This article is written by M. Ratchanya, a B.Com LLB (Hons) student, from School of Law, Sastra Deemed University, which discusses the issue of GST being a boon or a bane.

Introduction

India is a democratic nation which is capable of rendering a beacon of endurance to each and every citizen of the nation amidst a divergent economic crisis evolving day by day in the nation. It is a nation which put in force a bunch of strategic endeavors such as the ‘Make in India’ and ‘Digital India’ campaign. In addition to this strategic undertaking, the nation implemented a very significant effect on taxation in the nature of “One nation, One market and One tax” i.e., the Goods and Services Tax (GST). This new tax regime stimulates the economic progress in the society thereby involving the process of transforming the existing basement of indirect tax regime into the free flow of goods in the market. The most eminent role played by GST is that it eliminated the cascading effects of tax which is considered to be a rivalrous effect as it imposes a tax on the tax basis. The implementation of GST enabled the Indian products to be well competing in both domestic and international markets. This new tax regime is most expected by each and every individual in the society to have sustainable economic growth in the whole nation. The main object of GST is to fill all the loopholes prevailing in the society and to boost the Indian economy by unifying the indirect tax for entire states all over India.

Benefits of GST on Indian economy

It is a very known fact that the final price of the goods in the market cannot be determined by GST alone but is dependant on some other determinants like sellers profit margin, etc. The following are the benefits which are derived from GST.

• GST will boost the economy in the long run;
• There exists a less and simplified tax compliance policy in comparison with previous tax regime;
• A complete removal of the cascading effects of tax;
• A comparatively lower burden on the shoulders of the common man. For instance, the public will shed lower price on the similar products which were costly in the previous tax regime;
• Upsurge in the demand and consumption of goods due to which there is automatic upsurge in the supply of goods ultimately paving the way for rise in the production of goods[i];
• Eradication of bundled indirect taxes like VAT, Service tax, Excise, CST, CAD AND SAD;
• Effective control on the circulation of black money as there exists a mandatory check upon every traders and manufacturer in the market.

The above benefits of GST can be derived only if the actual benefit of GST is moving forward to the final consumer in the market.

GST purged Indian economy by framing the compliance bar high

GST is described to be a technology-driven and a self-policing system. The only interface between the authorities and the taxpayer is the technology, which is ushered by a new paradigm variation in the taxation system. But how so ever, the difficulties which arise during the process of catering to this new tax regime by the taxpayers cannot be solely blamed upon the technology glitches. During the previous tax regime, the tax credits were made available merely by the existence of invoices issued by the supplier, though the supplier himself has not submitted the tax to the government which he received from his customer. This process involved huge risk of fraud during transactions. Such fraud risks are substantially reduced under the new tax regime, as GST is described to be the ‘watchdog and game changer of the Indian economy’ [ii]. The significant features of GST are as follows,

• It involves the acquiescence of details of all the transaction at a more advanced level the
• The learning curve of tax practitioners and assesses are taken up to a steep level thereby ensuring a level of complete discipline under the regime of GST.

GST benefits are apparently visible in sectors like that of logistics in terms of effectiveness which enhance the economic growth rate in the entire nation. GST had largely eradicated the inefficiencies of the tax system which exists in the nation. It has been seen as the biggest tax reform in independent India by bringing together the entirety of India’s 1.3 billion population into a common market in one stroke by demolishing the interstate tariff barriers. The tax slabs of 0%,0.25%,3%,5%,12%,18%,28%,31% have subsumed the central, state and the local taxes into the line of ‘One nation, one market and one tax’ system. The businesses have also acquired a rebate for the taxes paid on the raw materials and services which makes them more competitive in the market. The severance in the GST is directed towards the informal sector of the economy and has enabled the informal sector to be integrated with the formal sector by way of tax rebates to the registered assesses. This process has left small firms with two options, i.e., either sign to the GST or to lose the competitiveness.

Indian economy has fallen prey to the elegance of GST

GST has eroded the circulation of black money in the economy by imposing a mandatory check on each and every trader and manufacturer, thereby acting as a frequent inspector for the payment of taxes. There is a thin line of demarcation between the organized and unorganized sector. The organized sector is described by the Central Statistics Office, by taking the instances of the manufacturing sector, as an enterprise in which the same will employ 10 workers if they involve electricity and 20 workers if the electricity is not involved by the enterprise. The other is depicted as an unorganized sector in the natural sense. Thus the interrelation between the Indian economy and the GST can be understood by the famous words which read as “All that is solid that melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind”[iii].

