MAGAZINE

IMPACT OF GOODS AND SERVICES TAX ON INDIAN ECONOMY
The Rajya Sabha passed the GST
Constitutional Amendment Bill which the
Lok Sabha had already approved last
year.One of the biggest taxation reforms in
India-GOODS AND SERVICES TAX is
all set to integrate State economies and
boost overall growth. GST is a broad
based and a single comprehensive tax
levied on goods and services consumed in
an economy. The main aim of the GST is
to eliminate excessive taxation.
‣ REDUCE TAX EVASION: It will be
more beneficial to purchase goods on
invoice. If the customer himself insists
on taking the bill, tax evasion will fall.
‣ EASE OF DOING BUSINESS: The
GST will reshape the indirect tax
structure by including majority of
indirect taxes. It will help in improving
the ease of doing business in the
country.
‣ REDUCTION IN THE
TRANSACTION COST: Creation of
unified market facilitates seamless
movement of goods across states and
reduces the transaction cost of the
businesses.
‣ GIVE MORE MONEY TO UNDER
DEVELOPED STATES: GST being
consumption based tax, tax collection
will go to the states in which goods are
consumed not where they are
manufactured.
‣ INFLATION: The Service tax rate
could shoot up from the current level
of 15% to 18%. This has lead to fears
that inflation could rise in short term.
‣ BOOST THE ‘MAKE IN INDIA’
PROGRAMME: The GST regime
will boost he programme as
manufacturers will get the input tax
credits for capital goods.
‣ SUPPORT TO SMALER
BUSINESSES: GST will even out the
tax structures of various states which
remove the location bias. Any person
can set up factory in any state without
having to worry about tax differences.
Taxes should not be the hindrance in
investment decision. This means that
even undeveloped locations can see
more businesses coming up.