What are the positive and negative impacts of GST?
POSITIVE AND NEGATIVE IMPACT OF GST
The GST bill, known as the Goods and Services Tax, was introduced in Lok Sabha in December, 2014 and was implemented from July 1, 2017. Goods & Services Tax is a multistage and destination-based tax that is levied on every value addition to the goods. GST was introduced with the aim of one nation one tax system. Under the GST bill all other taxes like Octroi, Central Excise VAT i.e. the value added taxes etc, got consolidated into one and it restructured the indirect taxation. The basic idea of this bill was to create a single, cooperative and undivided Indian market and to make the economy stronger and powerful. GST has divided the goods and services into various categories and applied the tax from 5 % to 28 % It has its own pros as well as cons. Elucidating on these prospects:-
Benefit of GST for the Centre and the States:
Experts are predicting a $15 billion a year in financial gains post implementing the GST bill as it has created a split of burden between the manufacturing and services/retail in taxes.GST will promote more exports thereby creating more employment opportunities and thus will boost the growth.
Benefit of GST for individuals and companies
Individuals will be also get benefited as the prices will come down and lower prices mean more consumption, and more consumption means more production, so it will foster the growth of the companies too.
POSITIVE IMPACT OF GST:
- Increase in Foreign Investment- With GST, India is now a 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 businesses to sell in the global market.
- Fewer Tax- GST has two constituents: 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.
- Reduce 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 we have already got rid of various taxes and duties on our businesses.
- Transparency- The tax administration has started working corruption free. Also enabling sales invoices to show the tax applied has resulted in transparency.
NEGATIVE IMPACT OF GST:
- Dual Control - GST is being referred to as a single taxation system but in reality it is a dual tax because both the state and centre both will collect separate tax on a single transaction of sale and service.
- Incumbent increase of the cost of some commodities - The tax rate has been increased for many products, thus increasing their costs.
- Some sector are at a loss- 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 jewellery, mobile phones and credit cards.
- Real Estate Market affected - Economists are of the opinion that 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 homes and reduced demand by about 12 percent.
There are approximately 140 countries where GST has already been implemented by Australia, Germany, Japan, and Pakistan. India is one of the most stable economies of the world and we have proved to be quite adept at adjusting to major economic renovations.
As the coin has two sides, same way implementation of GST impacts a nation both ways, positively and negatively. If we ignore the negative aspects and consider the positive effect, then it is a way to reduce the black money. GST is having a few initial problems, but with time, we will be able to see the bigger picture and it will surely result in an economic integration.
- Aayushi Shukla