There have been serious implications in the Indian economy by the implementations of GST which has brought the entire informal sector into the universe of the formal sector, thereby corroding away the flexibility of the economy and consequently killing off what is left behind. Small producers in the market render big credit to the large producers by way of accepting the delayed payment for their supplies. Large companies in this scenario sidestep the law on minimum wages and working conditions by involving the method of outsourcing their larger amount of their work to the small informal sector which is beyond the scrutiny of the state. But, due to the implementation of GST, there is a compulsion of every unit to be registered with the GST network and to file the returns, thus, drastically reducing instances of bending the law. Compliance of norms arising due to the implementation of GST is necessary in order to curb the appraisal of fraudulent activities in the society. Thus, GST is posed to rip apart any concealing veil in the economy.

GST – Disruptive v. Developmental

GST is considered as a boon for one section of people in the society and, a bane for other sections, as GST is not just a tax collection system but it is also a regime which brings about changes in the core of the national value system. The motto behind this new tax regime is to clean the society from all the evil tendencies. Hence, it creates a compulsory sphere for all businesses and traders to comply with it, and get registered under this new tax regime. Under GST, the MRP is more likely than not to create retail price collusion, as it becomes the de facto uniform price in the market. There have been many objections and strong disagreements regarding the implementation of GST. This is because of the fact that many socially wrong and habitual activities like liquor drinking are taxed at 0% slabs in the new tax regime but taxes on hotels and restaurants’ were at higher slab at the beginning of this new tax regime, though it has reduced at present. Therefore, an added confusion exists regarding whether GST is disruptive or it is developmental to the whole economy.[iv] The solution for this can be obtained only by day by day improvement in the Indian economy by the impact of GST. It is developmental in the sense that it clearly and completely eradicates the tax discrimination between every state in the same country by introducing ‘One nation, One market, One tax’ in a country like India.

Overall impact of GST on Indian economy

It should be understood that GST is not a tax concession system but a single Revenue Neutral Rate (RNR) on the goods and services in the society so that the total tax revenue of the central and the state prevails the same. The previous tax regime was considered as a major impediment to India’s economic growth and competitiveness. For instance, cascading effect on taxes made indigenous manufactures less attractive in the market. In this scenario, the implantation of GST is considered crucial for the growth of Indian economy. GST replaces the tax barriers with seamless credit which leads India in the common market as an economy which scales in production and efficiency in supply chain, thereby expanding the trade and commerce in the market. Sectors like organized, logistics, industry, and modernized warehousing, have received favorable impact by the introduction of GST in the economy. The integration of multiple taxes into a single tax reduced the cost of tax compliances and transaction tax. The new tax regime has also facilitated ease of doing business in the country.

The electronic processing of tax returns and tax payment and tax refunds through GSTNET without human intervention have curbed corruption and tax evasion activities.[v] The stable, transparent and predictable tax under GST has encouraged local and foreign investments in India, thereby creating significant job opportunities for the people of the country. Major beneficiaries under GST include FMCG [Fast Moving Consumer Goods], pharma, consumer durables, automobiles, logistics and the warehousing industry. As the previous tax regime was myriad with tax clauses, the new tax regime has reduced the tax burden on the producers and foster growth through increasing the scope for production. GST has extended the tax base and provides credit for the producers on the taxes paid by them during the chain of goods and services. It has further has removed the customs duty which was imposed on exports. Due to this, there are chances of the nation’s competitiveness increasing in the foreign market on the account of lower cost of the transaction.

Conclusion

Thus though GST is considered to be stringent in the economy, the benefits and impacts rendered in the economy are marvellous and mind-blowing. GST has made India a brighter economy by merging a large number of central and state taxes into a single tax system. It has made the taxation very ease for the industries by eradicating the inconvenient cascading effects of the tax. As the nature of GST is transparent it is very easy to administer and thereby promote sustainable growth in the economy by making the products competitive in the domestic and foreign market. Though there may be some drawbacks, the same can be fine-tuned like recent trimming of slabs in the hotels and restaurants. As mentioned earlier, it should not be viewed as a tax collection system but a regime which has a huge social and business ethics implication. Thus, through fear of possible retrospective tax inspection and survey lies at the heart of chorus against GST, GST stands against this negativity by culminating and rendering the positive impacts and effects to the societies in the long run for sure.

[i] GST Benefits and Impact on Indian Economy Available at

http://www.deskera.in/gst-benefits-and-impact-on-indian-economy/

[ii] GST shakes up Indian economy by setting the compliance bar high Available at http://www.livemint.com/Politics/O5U4s67gDJbXHPUYdSfYaK/GST-shakes-up-Indian-economy-by-setting-the-compliance-bar-h.html

[iii] A defining feature of India’s economy has just fallen prey to the beauty of GST Available at https://economictimes.indiatimes.com/news/economy/indicators/a-defining-feature-of-indias-economy-has-just-fallen-prey-to-the-beauty-of-gst/articleshow/60763110.cms

[iv]GST: Disruptive but developmental Available at http://www.livemint.com/Opinion/JgAhYGv5lsmOKGv9UKMZiM/GST-Disruptive-but-developmental.html

[v] Impact of GST on Indian economy Available at https://www.vccircle.com/impact-gst-indian-economy/