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- 15% service tax has been replaced by 18% GST.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.