Wednesday 28 June 2017

GST Rollout to Support India’s Growth Story

After a long wait of 17 years, the goods and services tax (GST) is all set to become a reality from the midnight of June 30.  GST is expected to provide the much-needed stimulant for the economic growth in India by transforming the existing base of indirect taxation towards the free flow of goods and services.
GST is the indirect tax reform that will replace several taxes levied by the central and state governments and change India into a single common market with a unified tax structure. It was introduced as the Constitution (122nd Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. Under GST umbrella, goods and services will be taxed at 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent.
GST, a uniform, indirect tax regime, will no doubt benefit the industrial class by improving the ease of doing business. Integration of current multiple taxes into single GST will reduce cost of tax compliance and transaction cost. GST will also remove cascading effect of taxes imbedded in cost of production of goods and services.

According to economists, lower GST rates may lead to a decline in inflation, however, the economic growth may not improve significantly in the short term even though it will benefit both India Inc and the government in the medium term. However, GST, which will be rolled out in July, will help raise India's medium-term growth to above 8 per cent, as it will enhance production and the movement of goods and services across Indian states.

With the implementation of GST, the flow of Foreign Direct Investments (FDI) may rise as the existing multiple tax laws are one of the reasons foreign companies are wary of coming to India.

In addition, India’s overall revenue is also expected to shoot up by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth.

GST could also result in increased employment, promotion of exports and consequently a significant boost to overall economic growth and factors of production that incudes land labour and capital.


The introduction of the Goods and Services Tax will be a very noteworthy step in the field of indirect tax reforms in India. The GST, because of its transparent character, will be easier to administer. The proposed taxation system holds great promise in terms of sustaining growth for the Indian economy.

Latin Manharlal Group

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