Is GST helping the Indian economy for the better?
The Goods and Services Tax is a reform designed to create an ecosystem where free and fair competition can thrive. The state and centre in unison decided to pool in their resource and sovereignty to create this fiscal consolidation for the common goal of economic prosperity. India’s first federal institution, the GST reform does away with the old multilayer arbitrary tax scheme, making it easier to administer taxes while making revenue collection more efficient.
When state and centre have the autonomy to levy charges based on their preferences, the entire system is distorted and the movement of goods also becomes difficult. Therefore, rooting out redundancy in a tax regime is important to escape the tax on tax effect. GST has put in place simple and homogeneous tax, the spoils of which can be utilized by the state and the centre equally.
A wide price drop across the spectrum is noticeable, something that was absent in the previous tax regime. The creation of a unified national market across the country -under the banner of GST-has increased manufacturing activities. In the recent GST council meet, the key area of focus was 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 Programme which aims at making India a manufacturing hub.
While India’s GDP did slip to 6.1 in the first quarter of the year 2017 it has bounced back to 6.3 and continues to progress. The Reserve Bank of India (RBI) ruled out any significant inflationary impact due to an increase in taxes. The reason being that a large number of items in the CPI were exempted from GST, and the effect of a rise in the tax rate on some items was compensated by a dip in the rates on other items. A notable rise is visible in the indices, it reflects the recovery of the economy against the recent slowdown. The Index of Industrial production (IIP) has seen an average rise of 1.1% since July 2017.
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. The introduction of a GST Network and E-Way bills has solidified the country's supply chain and put in place a structure that facilitates transparency. Now a dealer can track their shipments whether it is intrastate or interstate.