The Goods and Services Tax has taken 17 long years to be conceptualised since it was first proposed in 2000 by the then Prime Minister, Atal Bihari Vajpayee. This unified tax reform finally came into effect on 1st April 2017. GST is considered as the biggest tax reform the country has ever witnessed since Independence. The introduction of the GST is a transformative step towards the country’s economic growth. It has proved beneficial in a lot of different ways.
The secret ingredient to change is not fighting the old but in building newer ways. The Indian economy has faced a lot of change since the new government came into effect. It is important for our economy to evolve from time to time. The GST is one such change that the country has faced but its impact differs from industry to industry. Everyone must have had GST FAQs at some point. Let us have a look at the impacts of GST.
Impact of GST- “One nation, One tax”
Common National Market
GST has integrated the country of India into a common market. By removing tax barriers and by enabling a smooth flow of commodities from one state to another, GST had made tax administration much easier. It has subsumed several indirect taxes that were previously levied by both the center and the state and has brought a uniform indirect taxation system in India.
One of the backbones of the economy in a vast country like India is its logistics sector. With GST, a better-organized logistics industry is paving the way for the “Make in India” initiative into a global spectrum.
Improved Pharmaceutical Industry
GST has benefited the pharmaceutical industry as well. It is creating a field for generic drug makers. GST has also given a boost to medical tourism through a simple tax structure. However, the pricing structure is of concern but there is hope for a tax respite. This will make healthcare affordable and easy to access.
Affordable Telecommunication Services
In the telecommunications sector, GST will bring the prices down. Through efficient management of inventory and consolidation of warehouses, manufacturers are saving on costs. Manufacturers who sell equipment will find it easier to sell handsets and there will be an overall saving on logistics costs.
Transparency in Real Estate
A pivotal sector of the Indian economy is the real estate sector. It plays an important role in generating employment in the country. Assessing the impact of GST on the real estate sector largely depends upon the tax rates. However, GST is expected to benefit the sector as it already has helped the industry in some ways such as bringing transparency and accountability.
Elimination of the Cascading Effect
The process of tax calculation is much easier under GST as it has eliminated the multiple taxation system or the “cascading effect” of taxes on different stages of supply of goods and services. GST is one single unified tax as it saves both money and time.
Better and Easier Compliance
GST is a simple tax structure, has brought greater compliance. This has increased the number of taxpayers and tax revenues collected by and for the government. The simpler tax structure will also widen the tax base.
Lower Tax Rate for SMEs
For small and medium enterprises or SMEs, the tax rate has been lowered to 18-22% from the previous rate of around 32%. By bringing all indirect forms of tax under one roof, the SME business owners no longer have to run pillar to pillar for paying taxes. The job has been made much easier for all small and medium business owners.
Lower Transportation Cost in Agricultural Sector
Another important sector in India is the agricultural sector. It is one of the largest contributors to the country’s GDP. It covers approximately 16% of the Indian GDP. Before the GST, the agricultural sector faced a major issue in the cost of transportation of agricultural products as it was extremely high. But the GST has resolved this issue by improving the supply chain mechanism which reduces the overall cost of transportation and wastage of agricultural products.
Overall Reduction in Prices of Goods and Services
After the implementation of GST, the retail price of goods and services manufactured in India has gone down. Previously, the tax was levied on every step of the supply chain and the final consumer had to bear the burden of those taxes. But with GST being a single tax levied only at the point of consumption, the overall prices of goods and services have been reduced.
GST has brought one nation, one tax system but it is now the government’s responsibility to address the capacity building amongst various sectors of the Indian economy. The one nation, one tax has helped bring the entire taxation system under one single umbrella, thus making the tax management process much easier than before. In a positive light, it is believed that the GST is a good and simple process that has so far proved beneficial for the country’s economy.