Introduction
The Goods and Service Tax (GST) is a very complex tax system, which simplifies the huge tax structure in India by supporting and enhancing the growth of Economic development of the country. GST is a comprehensive subject which levies the tax on various sectors of the economy such as manufacturing, sale, and consumption of goods and services at a national level[1]. The goods and service tax bill or the GST bill, also referred to as the Constitution (One hundred and twenty second Amendment) Bill, 2014, initiates a value-added tax to be implemented at center and state level in the country. GST basically will be an indirect tax at all the stages of the production to bring about uniformity in the system.
After bringing GST into practice, there would be an amalgamation of the central and the state taxes into a single tax paying system, which is supposed to enhance the economy of India by increasing it GDP and will also increase the rate of production in domestic as well as international market. At the consumer level, it is supposed to reduce the overall tax burden, which is currently estimated as 25-30%.[2] Under this system, the consumer pays the final tax but an efficient input tax credit system ensures that there is no cascading of taxes- tax on tax paid on input that goes into the manufacture of goods.[3]
Need for GST
India’s current advance towards Economic Growth and improvement established from the changes attempted in 1991 financial emergency, which lifted India from a time of moderate development under communist run and gave a chance to enhance in living conditions in the tremendous, poor Country. In the meantime, numerous things have changed in India after the Balance of payment emergency in 1991. Indian policies became more positive about promoting export and allowing foreign capital to participate in the process of India’s Growth.[4]
Globalization and liberalization have become the order of the day. The interdependence of economies in their move for development compelled the Governments of all the countries to follow the globalization policies adopted by the major economies of the world. To survive and grow in this economic order rational and competitive tax policies are being adopted by every country. India has also fallen in line with the requirement and has been initiating modifications in direct and indirect taxes. The recent proposals of Direct Taxes Code (DTC) and Goods and Services Tax (GST) are considered as path breaking in the economic restructuring in general and in the taxation area in particular
Importance of GST
Presently the Constitution empowers the Central Government to impose Excise duty on the manufacturing product and service tax and Cenvat on a supply of services and it empowers the State government to impose a Sales tax and Value added tax on the sale of the goods by the people. So earlier there was a huge loss of revenue to the central and the state government, but after the implantation of the GST that is putting all under one taxation system has helped in the reduction of the revenue losses which will be utilized for the service of the public. The importance of implementation of Goods and Service Tax are mentioned below:
- The multiplicity of the taxes at the center and state level had resulted into complex indirect tax structure and along with there was hidden trade and industry loss.
- There is cascading of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at the stage of manufacture is available to the traders while paying the State level sales tax or VAT, and vice-versa. Further, no credit of State taxes paid in one State can be availed in other States. Hence, the prices of goods and services get artificially inflated to the extent of this ‘tax on tax’.[5]
- The presentation of GST would stamp an unmistakable withdrawal from the plan of dispersion of financial forces inserted in the Constitution. The proposed double GST envisions tax assessment of the same assessable occasion, i.e., the supply of merchandise and ventures, all the while by both the Center and the States. In this way, both Center and States will be engaged to force GST over the esteem chain from the phase of produce to utilization
- The credit of GST paid on inputs at every stage of value addition would be available for the discharge of GST liability on the output, thereby ensuring GST is charged only on the component of value addition at each stage. This would ensure that there is no ‘tax on tax’ in the country.
- The GST realizes an aggressive estimating. As every one of the items are burdened consistently the nation over, the different types of circuitous assessments will expel and which thus will diminish the taxation rate of the purchasers. This will decrease the costs of the items and expands the utilization which thus will be more useful for the organizations.
- India is said to have one market Economy, and by the implementation of GST, numerous markets divided by various tax shall be avoided.
Problems in Implementing GST
With the Introduction of the GST, many sectors faced difficulty in adapting to it because their business was getting affected by this proposed bill. Along with all these the implementation faced a lot of problems which are mentioned as follows:
- There was no clear picture available to the Government as well as the general public about the structure and working of this Bill.
- There of no mutual Agreement and cooperation between the state government and the Central government in regard to this proposed Bill, even though if implemented the levy of tax remained on the part of the state.
- The Revenue Neutral Rate (RNR) is the key factor responsible for the effective implementation of GST. But under GST, we could not say that the revenue remains same as that of the current system of taxation.
