International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064

Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391

GST in Indian Economy: It’s Benefits and Impact

Dr. Chandu Ravi Kumar
Assistant Professor, Ethiopian Civil Services University, Addis Ababa, Ethiopia

Abstract: The Goods and Services Tax (GST) is a value added tax implemented in India.GST is the only indirect tax that directly
affects all sectorsand sections ofour economy. The goods and services tax (GST) is aimed at creating asingle, unified market that
willbenefit both corporate and the economyBusiness is undergoing rapid transformation due to the globalization. Taxregime and
policies of any country are gaining high importance due to growingforeign trade between various countries. In the competitive world of
business,GST is a significant topic which requires lot of deliberations from academia andindustry.GST is expected to create a business
friendly environment, as price levels and hence inflation rates would come down overtime as a uniform tax rate is applied. It willpower
government's fiscal health as the tax gathering system would become clearer, making tax evasion difficult. An attempt is made in this
paper to study the concept of goods and service tax and its impact on Indian economy. The study also aims to know the advantages and
disadvantages of GST in Indian scenario.

Keywords: Value Added Tax, Central Value Added Tax, government, Economy, globalization

1. Introduction economy. He alsoexplain the proposed GST model will be

implemented parallel by the central
The Goods and Services Tax (GST) is a value-added tax and state governments as Central GST and State GST
imposed on most goods and services sold for domestic respectively.
intake. The GST is paid by consumers, but it is remitted to
the government by the businesses selling the goods and NishithaGuptha (2014) in her study stated that
services. In effect, GST offers revenue for the government. implementation of GST inthe Indian framework will lead to
The goods and services tax (GST) is an indirect sales commercial benefits which were untouchedby the VAT
tax that is applied to the cost of certain goods and services. system and would essentially lead to economic development.
The business adds the GST to the price of the product, a HenceGST may usher in the possibility of a collective gain
customer who buys the product pays the sales price plus for industry, trade, agricultureand common consumers as
GST; and the GST share is collected by the business or well as for the Central Government and the
seller and furthered to the government. StateGovernment

Initially France implemented GST to decrease tax-evasion. Pinki, SupriyaKamma and RichaVerma (2014) in their paper
Now, more than 140 nations have initiated GST with some titled “Goods and Service Tax- Panacea For Indirect Tax
nations having Dual-GST, for example Brazil and Canada. System in India” concluded that the new government in
India has preferred the Canadian model of dual GST as it India is positive towards implementation of GST and it is
has a federal structure where the Centre and states have the beneficial for central government , state government and as
powers to charge and collect taxes.India joins the GST group well as for consumers in long run if its implementation is
on July 1, 2017. backed by strong IT infrastructure.

