Arohar

Effect of GST on Indian Economy

June 4th

Goods and Services Tax(GST) is a value added tax that will replace all the indirect taxes levied on goods and services by the government,both central and states,once it is implemented.

The basic idea of this bill is to create a single, cooperative and undivided Indian market to make the economy stronger and powerful.

Advantages of GST bill :

GST is a transparent tax and also reduces number of indirect taxes. With GST implemented, a business premises can show the tax applied in the sales invoice.

GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will decrease.

Benefits people as prices will come down, which in turn will help companies as consumption will increase.

There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications in administration, including compliances costs. In the GST system, when all the taxes are integrated, the taxation burden will be split equitably between manufacturing and services.

GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.

It will also help to build a transparent and corruption free tax administration. Presently, tax is levied when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.

Benefit of GST for the Centre and the States

According to experts, by implementing GST, India will gain $15 billion a year. This is because it will promote more exports, create more employment opportunities and boost growth. It will divide the burden of tax between manufacturing and services.

Benefit of GST for individuals and companies

In the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be charged on the manufacturing cost. Individuals will be benefit by this as prices are likely to come down. Lower prices mean more consumption and more consumption means more production, thereby helping in the growth of companies.

Some of Disadvantages/Cons of GST in India are given below

• Some economists say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.

• Some economists says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST.

Article source :https://www.quora.com/What-will-be-the-short-term-and-long-term-effects-of-GST-bill