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role of gst in indian economy
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  ABSTRACT: The main aim of this project paper is to discuss the historical background and implications of theGoods & Services Tax (GST) in India. The paper include ho income tax and GST ereimplemented and the difference beteen Sales & Service Tax & GST. The GST asimplemented b! Indian Government to correct imbalance and to streamline the countr! s taxs!stem so that it ould be more efficient# transparent and business friendl!. The GST asimplemented at ever! stage of considered as a ne tax s!stem for India has a significant impacton ever! stage of a compan! production and distribution chain $%'* + Goods & Service Tax# India# Implication. INTRODUCTION : The Goods & Services ,ill (GST ,ill) as passed in the aj!a Sabha earlier in -ugust/01. The GST ,ill# hich is considered as one of the biggest tax reforms in the countr! sinceIndependence# proposes to eliminate all indirect taxes on goods and services and lev! a singlerate.Taxes are a difficult subject for the orking class# especiall! for those ho are unaareof its jumbled calculus. It looks like a ma2e of legalese and math# signif!ing nothing much. 'iththe GST# the government is aiming to simplif! it for the public. The government explains theGST in simple terms in the recentl!3published fre4uentl! asked 4uestions.GST is one indirect tax for the hole nation# hich ill make India 0 unified commonmarket. GST is a single tax on the suppl! of goods and services# right from the manufacturer tothe consumer. Simpl!# the amount that e expend for goods and services has the taxes embeddedin them. 5ostl!# the consumers are not even aare of or ignore the tax the! pa! for things the! bu!. -mendment of the bill is going to give a relief from the high percentage of taxes. In a recent meeting# the GST council has agreed on rate structure as / per cent# 6 per cent# 0 per cent# 07 per cent and 7 per cent. 8aving a slab rate structure in GST is a departurefrom popular international practice of having one rate of tax for all goods and services. Thecouncil has not announced the schedule of goods and services under each slab rate. The 5inister of 9inance (-:; <-IT=%) has mentioned that highest tax slab rate applicable to itemscurrentl! taxed at >/ per cent to >0 per cent (excise dut! plus ?-T) ill be taxed at a loer rateof 7 per cent. Some of the goods taxed at 7 per cent ill be charged ith an additional cess for five !ears. This ill make the life of Indians much simpler as the GST bill eliminates 0@ indirect  taxes. 5anufacturing ill get more competitive as GST addresses cascading of tax# inter3statetax# high logistics costs# creating a boost in the retail industr!.5inister of 9inance -run <aitel! explained h! the decision as taken to compensatestates ith a cess. A-s per our calculation# s 6/#/// crore ill be needed in the first !ear for compensation. If e have to raise this b! a! of tax# e ill need s 0#@#/// crore#A he said.A=uxur! cars# tobacco# aerated drinks ill be levied ith a cess# hich along ith clean energ!cess on usage of coal# ill be used to compensate states for loss of revenue#A he added. The9inance 5inister also said that the compensation to states ill have a sunset clause of five !ears#even as the council ill take a call ever! !ear to see if the same needed to be continued. Benefits of the GST Bill The final consumer ill bear onl! the GST charged b! the last dealer in the suppl! chain#ith set3off benefits at all the previous stages.5inister of 9inance -run <aitle! had earlier said that GST ill be beneficial to theBentre# states# industrialists# manufacturers# the common man and the countr! at large since itill bring more transparenc!# better compliance# increase in G*C groth and revenuecollections.=ogistics firms believe that GST ill help them and result in loering the product prices b! up to 0/ per cent. This ill affect the 5C ver! effectivel!# increasing sales and revenue.GST ill also generate groth for sectors like auto# consumer durables and fast3movingconsumer goods (95BG) hile in effect of these sectors to pass on impact of loer taxes ongoods to consumers. Impacts of GST on an average Indians life: air !ricing : The price of each item ill be justified because of the organi2ed taxes. These taxes are inturn taken from the end consumer and if this s!stem reduces the cost of each item# unjustifiedinflation ill be harnessed. Greater Transparenc : ight no# e pa! about #$%#&'  in taxes and it becomes up to &$' # indirectl!# in somegoods. GST ill ensure that !ou kno exactl! ho much tax !ou are pa!ing comprehensivel!  and for hat item. ou ill pa! exactl! ()'  tax for each item ith no hidden charges beingtaken out of !our pocket. *conomic Boost : 5anufacturing sector ill save both time and mone! ith this change. G*C is predictedto increase b! (%+'  as India ill become a one nation, one ta-. This boost might have some risein costs of ever!da! items for >3D !ears but once the change stabili2es# e ill mone! as theindirect taxes going out of our pocket ill be absent. Significant Changes in !rices : Cackaged food products# <eelr!# ead!3made Garments and Telephone ,ills illobserve an increase in the price because the current taxes for these items are significantl! lessthan ()' . <eelr! Sector ill observe the most difference# amounting to ()'  from the current #%/' . -ll this ill lead to increased expenditure for the common man.%lectrical -ppliances# Cropert! and Bars ill have a dip in the market price ith the advent of this ne la. estaurant 9ood being currentl! taxed ith an arra! of different taxes ith ?-Tvar!ing in each state# ill get uniformit! after this la. Important acts a0o1t GST Bill : The current GST ,ill committee headed b! 5r.-rvind Subramaniam and it hasrecommended a three3rate setup for rolling out GST ,ill into the government successfull!.The three tier structure is as follos. (. The goods meant for the poor should be taxed at (+'. . ()'  tax on all common items.>. /$'  tax on luxur! items.-lcohol# Cetroleum and it s products have been exempted from the initial structure of taxes.There ill be to major divisions of the GST ,ill# namel!# SGST2State3 and CGST2Central3. BGST is doing aa! ith indirect taxes such Bentral %xcise *ut!# Service Tax# -ddl. Bustoms*ut!# Special -ddl. Bustoms *ut! as ell as -ddl. %xcise *ut!. These indirect taxes are thosethat are collected b! the Bentre.SGST ill remove indirect taxes on goods and services hich are charged b! the State such as?-T# %ntertainment Tax# Curchase Tax# ctroi# =uxur! Tax and %ntr! Tax.  The States that have ratified GST are: -ssam (-ugust 0)# ,ihar (-ugust 01)# <harkhand (-ugust 0@)# Bhhattisgarh (-ugust )#8imachal Cradesh (-ugust )# Gujarat (-ugust >)# 5adh!a Cradesh and *elhi (-ugust D)# ;agaland (-ugust D)# 5aharashtra# 8ar!ana# Sikkim (-ugust E)# 5i2oram# Telangana (-ugust>/)# Goa (-ugust >0) and disa (September 0). Concl1sion: The macroeconomic impact of a change to the introduction of the GST is significant interms of groth effects# price effects# current account effects and the effect on the budget balance. - change in the tax mix from income to consumption3based taxes is likel! to provide afruitful source of revenue. The aggregate consumer price impact of the introduction of the GSTin India on the macro3econom! as both limited and temporar!.The Goods and Service Tax (GST) is a ne form of indirect tax hich ill replace otherslike service tax# sales tax# octroi# central and state sales tax imposed under the current multi3tax s!stem. It as expected to be a single tax levied b! the central government on the production of goods and services. Burrentl!# each state imposes a different tax. So# each state as counted as a different market b! businesses. It is a huge task to move goods from one state to another due to differential taxes. GST ill remove such demarcation and create a unified market. This is expected to help ease movement of goods across states and reduce costs for businesses. BIB4OGRA!56: .cbec.gov.in.gstindia.com.gstn.org
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