2. Literature Review 3. Need for GST

Ehtisham Ahmed and SatyaPoddar (2009) in their study on India’s latest progress towards economic growth stems from
“Goods and Service Tax Reforms and Intergovernmental reforms undertaken after the 1991 fiscal crisis, which lifted
Consideration in India” found that GST introduction will India from years of slow growth under socialist rule and
provide simpler and transparent tax system with increase in open an opportunity to progress living conditions in the
output and productivity of economy in India. however the immense, poor country. At the same time much had
benefits of GST are depend on the rationally designed GST. improved in India after the balance of payments crisis of
1991. Indian policies became more positive about
Dr. R. Vasanthagopal (2011) in his research paper “ GST in encouraging export and permitting foreign capital to
India: A Big Leap in the Indirect Taxation System” participate in the process of India’s growth.
concludes that switching to seamless GST from current
complicated indirect tax system in India will be a positive Globalization and liberalization have turn out to be order of
step in booming Indian economy. the day. The interdependence of economies in their transfer
for development compelled the Governments of all the
Syed Mohd Ali Taqvi (2013)“Challenges and Opportunities countries to follow the globalization policies accepted by the
of Goods andService Tax in India” the researcher explains major economies of the world. To survive and grow in this
the GST is only indirect tax thatdirectly affect all sectors and economic order rational and competitive tax policies are
sections of our country. It is aiming at creating asingle, being accepted by every country. India has also fallen in line
unified market that will benefit both corporates and with the requirement and has been introducing modifications
in direct and indirect taxes. The recent applications of Direct
Taxes Code (DTC) and Goods and Services Tax (GST) are
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Paper ID: ART20177925 759
 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
considered as path breaking in the economic restructuring in as State GST). Rates for Central GST and State GST
general and in the taxation area in particular. would be prescribed suitably, replicating revenue
concerns and acceptability.
Objectives of the Study 2) The Central GST and the State GST would be valid to
1) To have a brief understanding on GST. all dealings of goods and services made for a
2) To understand how GST will work in Indian Economy consideration except excused goods and services, goods
System. which are outside the purview of GST.
3) To know the advantages and disadvantages of GST in 3) The Central GST and the State GST are to be paid to the
Indian context. accounts of the Centre and the States distinctly
4) As the Central GST and State GST are to be treated
4. Research Methodology distinctly taxes paid by the Central GST shall be
allowed to be taken as input tax credit (ITC) for the
The study is descriptive and exploratory considering the Central GST and can be used only beside the payment
objectives of the studythe data collected are secondary of Central GST. The same principle will be applicable
source of data like Journals, Newspapers andGovernment for the State GST.
Reports. 5) To the point feasible, constant procedure for collection
of both central GST and the State GST would be
Brief time line of GST in India arranged in the respective legislation for the Central
Year GST Status GST and the State GST.
2000 PM Vajpayee set up a committee to draft GST law 6) The government of Central GST to the Centre and for
2004 a task force concludes GST must be implemented to State GST to the States would be given.
improve current tax structure 7) The tax payer would need to submit periodical returns,
2006 finance minister proposes GST introduction from April 1, in joint format 42 Presenting GST and Its Impact on
2010 Indian Economy as far as probable to both the Central
2007 CST to be phased out rates reduced 4 percent to 3 percent GST right and to the concerned State GST authorities.
2008 EC finalizes dual GST structure to have separate levy, 8) Each tax payer would be allotted a PAN-Linked
legislation
taxpayer Identification number with a total of 13/15
2010 project to computerize commercial taxes launched but
digits. This would bring the GST PAN-Linked system
GST implementation postponed
2011 constitution amendment bill to enable GST law in line with the prevailing PAN-Based system for
introduced Income Tax, enabling exchange and taxpayer
2012 standing committee begins discussion on GST but delayed compliance.
it over clause 279B
2013 standing committee tables its report on GST 7. Advantages of GST Bill implementation
2014 GST bill reintroduced in parliament by finance minister
2015 GST bill passed in Lok Sabha but not passed in Rajya 1) GST is a transparent tax and also reduces number of
Sabha indirect taxes.
2016 amended model GST law passed in both houses and
2) GST will not be a cost to registered retailers therefore
president gives assent
2017 Four supplementary GST bills passed in Lok Sabha and
there will be no hidden taxes and the cost of doing
approved by cabinet. Rajya Sabha passes four business will be lower.
supplementary GST bills. Finally GST is launched on 1 st 3) Benefit people as prices will come down which in turn
July will help companies as consumption will increase.
4) There is no doubt that in production and distribution of
5. How GST is applied goods, services are progressively used or consumed and
vice versa.
GST is an intake based tax/levy. It is built on the “Endpoint 5) Distinct taxes for the goods and services, which is the
principle.” GST is applied on goods and services at the place current taxation system, needsseparation of transaction
where final/actual consumption happens. GST is collected values into value of goods and services for taxation,
on value-added goods and services at each stage of sale or leading to the greater problems, administration,
buying in the supply chain. GST paid on the getting of goods including compliances costs.
and services can be set off in contradiction of that payable 6) In the GST system, when all the taxes are integrated, it
on the supply of goods or services. The manufacturer or would make possible the taxation burden to be split
wholesaler or retailer will pay the related GST rate but will equitably between manufacturing and services.
claim back through tax credit mechanism. But being the last 7) GST will be imposed only at the end destination of
person in the supply chain, the end consumer has to bear this consumption centered on VAT value and not at several
tax and so, in numerous respects, GST is like an end-point points. It will help in removing economic falsifications
retail tax. GST is going to be collected at point of Sale. and bring about increase of a common market.
8) GST will also help to build a clear and fraud free tax
administration.
6. Salient Features of the GST Model 9) Now, a tax is imposed on when a finished product
moves out from a factory, which is paid by the
1) The GST shall have two components: one imposed by
producer, and it is again levied at the retail outlet when
the Centre (hereinafter referred to as Central GST), and
sold.
the other imposed by the States (hereinafter referred to

