A lot has been discussed and published about the impact of GST on the indian economy - either positive or challenging.
The Goods and Services Tax (GST) is an indirect tax on goods and services that was introduced in 2017 to simplify the tax system. It replaced several indirect taxes with one tax, which made things a lot easier for businesses. The tax system has since been streamlined, leading to increased tax compliance and formalisation of the economy.
However, it wasn't all sunshine and rainbows when GST was first introduced, and some businesses had trouble adjusting to the new system.
In this blog, we explore the larger impact of GST on the indian economy. Let’s get started!
Below are some areas where we have seen positive impact of GST on the Indian economy:
GST streamlined the tax system by replacing multiple indirect taxes with a single tax, reducing complexity and making compliance more manageable for companies.
GST's technology-driven procedures like online registration, e-filing of returns, and e-way bills have raised tax compliance. The tax base has grown, increasing the government's tax intake.
GST's simplified tax code, elimination of interstate restrictions, and removal of checkpoints and entrance tax barriers at state borders increased efficiency and decreased logistical expenses. This helped the economy thrive, especially in industries like manufacturing and logistics.
By removing the cascading impact of taxes, the GST aims to lessen the tax burden on consumers and businesses. Consumers have benefited from reduced prices of goods and services due to the efficient input tax credit mechanism.
GST encouraged enterprises to join the formal tax system, enhancing tax collections, decreasing tax evasion, and improving openness.
Below are some areas where there have been challenges on the GST front for the Indian economy:
During the introduction of GST, small and medium-sized businesses had trouble adjusting to the new compliance standards, temporarily disrupting business operations.
While GST intended to simplify the tax code, businesses found the paperwork and compliance procedures burdensome. SMEs found it challenging to navigate the complexity of GST reporting and maintain proper paperwork.
Implementing the GST placed a significant adjustment load on small firms, which disproportionately impacted sectors that had enjoyed threshold exemptions or were exempt from specific taxes. Compliance costs, including investing in technology and professional services, increased.
Some industries, like manufacturing and logistics, benefited from GST, while others, including real estate and textiles, had difficulty adjusting to the new tax structure.
Adopting the GST led to temporary price increases due to shifting tax rates and categories, despite the goal of decreasing overall taxation.
Want to know how to calculate GST in India? Here’s a blog that can help!
The Goods and Services Tax, implemented in India in 2017, has greatly impacted the economy. It has streamlined the tax system, leading to increased compliance and formalisation of the economy. This has boosted growth in industries such as manufacturing and logistics. However, there have been challenges, including increased compliance burdens for small and medium-sized businesses and temporary inflationary pressures. Despite these challenges, the overall impact of GST has been positive, and the Indian economy is expected to continue growing. Looking for a simplification of the GST rules in India? We've got the perfect read for you.