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Impact of GST on Indian Economy
Article · November 2018
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International journal of basic and applied research
www.pragatipublication.com
ISSN 2249-3352 (P) 2278-0505 (E)
Cosmos Impact Factor-5.86
Impact of GST on Indian Economy
Dr. Namita Mishra
Associate Professor, Tecnia Institute of Advanced Studies
Abstract ; GST is a single national uniform tax levied across India on all goods and services. In GST,
all Indirect taxes such as excise duty, central sales tax (CST)and value- added tax (VAT) etc. will be
subsumed under a single regime. Introduction of The Goods and Services Tax (GST) expected as a
significant step towards a comprehensive indirect tax reform in the country, which would lead India
for its economic growth. The Proposed study is designed to know the impact on GST on Indian
Economy with the Help of Its individual effect on different sectors. The Study is Exploratory in nature
and Secondary Data has been used for the study. The data will be collected from different Journals,
Periodicals. Newspapers and Internets.
Key Words: GST, Economy,cascading effect of taxes,GST Council, Cess,taxation reforms
Impact of GST on Indian Economy
To remove cascading effect of taxes and also to provide for a common national market for goods and
services ,the Government of India proposed for amendments to introduce the goods and services tax
for conferring concurrent taxing powers on the union as well as states including union territory with
legislature to make laws for levying goods and services tax on every transactions.GST is an indirect
tax has introduced on 1 July 2017 in India and was applicable throughout India which replaced
multiple cascading taxes levied both by central and state governments. The GST is governed by a
GST Council. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and
28% and there is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold
.Further in addition a Cess of 15% or other rates on top of 28% GST applies on few items like aerated
drinks, luxury cars and tobacco products. Expert viewed it as biggest tax reform in India founded on
the notion of “one nation, one market, one tax” . The GST rollout has converted India into a unified
market of 1.3 billion citizens. The rollout has a positive hope of India‟s fiscal reform program
regaining momentum and widening the economy of the nation. The idea behind implementing GST in
the country in 29 states and 7 Union Territories is that it would offer a win-win situation for every
citizen .The entire taxation base will be shared between the assessment mechanism of the center and
the states who would get to collect tax on the economic activities taking place in Indian territorial
waters. At the ninth GST council meeting the center made significant concessions to bring states,
including the defiant ones. The administrative decisions will be as follows. The state will administer
90 percent of the tax players, including service providers with annual turnover up to rupees 1.5 crore
with scrutiny, and audit powers and the balanced 10 Percent will be controlled by the Centre. Tax
players above that threshold turnover, including those pay integrated 9interstate imports)GST will be
equally shared between the canter and state, and this will lead to significant shifting of the tax
players base from center to state.
385 Received: 8 October Revised: 15 October Accepted: 20 October
Index in Cosmos
November 2018 Volume 8 Number 11
UGC Approved Journal
International journal of basic and applied research
www.pragatipublication.com
ISSN 2249-3352 (P) 2278-0505 (E)
Cosmos Impact Factor-5.86
Objectives
To understand the concept of goods and service tax
To find out short effect of GST on Economy.
To find out the Impact of GST in future.
Methodology:
The proposed study is a Desk research and is an attempt of descriptive research, based on the
secondary data sourced from journals, Internet, articles, previous research paper, parliament library
and reference research ,Documentation and information service(LARRDIS]
Review Literature:
Nishita Gupta in her study „Goods and service tax: it‟s impact on Indian Economy” stated that The
goods and services Tax (GST) will indeed be a significant improvement towards a comprehensive
indirect tax reforms in India and it would give India a world class tax system and improve tax
collections. It would end distortions of differential sectors .Further viewed that it would lead to the
abolition of taxes such as central sales tax, state level sales tax, octri, entry tax, stamp duty, telecom
license fees,taxon consumption. GST is expected to create a business friendly environment in India,
as a result price levels and inflation rates would come down overtime because of application of
uniform tax rate. MoreoverIt will also improve government's fiscal health as the tax collection system
would become more transparent, making tax evasion difficult.
Nitin Kumar wrote in his research paper “Goodsand Servicestax in India: A way forward that The
Goods and Service Tax (GST) is one of the biggest taxation reforms in India The central idea behind
this form of taxation is to replace existing levies like VAT, , service tax ,excise duty and sales tax by
levying a comprehensive tax on the manufactureand consumption of goods and services in the
country. GST is expected to unite the country economically as it will remove various forms of taxes
that are currently levied at different points.
