Impact of Goods and Services Tax on Indian Economy

After 2.5 Years of Implementation, let us now Impact of Goods and Services Tax on Indian Economy.

Positive Impact Impact of Goods and Services Tax on Indian Economy

  • GST replaced 17 indirect taxes and created a single window system for payment of indirect taxes.
  • Procedure is simple because online forms of GST are easily available.
  • It will also help in building a transparent and corruption free tax administration.
  • It will also curb black money.
  • There is reduction in tax evasion with implementation of GST.
  • Manufacturing of goods became more competitive than foreign companies thereby encouraging exports.
  • Manufacturing goods become cheaper leading to low logistics and costs.
  • Due to GST, there is full utilization of input tax credit by its reduction by 12-14% in cost of capital goods.
  • This lead to rise in investment of capital goods by 6%, leading to rise in overall investment by 2%.
  • Though there will be more inflation due to GST but considerably it will fall leading to more efficient production.
  • It will then lead to creating more jobs, which in turn will lead to making more revenue by the Government.
  • Small businesses also benefit as they do not lie under GST terms and condition but composition schemes.
  • Composition schemes consists of different terms and conditions advantageous to small businesses.

Negative Impact of Goods and Services Tax on Indian Economy

  • In business firms, while changing to GST system, they had to install a new software which had a negative impact.
  • GST requires all payments to be done online so small businesses are not able to cope up due to lack of knowledge and training of new technology.
  • It can lead to protests by small businessmen.
  • Goods, exempted from tax are now taxable, leading to rise in prices of goods, in turn leading to inflation.
  • Petroleum and alcohol products don’t fall under GST leading to cascading system.
  • It is also having a negative impact on consumers because prices of these products are rising.
  • The GST transaction fees within the financial system has become expensive creating problems for businesses.
  • 15% service tax has been replaced by 18% GST.
  • Tax free items related to disabled persons now come under GST.

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