GST is imposed across the India on the manufacture and distribution of goods and services. This tax is imposed at any point of the production chain. For both the client and the manufacturer, GST is levied. It is a tax dependent on destinations. This implies that at the point of consumption, GST is to be obtained. Therefore, if a commodity is produced in Bihar and sold in Bhopal, the Bhopal tax will be imposed.Besides this, GST is obtained at any point of the production processes where value is added to the product.
The taxation on services and goods, or GST, entered into force on 1 July 2017. The goal of implementing the tax was to substitute a single unified tax for all current indirect taxes. The indirect taxes, such as central excise tax, service tax, VAT and leisure tax, have been integrated via GST. This big move has allowed India’s people to conveniently file their taxes without the hassles they have faced before. And this paper will address the effect on the Indian economy of GST.
Effects on the Indian Economy can be summed up in the given below points –
- Rationalization of the taxation system: The level of tax they are paying and its justification are easily known by both consumers and producers. In addition, it is also possible to prevent issues with the treatment of tax authorities and regulators.
- Small and medium-sized enterprises are included in the tax structure– Small and medium-sized enterprises are also eligible to file under the GST Composition Scheme. They pay the taxes as per their yearly production through such a system. Therefore, companies with an annual approximately Rs. 1.5 crores have just 1 percent GST to pay. In addition, other companies with a turnover of Rs 50 lakh are expected to pay GST at 6 percent.
- Export boom-The decline in manufacturing costs in the domestic market would enhance the competitiveness of National products in the international market. For export markets, who compete with global producers that work on very distinct cost structures, this works fairly well.
The national economic effect of a shift in the implementation of the GST would be substantial in terms of economic growth, cost, current account and budget balance. A move from earnings tax to expenditure tax will provide a significant fillip to the income source with an expanding services industry and a high economic growth curve in India today. Of course, mostly with implementation of GST, there would be a narrow, minimal price impact on the broader economy.
But then again, the administrative enforcement expense of GST, which would be likely to increase tax revenue from the “parallel” or “black market, is projected to have a greater effect. A full failure to implement GST will result in a soaring shortfall to about 4-4.2 percent during FY16-17 from 3.99 percent now in an environment where the government is cautiously venturing on fiscal deficit management. So, the issue we all should worry of is how fast we should get GST in rather than whether we should.