The goods and services tax (GST) is important as it acts as a stimulant for the much needed economic growth. There is a lot of apprehension relating to the proposed GST regime and its effect on the Indian Economy.
Taxation both direct and indirect promotes economic growth as well as equitable distribution. GST transforms the existing basis of indirect taxation towards free flow of goods and services within the economy. The expectation from the GST is high.
Why GST for India?
The tax structure of India is very complex and GST is the need of the hour. There are various issues related to manufacturing, sale, service etc that needs to be rationalized. There are several transactions that take the form of both sales and services. Also, the existing law has resulted in a number of issues related to the interpretation of various provisions along with the category of the product and the nature of services.
India needs a comprehensive levy7 and collection on both goods and services at the same rate with the benefit of input credit. GST will ensure competitive pricing. The tax paid by final consumers will come done, thus boosting consumption, which is beneficial for the companies. It will also boost exports.
The Indian economy demands fiscal consolidation and reduction in fiscal deficit. Through GST, this can be achieved.
Impact of GST on Indian Economy
- Reduce tax burden on producers and foster growth through more production. GST would solve the problem of double taxation by providing a tax credit to the manufacturers.
- There will be more transparency in the system. The customers will know exactly how much tax they are paying and for what.
- GST would widen the tax base and add more revenue for the Government.
- GST also removes the customs duties applicable on exports. This would increase our competitiveness in the foreign market.
- The GST regime will subsume most central and state level taxes. It is expected to have a single unified list of concessions/ exemptions as against the current concessions/ exemptions available across goods and services.
By amalgamating a large number of state and central tax into a single tax, it would alleviate cascading or double taxation in a major way and pave the way for a common national market. The implementation of GST holds great promise in terms of sustainable growth for the Indian economy.