GST is a comprehensive indirect tax that will replace existing indirect taxes on goods and services in India. It will be levied at each stage of sale or purchase of goods and services based on input tax credit. GST aims to create a unified national market, reduce the overall tax burden through input tax credit, and boost tax revenues. However, there are challenges in implementing GST such as getting approval from all state governments and setting an appropriate revenue neutral rate. GST is expected to benefit various sectors of the economy by simplifying taxation, reducing costs, removing inter-state barriers, and increasing tax revenues.

1. GST
&
Effect on Indian Economy
Submitted To Submitted By
Mr. Karan Sabharwal Lalit Chaudhary

2. What is GST
GST stands for “Goods and Services Tax” and is
proposed to be a comprehensive indirect tax
levy on manufacturer, sale and consumption
of good as well as the services at the national
level. It will replace all indirect taxes levied on
goods and services by the Indian central and
state governments. Goods and services tax
would be levied and collected at each stage of
sales or purchase of goods or services based
on the input tax credit method

3. NEED OF GST IN INDIA
• The mechanism of imposing taxes, exemptions,
abatements, other benefits are different in state and centre
• India needs comprehensive levy and collection of both
goods and services at the same rate with the benefit of
input credit.
• Existing law has resulted in significant number of issues
related to interpretation and the category of products and
the nature of services
• GST will ensure boost to exports. When the cost of
production falls in the domestic market, Indian goods and
services will be more prices competitive in foreign markets.
• A simple tax structure can bring a greater compliance, thus
increasing number of tax payers and in turn tax revenues of
government

4. CHALLENGES FOR GST IN INDIA
• Passing of Bill in Rajya Sabha – Since central
Government is not having sufficient majority in Rajya
Sabha
• Consent of states – For implementing it is critical that
GST bill is passed by the respective state government in
state assemblies so as to bring majority.
• Threshold Limit in GST – While achieving broad based
tax structure under GST, both empowered committee
and Central Government must ensure that lowering of
threshold limit should not be a “taxing” burden on
small businessman in the country.

5. • Revenue Neutral Rate – It is a most prominent
factor for its success. We know that in GST
regime, the government revenue would not be
the same as compared system. Hence, through
RNR Government is to ensure that its revenue
remains same despite of giving tax credits.
• Robust IT sector – Government has already
Goods and Services tax network (GSTN). GSTN
has to develop GST portal which ensure
technology support for registration, return filing,
tax payments, IGST settlements etc.

6. Benefits
• A Simple life for Indian Taxpayer: There are a total of 17 indirect
taxes levied on the Goods and Services sector of India and thus the
tax collection system is also complex. GST Bill will replace all those
indirect taxes
• Decreased costs for Inventory and Logistics: The state checks the
trucks and transporting vehicles at the borders which result in
slowing down the movement of trucks. In the US, the trucks travel
at least 800km a day as compared to the Indian trucks, who travel
only 280km a day. So, the logistics costs will reduce.
• Increased Revenue Collection: The evasion of tax will decrease and
the input tax credit will encourage the suppliers to pay their fair
share of taxes. Due to GST bill, the number of tax-exempt goods will
decline and also, the centre and state will have a dual oversight
over the payment and collection of taxes.
• No Cascading Effect: The cascading effect of the tax on tax will
diminish and the manufactured goods will become cheaper with
lower logistics and tax costs for Indian consumers.

7. • Help to E-Commerce Industry: The several E-
Commerce companies were not even able to ship
to some states due to state restrictions and
levies. They have basically complicated the e-
commerce activity. Now, the levy of GST Bill will
convert India into one uniform market.
• Push to “Make in India”: The GST applicability
will invite more competition in the manufacturing
sector as it will address the issues of cascading
effect, inter-state tax, fragmented market and
high logistics costs.

8. Impact of GST in Indian Economy
• Reduce tax burden on producers and foster growth through more
production. This double taxation prevents manufacturers from
producing to their optimum capacity and retards growth. GST
would take care of this problem by providing tax credit to the
manufacturer.
• Various tax barriers such as check posts and toll plazas lead to a lot
of wastage for perishable items being transported, a loss that
translated into major costs through higher need of buffer stocks
and warehousing costs as well. A single taxation system could
eliminate this roadblock for them.
• A single taxation on producers would also translate into a lower
final selling price for the consumer.
• there will be more transparency in the system as the customers
would know exactly how much taxes they are being charged and on
what base.

9. • GST provides credits for the taxes paid by
producers earlier in the goods/services chain.
This would encourage these producers to buy
raw material from different registered dealers
and would bring in more and more vendors
and suppliers under the purview of taxation.
• GST also removes the custom duties
applicable on exports

10. Impact on different sectors
• Food Industry: The application of GST to food
items will have a significant impact on those
who are living under subsistence level
• Housing and Construction Industry: In India,
construction and Housing sector need to be
included in the GST tax base because
construction sector is a significant contributor
to the national economy.

11. Conclusion
• Goods & Service Tax (GST) would
be to eliminate the cascading effects of taxes
on production and distribution cost of goods
and services. The exclusion of cascading
effects i.e. tax on tax will significantly improve
the competitiveness of original goods and
services in market which leads to beneficial
impact to the GDP growth of the country