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.
Conclusion
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.