Dr. Ambrishstates in his study”Goods and Service Tax and Its Impact on startups “that
GST is expected to unite the country economically as it will remove various forms of taxes that are
currently levied at different points. Based on a 2015 NASSCOM reportthis paper alsoanalyzed how the
GST has impact on startup of the country and how the has The impact on GDP.
Dr. R. Vasanthagopal, Studied “GST in India: A Big Leap in the Indirect Taxation System”, and found
that the positive impacts are dependent ifdesign of the GST is rational and if balancethe conflicting
interests of various stakeholders. Further he said GST would be a big leaf ion the indirect tax system
and also give a new impetus to India‟s economic change. furtherhe mentioned that the
implementation of the GST would be pegged as one of the biggest game changing reforms of the
Indiangovernment, whichwill help India to become an economically integrated economy and help to
reduce business costs and facilitate seamless movements of goods and services eliminating local
charges.
386 Received: 8 October Revised: 15 October Accepted: 20 October
Index in Cosmos
November 2018 Volume 8 Number 11
UGC Approved Journal
International journal of basic and applied research
www.pragatipublication.com
ISSN 2249-3352 (P) 2278-0505 (E)
Cosmos Impact Factor-5.86
An overview of GST and Its impact on different sectors
If talk about impact of GST on manufacturers, distributor and retailers It is believe GST is expected to
boost competitiveness and performance in India‟s manufacturer due to tax structure. High
infrastructure spending and declining export are just some of the concerns of this sector. Single tax
system will decrease the administrative costs for manufacturers and distributors and this sector will
grow more strongly.
If thrown glance on impact of GST on Service Providers it is observe that most of the tax burden is
borne by domains such as telecommunication services, Insurance industry, business support
services, Banking and Financial services , IT services etc. Introduction of GST willdecrease burden
The Logistic industry forms the backbone of the economy. We can fairly assume that a well-
organized and mature logistics industry has the potential toshoot ahead the “Make In India” initiative
of the Government of India and has positive impact on economy. Simultaneously GST will help the e-
com sector‟s growth but the long-term effects will be particularly interesting because the model GST
law specifically proposes a tax collection at source (TCS) mechanism, If talk about Pharma industry
GST is expected to benefit the pharma and healthcare industries. It boost medical tourism
withsimplified tax structure. Telecommunicationssector prices are expected to come down after GST.
Manufacturers will save on costs through efficient management of inventory. Handset manufacturers
will find it easier to sell their equipment as GST will negate the need of the state and will also save up
on logistics costs. Textile industry generates employment to a large number of skilled and unskilled
workers . It contributes about 10% of the total annual export, and this value is likely to increase under
GST. GST would affect positively to the cotton value chain of the textile industry which lead economic
growth. The real estate sector is also plays important role in the Indian economy, it Plays an
important role in employment generation in India. The sector will see substantial benefits from GST
implementation. Agricultural sector is the largest contributor of GDP. It covers 16% of GDP.The
major issues faced by the agricultural sector, is transportation of agri products across state lines. It is
expected that GST will resolve the issue of transportation. FMCG sector could rise significant savings
in logistics and distribution costs as the GST will eliminate the need for multiple sales depots. The
GST rate for this sector is expected to be around 17% which is way lesser than the 24-25% tax rate
paid currently by FMCG companies. Under the current tax system, there are several taxes applicable
on automobile sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty which
will be subsumed by GST.
