The introduction of the goods and service tax has had a transformational impact on the Indian economy, effectively unifying the nation at the same time as a result of what is the largest indirect tax regime the country has seen.
Dismantling internal tariff barriers and replacing them with a system that pulls everyone in the same direction is expected to spearhead India’s fiscal reform ambitions.
You still need handy tools such as a GST calculator to help you work out your tax filings and achieve compliance, but the key question is what impact does this tax structure has on the economy, both in the short term and into the future?
The tax base has increased
GST was first introduced back in July 2017 and the initial result was to bring taxpayers of over 38 lakh into this new unified regime.
This number has steadily risen and the end result is that the tax base has increased by a staggering 90%.
What this massive migration of taxpayers has created is a tax base that encompasses a large part of the economy compared to before GST was rolled out and it has been credited with a noticeable change in compliance behavior as a result of this centralization.
That has to have a positive impact on the Indian economy if more taxpayers are in the system and paying their liabilities more efficiently, generating a higher level of government revenue as a result.
Tax rates have been rationalised
Current GST laws are fundamentally different from how they looked when the tax was first introduced and the fact that nearly 700 amendment notices have been issued since 2017 should tell you how things have changed.
Taxpayers have led this demand for a clearer structure and what we have now is a tax system that is far simpler and is designed to reduce the prospect of tax evasion too.
These legislative amendments are perceived to have been a positive move for the financial stability of the Indian economy.
Improved production and sector growth
The general impact of GST is that certain parts of the economy, such as the retail industry, for instance, are that taxes have reduced. This means that the end consumer has benefitted because of the lower tax cost attached to items.
A reduced tax burden as a result of GST has helped improve production costs and stimulated retail growth.
Taxation roadblocks have been removed
India has historically struggled with transportation timeframes and freedom of movement because of a complicated tax system involving issues such as check posts and tolls.
It is now much easier to transport goods across the country with far fewer bureaucratic complications to contend with thanks to a single taxation system.
GST has also meant that customs duty on export items has gone down too, resulting in an increase in the rate of exports.
There is little doubt that GST has managed to simplify the Indian tax system and a single tax has created a greater degree of visibility when it comes to costs, whether you are a producer or a consumer.
A reduced tax burden has to be better for any economy and GST appears to be having a positive impact across the country.
