Impact Of GST On Indian Economy

 

The implication of GST was the most significant tax reform in India's independent history. In this case, the government combined all indirect taxes into one. In India, the Goods and Service Tax (GST) was adopted to implement the "one nation, one tax" concept. GST is a destination-based tax applied on the consumption of goods and services across the country, thereby transforming the country into a single market.

A destination-based tax is one that is imposed in the state where the products or services are consumed rather than in the state where they are produced.

 

GST's Positive Impacts

 

·       The elimination of interstate checkpoints built to impose taxes on cross-border transactions is the most major benefit of GST. This has helped to remove barriers to goods movement across states and contributes to the creation of a national common market. The estimated long-distance journey time for goods transportation has decreased by over 20%.

·       The change has also improved supply chain management, making it unnecessary to open branch offices just to avoid paying interstate sales taxes. The elimination of the interstate sales tax made taxes destination-based and decreased inequitable interstate tax exporting.

·       Previously, several taxes ( Tax on Tax ) were imposed on the same goods, increasing the price. The implementation of GST has had a significant impact on the Indian economy, since it eliminated the cascading effect, lowering the burden on the product or service's ultimate customer.

·       The implementation of the e-way bill system with the exception of a few minor technical issues, the e-way bill system has mostly been simplified. During FY 19, the total number of e-way bills created (including inter-state and intra-state) was 56 crore, and this figure grew by 13% to 63 crore in FY 20.

·       Over 38 lakh taxpayers switched to the GST system after its commencement on July 1, 2017. In September 2017, the number has risen to more than 64 lakh people. Also, with the inclusion of over 58 lakh new GST registrations, this figure has risen by over 90%, and we now have 1.23 crore active GST registrations as of March 2020. This expansion suggests a considerable rise in the tax base as well as a shift in the compliance behaviour of taxpayers. Despite the fact that this number has fallen considerably, this is due to the Covid epidemic and cannot be linked to GST.

 

GST's Negative Impacts

 

·       Small and medium-sized enterprises may continue to struggle with the GST tax structure's complexity. They'll need to send out GST-compliant invoices, keep digital records, file timely returns. This means that, among other things, the GST-compliant invoice must include information such as the GSTIN, the supply address, and HSN codes.

·       One of the most significant factors impeding the expansion of the cement sector is the high rate of GST. In India, cement is taxed at a rate of 28 percent, which is more than in other developed and developing nations. Because more than 65 percent of cement is used in home construction, a higher tax rate on cement will disproportionately harm the poor. GST, according to some experts, would have a detrimental influence on the real estate industry since it would increase costs by 8 to 10% and lower demand by 12%.

 

Conclusion

 Making a change is never easy. The Government is making every effort to make the GST transition as smooth as possible. To gain the benefits of a unified tax system and easy input credits, it's critical to learn from the worldwide countries who implemented GST before us handle the initial issues.