes of people, tax policies have played an important role to curb tax evasion and brought efficiency & equity in Indian taxation market.
More transparency can be seen in the taxation system and the tax official also has started making the system corruption-free with the help of promoting digitization. Tax compliance would be simple for businesses and the duplication of efforts will reduce.
Hope for a brighter economy
GST can be considered a very noteworthy step for the taxation system by making taxation overall easy for the consumers as well as industries. If we see it as per the end customer, reduction in the overall tax burden on goods and services would be a good decision. Along with that, the GST would also bring competition in the domestic and international markets for Indian products.
Last but not least, we can witness a more transparent taxation system just because of the digitization of the GST. Day by day the government is taking good steps towards the taxation system such as the introduction of the E-way bill or the blocking of the E-way bill which would evade taxes.
Summing up GST’s journey so far
In a nutshell, it depends on the government on how to boost up the capacity of the lesser-endowed participants such as the small-scale manufacturers, businesses and traders. The tax officials have to find ways for making simple the overall compliance cost and other necessary changes for the betterment of the masses.
The government is making all efforts to build up a nation with a simple, transparent and corruption-free taxation system but if we are looking for fruitful result then the entire country has to work together as a whole towards making it successful.
Is GST still hard for you?