- Loss of revenue to the state. If we buy any product the VAT @ 14.5% is included towards it, after the GST regime, there will be no VAT then it results in the loss of revenue to the state.
- Even though the Government said that they will pay all the losses of the revenue of the state government, it will again somehow be imposed on the general public only in some other form.
- IT is the backbone of GST which would connect the various stakeholders through the Virtual platform. So, the government must show keen interest in the development of the portal for GST and successfully achieves it.
- There is a large debatable question in implementing the GST such as whether the small entrepreneurs and small firms will be helpful through the GST regime? , whether the government and the Public ready for such a change? Are some of the questions which are highly in a confused dilemma?
- It is costing the government a huge amount to train the staff of the taxation Department about the implementation of the Goods and Service Tax.
Impact on the Economy
- GST is probably going to enhance the duty to GDP proportion of the nation The GDP development is probably going to go up by 2%, in any case, one percent of extra duty may influence GDP unfavorably.
- Every year there is a development in charge income in 8-10% territory
- GST is probably going to support GDP of India by 100 to 150 bps bringing about expanded charge income
- The GST nonpartisan rate is required to associate with 17-18%, which would be gainful to assembling division where the assessment rate is around 24% at a display and may not liable to give any incremental assessment income to the government.
- The administration part is a most exceedingly terrible hit if GST actualized at 17-18% rate. The benefit impose has been expanded from 12.36% to 14% a year ago and further 0.5% as Swachh Bharat cess and 0.5% as KrishiKalyanCess this year, if this is expanded by another 3-4% that would be a positive difficulty for benefit area and for shoppers as well.
- This builds charge income for the administrations which raises the capital expenditure; which thus supports the development of the economy.
- GST will likewise bring the sloppy area which appreciates the cost advantage, into the duty section.
- Single assessment rate will diminish the cost of merchandise (as of now, for a client, the taxation rate of merchandise is anyplace between 25-30 for each penny while GST proposes a duty rate of 18 for each penny and might be brought down in following years) consequently expands utilization consumption which thus rises the benefits for organizations. It’s unquestionably a win– win circumstance for organizations and additionally buyers.
- With more than 160 nations executed GST, it streamlines charge framework all around.
- GST additionally evacuates the custom obligations relevant on sends out. This has major suggestions for the Indian economy: influencing fares to tax exempt would goad exchange for our economy.
- Our intensity in outside business sectors would increment by virtue of lower cost of exchange while the imports will be saddled same as residential products what’s more, administrations.
- It gives charge credit to the makers and diminishes taxation rate and along these lines cultivate generation and development.
- Additionally, GST is likewise anticipated that would avoid state extract on liquor and tobacco from its domain. This suggests a vast income source still rests with the state government to produce money streams from.
Conclusion
In straightforward, GST would a positive for assembling division and negative for benefit segments, as the present assessment rate for assembling is way higher at that point proposed GST charge rate and for administrations, proposed GST will be a higher rate of assessment. GST is certainly a decent move to change aberrant tax collection in India and has constructive outcomes on GDP development, Tax income, fares, work thus numerous. In any case, even following 10 years Government have neglected to execute it, because of assortment of reasons like, pay instrument for the states, GST rates, and issues identifying with nourishment items, oil, and tobacco and numerous political issues as well. With bunches of defects in the present expense structure which is influencing the development of economy, there is a need to actualize GST and to streamline our development with worldwide economy. The execution of GST would clear path for a basic furthermore, justifiable assessment structure, and furthermore help in staying away from any avoidance taking put at any level. Hence, part being said and done, a fitting usage would prompt really comprehends whether “GST is a help or bane”.
[1] The Economic Times (2009) Featured articles from the Economic times.
[2] https://www.omicsonline.org/open-access/a-research-paper-on-an-impact-of-goods-and-service-tax-gst-on-indianeconomy-2151-6219-1000264.php?aid=82626
[3] GST INDIA (2015) Economy and policy
[4] Mukherji, Rhul (2005), “The Indian State Under Globalization: A Research Agenda”, Background paper for the Ford Foundation’s Project administered by National Foundation of India
[5] First Discussion Paper On Goods and Services Tax In India, The Empowered Committee Of State Finance Ministers New Delhi November 10 , 2009