Volume 6 Issue 11, November 2017

www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: ART20177925 760
 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
10) GST is supported by the GSTN, which is a [7] K.C. Archana, What is the GST Bill? What does it mean
completelyunited tax platform to deal with all aspects of to you and me, India Today, November 28, 2015
GST. [8] Nishita Gupta, Goods and Services Tax: Its
implementation on Indian economy, CASIRJ Volume 5
8. Disadvantages of GST Bill implementation Issue 3 [Year - 2014] ISSN 2319 – 9202, Pg. No.126-
133.7]
1) Certain Economist says that GST in India would impact [9] Pinki, SupriyaKamna, RichaVerma(2014). “Good and
adversely on the real estate market. It would add up to 8 Service Tax – Panacea For Indirect Tax System In
percent to the cost of new homes and reduce demand by India”, “Tactful Management Research Journal”,Vol2,
about 12 percent. Issue 10, July2014
2) CertainSpecialists says that CGST(Central GST), SGST [10] Syed Mohd Ali Taqvi, (2013) “Challenges and
(State GST) are nothing but new names for Central Opportunities of Goods and Service Tax (GST)
Excise/Service Tax, VAT and CST. Therefore, there is inIndia”.
no major drop in the number of tax layers.
3) Some retail products currently have only four percent tax
on them. After GST, garments and clothes could become
more lavish.
4) The aviation industry would be affected. Service taxes on
airfares presently range from six to nine percent. With
GST, this rate will surpass fifteen percent and effectively
double the tax rate.
5) Adoption and migration to the new GST system would
involve teething troubles and learning for the entire
ecosystem.

9. Conclusion
No doubt the GST by subsuming large number of indirect
taxes and having a uniform Indirect tax structure throughout
the country will definitely boost up economic unification of
India. Again with better conformity and revenue resilience
GST will evade the cascading effect in Indirect tax regime.
It is preferred every economy must adopt GST or VAT at
national level to make their economy attractive for foreign
investors. History has proved that many countries have
benefited from moving to a GST regime. In India, Execution
of GST would also significantly help in removing economic
biases caused by present complex tax structure and will help
in progress of a common national market. By instigating
GST, the developing economy like India can accomplish
sustainable and balanced development.

References
[1] A Primer on Goods and Services Tax in India, Centre
for Budget and Governance Accountability, new
delhi,2011
[2] AartiSaxena,Overview of Proposed Goods and Services
Tax (GST) Regime in India, Deputy
[3] Secretary (State Taxes), Department of Revenue,
Ministry of Finance, Government of India
[4] Dr. R. Vasanthagopal (2011). “GST in India: A Big
Leap in the Indirect Taxation System”, International
Journal of Trade, Economics and Finance, Vol. 2, No. 2,
April 2011.
[5] EhtishamAhamad and SatyaPoddar (2009). “Goods and
Service Tax Reforms and Intergovernmental
Consideration in India”, Asia Research Center, LSE,
2009.
[6] GovindaRao, Goods and Services Tax in India:
Challenges and prospects, Topics: Macroeconomic
Policy, 25th Aug, 2014

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