Impact of GST in Indian economy

Oct 1, 2017 by

The year 2016 saw one of the most incredible economic reforms in India when on 8th November midnight, all 1000 and 500 currency notes were stopped from being used. Another reform came into light when the Goods and Service Tax was introduced from the 1st of July. Ever since India got its independence, there has not been such a revolutionary change in economy and this has helped organize all the markets very effectively. Yes, there have been many debates about the effect of GST on Indian economy and how it has disrupted the demand supply balance. However, if you had to sit down and analyze the impact GST would have on the economy in 5 or 10 years, then you would be amazed to see the benefits of this tax system. So, here is a brief idea how GST will impact Indian economy in a good way:

  • There are two ways of looking into GST; one from the customer’s side and another from the seller’s side. Almost every FMCG product that includes the daily usage items like soap, shampoo, oil, toothpaste and many such products will now have lower price than before. For the companies selling these products, they would also benefit because the tax they have to pay will be returned by the respective state.
  • Exporters will have a gala time because of GST because the value of foreign currency will decrease to a great extent. In fact, it has already reached the lowest in the last few decades. So, the value in Indian currency will increase automatically and the more you export the more profit you make. On the other hand, there is no customs duty or any other tax that is imposed. With a single GST, exporters can now file for their returns and get the money back that they paid as tax initially.
  • Price of consumer durables such as cars, air conditioner, washing machines and so on will increase a lot. Previously, the tax slab was at 13.5% which has increased to 28%. This is because they are considered luxurious goods.

If one has to summarize the concept of GST in one sentence, it would have to be like this; the poor and middle class people will benefit in the coming years while rich people have to consider their spending accordingly.

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