What is GST ?
Goods and Services tax (GST) is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India to replace taxes levied by the central and state governments.
This method allows GST-registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Administrative responsibility would generally rest with a single authority to levy tax on goods and services.
Impacts of GST on Indian Economy:
The introduction of Goods and Services tax (GST) would be a very noteworthy step in the field of indirect tax reforms in India, by amalgamations a large number of central and state taxes into a single tax.
Introduction of GST would also make Indian products competitive in the domestic and international markets. Once GST implemented in the system holds great promise in term of sustaining growth for the Indian economy.
As per GST act which is passed in Lok Sabha and Rajya Sabha four tier GST tax structure at 5%,12%,18, and 28% rate decided., with lower rate for essential items and the highest for luxury and de-merits goods, including luxury cars, SUVs and tobacco products, that would also attract an additional cess.
IMPACT OF GST ON INDIAN ECONOMY:
- Removal of tax barriers with seamless credit will make India a common market leading to economies of scale in production and efficiency in supply chain.
- Removal of cascading effect of taxes embedded in cost of production of goods and services, significantly reducing cost of indigenous goods and indirectly promoting ‘Make in India.
- Stable, transparent and predictable tax regime to encourage local and foreign investment in India creating significant job opportunities.
- Reduce tax burden on producers and foster growth through more production. This double taxation prevents manufacturers from producing to their optimum capacity and retards growth. GST would take care of this problem by providing tax credit to the manufacturer.
- A single taxation on producers would also translate into a lower final selling price for the consumer.
- GST would add to government revenues by widening the tax base.
GST provides credits for the taxes paid by producers earlier in the goods/services chain. This would encourage these producers to buy raw material from different registered dealers and would bring in more and more vendors and suppliers under the purview of taxation.
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