What is GST?
GST (Goods and service tax) is the most awaited tax reform post independence. GST aims to bring uniformity and predictable tax regime throughout the country. It enables fewer compliance burdens for the businesses, transparency in transactions, widening the tax coverage. Faster movement of goods, balanced tax for goods and services.
In simple words, it would introduce two-tiered One-Country-One-Tax regime.
The primary impacts will be in the form of:
- More employment
- Better government services
- Lower corruption
How does it impact the overall economy of India?
- It is predicted that an overall economic growth of at least 2% is anticipated once GST is implemented.
- It would subsume all indirect taxes at the center and the state level.
- It would not only widen the tax regime by covering goods and services but also make it transparent.
- It would free the manufacturing sector from cascading effect of taxes, thereby improving the cost-competitiveness of goods and services.
- It would bring down the prices of goods and services and thereby, increase consumption.
- It would create a business-friendly environment, thus by increase tax-GDP ratio.
- It would enhance the ease of doing business in India.
Biggest concerns:
- The tax rate is very high[3]especially for services. Even at the proposed 18% it is higher than most of Indian competitors such as Thailand, Malaysia, Singapore, China etc. The government doesn’t want to cap even this.
- There is no clarity on how the city municipalities will get their share as they are no longer allowed to tax octroi and other taxes.
Hoping that these kinks are rolled out. Ultimately it is the big picture that excites.
Almost every country in the world have moved to GST in the past 25 years[4] and the experience has been mostly positive. Hardly 20 countries are holding out, India one among them.
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