The implementation of GST is a milestone reform for the Indian economy. It has overhauled the entire taxation structure by combining numerous taxes into a unified tax. Due to the considerably less complicated taxation system, the cascading effect will lead to a decrease in the price of goods and services across the country.
GST is a technology backed tax reform that pushes businesses and vendors to file for taxes every month, facilitated by the intuitive gstn portal. However, no change of this scale has been without its fair share of issues.
Let’s look at some of the short term and long term effects on our nation’s GDP resulting from the GST implementation.
GST Implementation: Short Term Effects On GDP
There are numerous short term implications that GST has on the GDP of India. The IMF, in its bi-annual World Economic Outlook, stated that the Indian economy would grow at 4.2%, rather than 5%, as reported by the statistics department. Moreover, from a consumer standpoint, the taxes on everyday consumables carry the same or a higher amount of tax in GST.
Aside from this, GST compliance comes with an additional cost to businesses. This cost can prove to be high for small companies to comply with the new tax norms. Due to this, business owners were forced to increase the prices of their goods and services to make up for the increased compliance rates.
GST Implementation: Long Term Benefits On GDP
One of the foremost benefits of GST implementation is a reduction in the tax charged on transactions carried out for goods and services. The increased transparency and reduction of overhead costs ensure further tax compliance by businesses. Not to mention the ease of doing business that comes with a transparent taxation system.
GST has also benefitted the Make in India programme due to the ability to avail the input tax credit. The GST scheme has also improved the indirect tax revenue as businesses are required to adhere to stricter compliance norms. The gst website has all the filing related information that can help businesses in seamlessly filing their taxes.
Let’s have a look at all the positive impacts that GST implementation has on the GDP of the nation.
- Transparent tax system boosts investments and tax compliance.
- Ability to file taxes online is convenient for businesses that can result in a greater number of taxpayers.
- A unified tax means fewer transaction costs. The reduced transaction costs can help in lowering the cost of goods and services across channels.
- Since GST is a technology-based tax, the chances of tax evasion by businesses are reduced drastically.
- The entire tax infrastructure becomes uniform, and all the records are available digitally, at the click of a button.
- Ability to avail input tax credit helps taxpayers in availing credit of the taxes they paid previously in their resourcing and supply channels.
- The logistics sector has become relatively time-efficient as opposed to the previous tax regime that required the fleets to pay taxes at almost every state border.
Economists state that a well-designed GST system alone can provide a 1-3% boost to our nation’s GDP. The simplified tax structure will bolster investor confidence and generate thousands of jobs. A single tax ensures an overall low compliance cost and will promote equality in the market.
The government has constantly been churning out reforms that make the GST system more efficient. All of the above-mentioned points have a tremendous impact on boosting the GDP of our nation and will definitely put India on the forefront of development.
Conclusion
The effects of GST implementation are far and wide. Not only is it historic tax reform, but the scale of its application has affected each and every taxpayer across the country.
Although GST has resulted in an increased compliance cost, the government is continually working on new amendments that can help businesses in lowering their compliance costs. From a consumer’s point of view, GST is expected to reduce the tax burden and promote a transparent taxation system.
Furthermore, as the government has increased tax revenue, the government can put that money back in the economy that has the potential to generate thousands of new jobs. These factors combined can provide an enormous boost to the GDP growth of a nation.
