Impact of GST on the Indian Economy and Consumer Experience

International Journal of Research and Scientific Innovation (IJRSI) | Volume V, Issue IV, April 2018 | ISSN 2321–2705

Impact of GST on the Indian Economy and Consumer Experience

Dr. Arekari Shanta¹, Prof. R. L. Nandargi²

  ¹Associate Professor, Department of Management Studies, SCOE, Pune, Maharashtra, India
²Department of E & TC, IOT Hadapsar, Pune, Maharashtra, India

Abstract: India’s biggest tax reform is now a reality. A comprehensive dual Goods and Services Tax (GST) has replaced the complex multiple indirect tax structure from 1 July 2017.The concept of GST was seen for the first time in 1999. On 8 August 2016, the Constitutional Amendment Bill for roll out of GST was passed by the Parliament, followed by ratification of the bill by more than 15 states and enactment of the bill in early September.

It is important to understand that GST is not a tax concession scheme where the government has reduced the tax rates and hence all the goods and services would become cheaper once GST is implemented. Government was attempting to fix a single Revenue Neutral Rate (RNR) on the goods and services so that the total tax revenue of the State and the Central Government remain the same. However, due to practical considerations and keeping in view the social conditions of India, four GST slabs have been set at 5%, 12%, 18% and 28% for different items or services. There is also a special rate for precious metals. The rate of 18% would however be applicable for most goods and services.

Key words: Revenue, Tax rate, Goods and Services Tax, Indian Economy.

I. INTRODUCTION

Government is trying to see that the new GST rates remain more or less similar to the effective tax rates of excise, service tax and VAT in the present time. Hence, the prices of most commodities would remain the same. However, the immediate impact of GST would be as following.

All the services would become more expensive immediately since the present Service Tax rate is only 15% which is now raised to 18% in GST.

Some goods would become cheaper due to lower rates levied on such items.

Most goods would become more expensive since the GST rate of 18% or 24% is much more than the present VAT rates which are around 12-15 %. The dealers and retailers are NOT likely to pass on this extra rate immediately to the consumer and they would profit from the increase Input Credit Tax (ICT). However, soon the consumer would reap the benefit and the prices would come down.

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