Goods and Service Tax is a major economic reform in India after the 1991 economic liberalisation. GST, proposed to be rolled out from 1st July 2017, will have a four-tier structure with rates ranging from 5% to 28%. But regrettably, a large chunk of the economy, which includes real estate, electricity, alcohol and petroleum products, is out of GST.
It brings benefits to all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus paving the way for an integrated economy at the national level. By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve liquidity of the businesses aspects. GST is a destination based tax. It follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flow and better working capital management.
It will not drastically reduce the ‘Current Account Deficit’ of India.
It will not enormously increase the growth and size of economy of India and will not overtake
China in the near future.