How GST Will Impact Economy: Your 10-Point Cheat-Sheet

The GST will reshape the indirect tax structure by subsuming majority of indirect taxes like excise, sales and services levies. This will do away with the complex indirect tax structure of the country, thus improving the ease of doing business in the country. Exports will become competitive as the GST regime will eliminate the cascading impact of taxes. A National Council of Applied Economic Research study suggested that GST could boost India's GPP growth by 0.9-1.7 per cent. GST is a key 'brahmastra' for India's gross domestic product in times of challenging global environment, says trade body Assocham president Sunil Kanoria. GST will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses. A UBS Securities study found that truck drivers in India spend 60 per cent of their time off roads negotiating check posts and toll plazas. The foreign brokerage said that 11 categories of taxes are levied on the road transport sector. The GST will help bring down logistical costs. Under the GST, manufacturers will get credits for all taxes paid earlier in the goods/services chain, thus incentivising firms to source inputs from other registered dealers. This could bring in additional revenues to the government as the unorganised sector, which is not part of the value chain, would be drawn into the tax net. To claim input tax credit, each dealer has an incentive to request documentation from the dealer behind him in the value-added/tax chain. Thus, the new tax regime is seen as less intrusive, more self-policing, and hence more effective way of reducing corruption. The supplier, because of the paper trail left by the GST, knows that his evasion will be more likely to be detected once his client is audited. Experts say that GST will improve tax compliance. A Finance Ministry report said that the GST regime will boost the 'Make In India' programme as manufacturers will get input tax credits for capital goods. The clean-up of the Indian taxation system will reduce the number of excise duty exemptions. According to the government's estimates, excise tax exemptions result in foregone revenues of Rs. 1.8 lakh crore. The comparable figure for the states is about Rs. 1.5 lakh crore. Together, India loses about 2.7 per cent of GDP because of exemptions. The service tax rate could shoot up from the current level of 15 per cent (including Krishi Kalyan Cess). Under the GST tax regime, this tax rate may go up to 18 per cent. This has led to fears that inflation could rise in the short term. Implementation of GST is expected to lead a temporary rise in inflation, which will typically last a year, DBS Bank said in a note. But the bank expects the impact on inflation to wear off gradually due to base effect. Inflation in the second year after GST implementation will benefit favourably as the numbers would be compared to already-high figures of the first year of implantation.

How GST Will Impact Economy: Your 10-Point Cheat-Sheet

NDTV Profit

NDTV Profit

Follow Us

DISCOVER US FASTER

DOWNLOAD THE APP