GST- and its impact on the Country - Seeker's Thoughts

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GST- and its impact on the Country

Introduction: GST and its negative and positive impact

GST- In simple words, Good and Service Tax is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previous existed in India in case of intra-state sales, Central GST and state GST will be charged.

The Goods and Services Tax Act was passed in the parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi stage, destination-based tax that is levied on every value addition.

There are multiple change-of-hands an item goes through along its supply chain: from manufacture to final sale to consumer.

Consider the following case:
1-      Purchase of raw materials
2-     Production or manufacture
3-     Warehousing of finished goods 
4-     Sale to wholesaler
5-     Sale of the product to the retailer
6-     Sale to the end consumer

These chain reaction can be understood by the following example                              The manufacture who make biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar flour is mixed and baked into biscuits.
The manufacture then sells the biscuits to the warehousing agent who packs large quantities of biscuits and labels it. That is another addition of value after which the warehouse sells it to the retailer.
The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits thus increasing its value.
GST will be levied on these value additions i.e. the monetary worth added at each stage to achieve the final sale to the end customer.
GST- positive and negative impacts are as follows:

Positive impacts

1-  Increase in foreign investment – India is now unified market and the foreign investment has increased in India. The goods that are manufactured within India because of their reduced costs have become more competitive in international market leading to growth in export. The implementation of goods &services tax puts India in the line of international tax standards, making it easier for Indian business to sell in the global market.

2-    The central GST and the state GST, the central GST will replace -service tax, central excise duty, and custom duty etc. the state GST will replace – state VAT, central sales tax, tax on advertisements, luxury tax, purchase tax, entertainment tax etc. Before GST, there were so many taxes and now they have replaced all these taxes and duties with central GST and state GST.

3-     Reduced the cost of doing business- GST has changed VAT all over India. Now we do not need to pay different amounts of taxes in different states. It is one tax system for all states of India and so have already got rid of carious taxes and duties on our businesses.

4-     Transparency – The tax administration has started working corruption free. Also enabling sales invoices to show the tax applied has resulted in transparency.

Negative impacts
1-      Dual control- GST is being referred to as a single taxation system but, it is a dual tax because both the state and center both will collect separate tax on a single transaction of sale and services.
2-     The tax rate has been increased for many products, thus increasing their costs.
3-     Sectors like textile, media, pharma, dairy products, IT and telecom are bearing the brunt of a higher tax. Also, the price of commodities has increased like jewelry, mobile phones and credit cards.
     4-     Real estate market affected- Economists believe GST in India has already had a negative impact on the real estate market. It has added up to 8 percent to the cost of new hones and reduced demand by about 12 percent.


As the coin has two sides, same way implementation of GST impacts a nation both ways, positively and negatively. If the negative aspects are ignored and the positive effect are considered, then it is a way to reduce the black money. GST is having few initial problems, however with time, the bigger picture and it will surely result in an economic integration.