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IMPACTS OF GST ON INDIAN ECONOMY

Kayal Vizhi J, Anne Monica T , Eugine Selvaraj J
Student of MBA
St. Joseph’s Institute of Management
St. Joseph’s College (Autonomous)
Tiruchirappalli

ABSTRACT
This paper is about the effect of GST on economic growth in India. Our GST council has concluded
the rates for all the goods and service of various tax portion. The GST is expected to fill the slit in
the current scenario and uplift the Indian economy. This can be done by integrating the indirect
taxes for all states throughout India. The tax rate are set at the range 0% to 28% for various goods
and services. Virtually partial of goods and services comes under 18% tax rate. This will be
changing our life after the post GST. This will surely add to government revenue by extending the
tax base. This will make the Indian market more stable than ever before, and Indian firms can
compete with foreign firms. It is expected remarkably ease double taxation and make taxation
overall easy for the industries. The GST, because of its crystalline character will be easier to
handle. Once executed, the intended taxation system should hold great assurance in terms of
encouraging the growth for the Indian economy. Here we just compare the old GST with updated
GST in India’s per capita income. There are both positive impact and effects of GST.

KEYWORDS: GDP ,goods and services, GST, revenue, tax rate.

INTRODUCTION
GST India's biggest tax reform based on the notion of "one country, one market, one tax" is
finally here. The time has finally arrived that the Indian government was waiting for a decade.
The single largest indirect tax regime has come into force, eliminating all trade-related inter-
state barriers. The one-stroke GST rollout has turned India into a single tag.

The rollout has revived the hope of recovering momentum and increasing the economy from
India's fiscal reform program. Then again, there are concerns of instability that are rooted in
what is seen as a hurried transition that may not help the country's interests.
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Will the hopes prevail over uncertainty depend on how our government works to make GST a
"good and simple tax." The idea behind the implementation of GST across the country in 29
states and 7 territories of the Union is to offer everyone a win - win situation. Manufacturers
and retailers would benefit from less tax filings, clear laws, and simple bookkeeping; customers
would pay less for goods and services, and government would generate more revenue as
revenue gaps would be plugged. As we all know, the facts of the ground differ. So, how did
GST really affect India?

What is GST?

Goods and Services Tax is levied on goods and services manufacturing and sales nationwide. At
each point of the manufacturing process, the tax is paid. GST refers to the consumer as well as the
supplier. It's a tax based on a destination. This means that at the point of consumption, GST is to
be collected.

GDP Data for FY 2018-19 Last Quarter(January to March 2019)

In the quarter of January – March, India's GDP was recorded at 7.7 percent, with a fast approach
to better than 7.0 in the previous quarter. With some expectations in the financial year 2018 for
6.7 percent, respectively 7.3 percent and 7.5 percent in the FY 19 and FY 20. Because of GST,
as experts speculate, there is some hindrance to the GDP number, but still, many economists
are likely to maintain around 6.5%.

Latest Update on GDP Data for FY 2019-20 2nd Quarter(July to September

2019)

In addition to the woes of the Indian Prime Minister and the Ministry of Finance, India's GDP
(Growth Domestic Product) plunged further down to 4.5% from the earlier 5% of GDP in the
first quarter of the second quarter of FY 2019-29. Over seven quarters now, the same pattern
of GDP felling has been going on. While there was a 5 percent GDP in the first quarter of 2019-
20, there was a 0.5 percent decline in the second quarter. During last year's same period, i.e.
the second quarter of FY 2018-19, the country's GDP growth was 7.1%.The new GDP recorded
is 2.6 percent lower compared to that, which is also the lowest in the last six years.

POSITIVE IMPACT

Most of every industry body is wholely prepared to implement the new indirect taxSystem,while
commending the efforts of the government towards its implementation. The national GST
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reform India's fragmented structure of indirect taxation and unify the more than $2trillion
industry into a single market of 1.3 billion inhabitants.India will push several notchesup by this
single, but the country's most significant tax reform, to the international ease of doing ladder.
instead of single GST, India introduced dual GST.It has disrupted the whole GST system in
India ,introduce such a tax regime, the centre will need to work with 29 states and 7 federal
territories. Short IT is possible that such a system would generate both economic and political
problems.It is possible that such a system would generate both economic and political problems.
When deciding prices, states are likely to lose their influence when GST is introduced.The
allocation of taxes between the states and the government is a matter of contention, with no
agreement on revenue neutral.15% pre-GST service levy, which inpost-GST will rise to 18-20%.

Impact of GST on FMCG Sector

The FMCG sector, Indian economy's fourth largest segment, has a giant market size of over
US$ 13 billion. Like many others, the sector was also subject to multiple taxes like service tax,
VAT, excise duty, central sales tax, etc. Before July 1, 2017, the overall tax rate stood at 20%-
25%. But under the impact of GST, on average, the rates could fall to 18%-20%. The Fast
Moving Consumer Goods (FMCG) has a large distribution overhead with almost 2 percent -7
percent of the total logistics cost. With the implementation of the GST tax, however, the cost
could be reduced to 1% -3%.

IN STARTUPS

By offering them a growth-friendly environment, India has seen many startups rise and shine under
the GST regime. GST India model has brought many features such as purchase tax credit, easy
registration and tax payments, unrestrained movement of goods and services that have proven to
be helpful to start-up growth

TAX STRUCTURE IMPLIFICATION

GST has streamlined the country's tax process. Since GST is a single levy, it has become easier to
calculate taxes at the multiple stages of the supply chain. It offers all consumers and suppliers a
good idea of the amount of tax they are paying and the context on which they are focused. In
contrast, it is also possible to avoid the hassles of treating tax agents and authorities.
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FUTURE LOOKS LIKE

It is expected that GST would not lower the taxes but minimize tax slabs. The growing countries
reform their economy by applying only two or three rates-lower rates for essential products, high
rate is assigned for expensive goods .In India there are five to six slabs, most are three rates –
integrated ,central, state rates .They assign such rates because they are in need of growth in revenue
for the government . This will shift any time soon. The government will revise the RNR (revenue
neutral rate).

The impact of GST on the economy refers to be in a positive way in the medium term .the
government will increase the revenue from the taxes to extend the tax net and fiscal deficit.
Inflation must be reduced as the tax on tax effect would be rejected. The industries would try to
develop their growth in business by implementing tax reform of the firm.

CONCLUSION

Accordingly, it is up to the government to predict the capacity among the less equipped
participants like small scale traders and producers. Many solution has to be taken to reduce the
overall consent cost and goods with high GST. GST would implement transparent and corruption-
free tax administration, eliminating the existing gaps in indirect tax structure. GST is both
business-friendly and consumer friendly. GST in India is poised to improve each of these
stakeholders ' positions drastically. We need a tax system reform that is better than previous
taxation. GST will enable India to better negotiate its terms in international trade forums. GST
aimed at increasing the taxpayer base by bringing compliance between SMEs and the unorganized
sector. This will make the Indian market more stable than ever before, and Indian firms can
compete with foreign firms.

GST will be good and simple only when the entire country works as a whole towards making
it successful.

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