HOw does the GST effect the economy of India

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HOw does the GST effect the economy of India?

Either in good way or bad way?


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The idea of the Goods and Services Tax (GST) was first conceived by the task force on implementation of the Fiscal Responsibility and Budget Management Act, 2003. The tax system was conceptualised to address the heavily skewed proportion of indirect tax rates that prevailed under India’s complicated tax regime. Considered as a destination-based tax, the final introduction of GST on July 1st 2017 sought to simplify the federal construct of indirect taxation, lower compliance cost, and increase the overall “formalisation” of the business economy across India, in the hopes of making it an attractive destination for greater investment.

The intent of the tax and its functional nature seeks to offer a more simplified, indirect tax system. However, the implementation of the tax system across different states have yielded mixed effects so far. A report by the Tribune highlighted some of the key implementation problems concerned with the rollout of GST after July, providing a detailed analysis on the short-term impact of the tax on small and medium enterprises in the two cities of Rudrapur, Uttarakhand, and Malappuram, Kerala.

According to an economic survey conducted by the National Informatics Centre (NIC), the implementation of GST so far, has resulted in an increase in the number of unique indirect taxpayers by more than 50%. There are 3.4 million new indirect tax registrants. The level of tax filers by November 2017 was 31% greater. The Finance Minister stated that 7.2 million of the 8 million indirect tax assesses under the earlier tax system have migrated to GST, while 1.3 million new taxpayers have also signed up under the new system, indicating that the tax base is set to widen significantly by the end of the financial year.

However, in a recent field study conducted by the Centre for New Economics Studies (CNES), O.P. Jindal Global University, we interviewed 40 businessmen and women in the manufacturing and service sector from Rudrapur and Malappuram.

The study was designed to assess:

  • The problems faced in the adoption of GST through the cost of transitioning from the previous tax system to GST.
  • A net-effect on the overall compliance cost for doing business.
  • The degree to which there has been a business transition from the informal to the formal sector.



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