An analysis on GST and its impact on Indian Economy
The implementation of goods and service Tax(GST) coupled with a digitized economy ushered in by
demonstration, will make India‟s economy” look much cleaner and bigger “said union fin ance
minister ArunJaitely at the vibrant Gujurat global Summit. Further he said ,it is going to be a major
step towards the integration of informal economy and this itself is going to increase the transactions,
which are covered within the Banking system transactions and may lead to higher revenue in the
387 Received: 8 October Revised: 15 October Accepted: 20 October
Index in Cosmos
November 2018 Volume 8 Number 11
UGC Approved Journal
International journal of basic and applied research
www.pragatipublication.com
ISSN 2249-3352 (P) 2278-0505 (E)
Cosmos Impact Factor-5.86
future .He said “A new India Has Emerged‟.It is inevitable that with the increase in level of demand,
the level of supply would respond likewise. TheGST council is being asked by the ministry of
Commerce to keep exporters of the plantation, leather and cement out of its framework and
suggested to impose lower tax on them to boost output and increase employment generation. With
this the producers increase productivity and perform better in global market‟s council retained its
proposed definition of Agriculturist to allow a land to have been personally cultivated only if its
farmed by individuals and family members of HUF and its exempted under GST. Manufacturers and
traders would benefit from fewer tax filings, transparent rules and overall a sound book keeping
system. Consumers would be paying less for the goods and services and lead to change their
expenditure pattern and livelihood, The government would generate more revenues as revenue
leaks would be plugged by GST implementation. How has GST really impacted India in current
economy situation and in future. Firstly: from the viewpoint of the consumer, the consumers have pay
more tax for most of the goods and services they consume. The GST implementation has a cost of
compliance and tax on most of the goods attached to it. It examine that this cost of compliance will be
prohibitive and slightly high for the small scale manufacturers and traders. Resulted to this pricing of
goods will go high and has direct impact on cost of living of the society. Secondly: If long term effect
of GST analyses it is expected that GST would not just mean a lower rate of taxes, but also minimum
tax slabs imposed on .In many Countries where the Goods and Service Tax has helped in reforming
the economy, apply only 2 or 3 rates .GST is designed to minimize the rate with a lower rate for
essential commodities, and a higher tax rate for the luxurious commodities. Currently, in India, there
are 5slabs, but there will be a shift soon .thirdly ;Impact of GST on macroeconomic indicators is likely
to be very positive in the medium-term. Inflation would be reduced as the cascading (tax on tax)
effect of taxes would be eliminated in the country and at the same time revenue from the taxes for the
government is very likely to increase with an extended tax net, and the fiscal deficit is expected to
remain under the checks and GST would be a change maker on this. Moreover, exports would grow,
while FDI (Foreign Direct Investment) would also increase. The experts believes that the country
would grow economically in the ease of doing business with the implementation of the most important
tax reform ever in the history of the country.
Conclusion
A single taxation system would encourage new businesses and entrepreneurs to engage in service
and manufacturing sector. GST levied only on consumption of goods or services .This leads to
eliminate economic distortions in taxation amongst states and also helps in free movement of goods
,further it also minimize the complexity of taxation. It will also beneficial to individuals as the prices
will go down due to GST and decrease in price leads to increase in consumption and directly
increase the GDP.As GST implementation applied at a time for all states lack of policy barrier will
removed. Directly GST will increase the investment in FDIs which increase the foreign exchequer of
the country and indirectly increase the employment opportunities. It will promote new startups in
India for its business-friendly tax structure.
388 Received: 8 October Revised: 15 October Accepted: 20 October
Index in Cosmos
November 2018 Volume 8 Number 11
UGC Approved Journal
International journal of basic and applied research
www.pragatipublication.com
ISSN 2249-3352 (P) 2278-0505 (E)
Cosmos Impact Factor-5.86
Bibliography
1. Gupta Nishita (2014)CASIRJ Volume 5 Issue 3 ISSN 2319 – 9202,Goods and service tax: it‟s
impact on Indian economy”.
2. Goods and Services Tax (GST) - A step forward (2013) available at
www.articles.economictimes.indiatimes.com
3. Dr. Ambrish”International journal of Arts ,Humanities and management studies, Goods and
Service Tax and Its Impact on startups 4
4. DrVasanthagopal.R. (2011),International Journal of Trade,EconomicsandFinance,Vol.2,No.2,
April 2011 ,GSTinIndia:ABigLeapintheindirectTaxationSystem
5. CASadukiaRajkumar,' A Study On Proposed Goods And Services Tax [GST] Framework In
India” available at www.taxclubindia.com
6. Articles from parliament library and reference research ,Documentation and information
service(LARRDIS]
Articles from News Papers
1. Fe Bureau ,NewDelhi,Jan 17Jan 2017 “GST Council settles dual; control issue
,Financial Express.
2. Nair Avinash ,(Jan12 2017) , “GST plus digital will make economy bigger, cleaner:
Jaitley, Indian Express .
3. SenRanjoy(09January2017)‟Economy; encouragement interspersed with
circumspection, Deccan Herald .
4. Magazine Aanchal(03 Jan 2017) “Absentee Landlords ,food processing firms brought
under GST net”Indian Express.
Internent
1. www.indiataxes.com
2. www.articles.economictimes.indiatimes.com
3. www.taxmanagementindia.com
4. www.goodsandservicetax.com
5. www.casirj.com
389 Received: 8 October Revised: 15 October Accepted: 20 October
Index in Cosmos
November 2018 Volume 8 Number 11
UGC Approved Journal
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