Page 1 of 7
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 106
Impact of GST on Indian Economy
Aruna
Research Scholar
Department of Economics
M.D.U. Rohtak(Haryana)
Abstract: The GST was aimed towards helping India achieve its ambitious growth goals. It was
supplemented by a bunch of strategic undertakings like the Make in India and Digital India
campaigns. The Goods and Services Tax (GST) scheme of the government was expected to
provide the much needed stimulant for economic growth in India by transforming the existing
base of indirect taxation towards the free flow of goods and services. Most of the scholars also
agree to the fact that GST is also expected to eliminate the cascading effect of taxes. India is
projected to play an important role in the world economy in the years to come. The expectation
of GST being introduced is high not only within the country, but also within neighboring countries
and developed economies of the world. Post implementation of GST, there was a high rate of
around 28 percent slab. However, GST had its own share of challenges in the form of tax evasion
due to high tax slab differences. Therefore, GST Council deliberated on this issue and then after
started paring down the 28 percent rate. So, it can be said that some progress has been made on
this. However, there is a long way to go with the GST and its future consequences would shape
the India economy.
Keywords: Indian Economy, GST, Positive Impact, Negative Impact, GST Council.
Introduction: Most of the scholars agree to the fact that with the implementation of GST, a
diverse price drop across a wide spectrum is evident. Undoubtly, the creation of a unified national
market within the country under the banner of GST has increased manufacturing activities in
every sector. Moreover, from time to time, GST council meet has worked on the key areas like
the cottage industry. The rates for a number of raw materials were rationalized in a bid to boost
the country’s small-scale industry. In these aspects, it resonates with the Make in India
Page 2 of 7
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 107
Programme which aims. GST has pushed the economy one step closer to a common market i.e
free movement of capital and services. Doing business now has become easier and the hassle- free movement of the goods enables smoother transport thereby plugging in the logistical
inefficiencies. With the introduction of a GST in India, transportation of goods has become hassle
free. GST is being supported by E-Way bills which has simplified the business in the country and
has helped numerous supply chains. With the advent of GST, traders can easily monitor their
transport operations.
What is GST: GST which stands for the Goods and Services Tax is a unified tax regime under which
tax is levied on the value added for the delivery of goods and services. This system was brought
into implementation on the 1st of July, 2017. However, it is noteworthy here that the proposal
for putting up a new taxation regime has been raised from time to time in the Indian parliament.
This idea has its roots to the year 2000 when it was first raised with the efforts of an Empowered
Committee (EC) under the Late Shri Atal Bihari Vajpayee. However, it took a failed attempt to
pass the bill in 2009 and several years of commitment to finally get it implemented under the
government of Honorable Shri Narendra Modi. In this research paper, we shall take an overview
of the inner workings of this new taxation regime and also see, how India is affected by GST(both
negative and positive impacts). GST was first implemented in accordance with GST bills passed
by the government. The Government of India has enacted four bills on 12th April 2017 laying
down the GST Rules. These bills are as following:
Central GST (CGST) Bill
State GST (SGST) Bill
Union Territory GST
GST (Compensation to States ) Bill
Traders have to first register themselves to start the process of GST. Under this provision, a
business which first needs to undergo the process of GST Application. After GST application, the
next step includes filing requisite GST returns in order to maintain the GST compliance of a
Page 3 of 7
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 108
particular business. Post successful registrations, the businesses are provided with a unique
identifier known as GSTIN. This number can later on be confirmed using the GST Verification.
Moreover, GST is a destination based tax, this implies that whenever there is a change in the GST
structure, the final burden would be borne by the end consumers who are using those of the
goods and services.
Impact of GST: GST had its own fair share of positive impacts. This is the prime reason why it was
implemented in the first place. One of the major impacts that GST has had was the removal of
the cascading effect of taxes. Cascading effects means a taxpayer had pay tax on sale as well as
the purchase of goods and services. This was termed as the ‘tax on tax’. Apart from this, there
are many more major ones which we shall discuss further in the paper. It is a well-known fact
that GST has simplified the taxation structure in India and benefited numerous traders. However,
Goods and Services Tax regime has also had several other impacts on the India economy like ease
of business, unified market etc. Let us now take a view at GST and its impacts on the economy.
Positive GST Impacts: Given below are some major impacts of the implementation of the GST
that will benefit the Indian economy in reaching its desirable targets:
Benefits for Repairs and Maintenance: One of the most benefitted groups by GST would
be the dealers in repairs and maintenance services. This group will have dual benefits
from the GST that is the credit of input and credit of input services with the accordance
with the GST system. Before the introduction of GST, the repair service providers could
only benefit from the credit of input services. This was a very limiting compensation for
the service providers as compared to their costs of operations. However, all this has
changed positively since the introduction of GST.
Simplification of Complex Tax Structure: The earlier tax structure in India was famous for
its complexity and bulkiness. Moreover, it was hindering the economic progress of the
country. However, tax calculation under the system of GST has become much more
simplified. This replaces the multiple stages of taxation under the old tax regime. This has
