GST -GOODS and SERVICES

GST

GST stands for Goods and Services Tax

GST will be a boon for India's economy
It is estimated that introduction of goods and service tax (GST) reform will add 500 billion dollars to the state's coffers, adding 1.4 per cent to the GDP. If this happens, it will bring about a silent revolution in the economic history of India

How will the GST help in spurring the growth and increase the volume of collection?


There is a saying in Kautilaya’s Arthshastra, the first book on Economics in the world, that the best taxation regime is that which is based on principle of “Liberal in assessment and ruthless in collection”. The proposed GST seems to be based on this very principle.

Firstly, The introduction of GST is likely to rationalise irrational, complicated, cumbersome and multiple indirect tax and thereby plug the loop holes in this system. It will help stop pilferage and at the same time will offload the overloaded tax burden from some organisations.

Secondly, the multiple taxations have led to birth of a somewhat repressive and lethargic system of tax collection and are doing more harm than good to the growth of the economy. The red-tapism in this area is loathing and no progressive country can afford it. The GST would hopefully do away with many, if not all, such anomalies in the system and metamorphose it into an efficient agency based on scientific and rational system of assessment. It would in a long run help increase the overall amount of tax collection
Thirdly, the present system of refunding of taxes is a horrible experience. The un-refunded tax on capital goods is a bane for capital accumulation. This in a way hinders the savings also, which is a pre-requisite to the growth. If this over-taxation is done away with, it will come as a boon for the honest taxpayers.

At present, indirect taxes are collected at various points, right from manufacturing to retailer’s outlet. It involves cumbersome process of assessment and primitive ways of collection. Such systems ultimately encourage tax evasion and also increase cost of commodities. GST proposes that the indirect taxes would be levied at the destination point which would be less distorting and non-complicated.
if we take into account the GDPs of countries like the USA, China, Japan, they are significantly much more than that of ours. For instance, GDP of G-20 Nations (chart below) suggest that India has miles to go to achieve the level of the developed nations. The ongoing economic downturn and slowdown of economy across the world has given India a golden opportunity to stake claim and get a cushioned berth in the world order, but for this we are required to increase our volume of GDP at least twice the present level.

The direct taxation regime has been by and large undergoing annual fine-tuning and as a result of it the revenue receipt in this account has considerably increased but reform on such scale in indirect taxes has not been done. Indirect taxes are, therefore, urgently required to be made rationale and unified. If the GST is introduced it would certainly increase the volume of the tax collection, thereby provide a great stimulus to our gently moving economy which has arrived at a level playing field vis-a-vis many major economies of the world
Country

GDP IN TRILLION USD

USA

13.84 TRILLION USD

JAPAN

4.30

GERMANY

2.81

BRITAIN

2.14

FRANCE

2.05

ITALY

1.79

CANADA

1.27

CHINA

6.99

India


1 trillion dollars

Finally, the world is moving towards economic unification. The very concept of European Union (EU) is based on a common European market based on unified and simplified taxation system. They have adopted ‘euro’ and even the concept of a European Parliament is being visualised. If two or more nations come close and form economic unified entity (SAFTA,NAFTA,ASEAN etc are examples), why the federating units of India i.e. States do not eschew trivial economic and political interests to help establish a modern, unified and efficient tax regime. After all the very concept of distribution of taxes amongst the states were enshrined in the constitution to do away with such contradictions