IMPACT OF GST ON THE INDIAN FINANCIAL SYSTEM

INTRODUCTION

Goods & Services Tax may be a comprehensive, multistage, destination-based tax which will be levied on every value addition. Goods and service Tax (GST) implemented in India to usher in the ‘one nation one tax’ system, but its effect on various industries is going to be slightly different. the primary level of differentiation will be available counting on whether the industry deals with manufacturing, distributing and retailing or is providing a service.

The pioneering Goods and Services tax is now on its thanks to being implemented from 1st July. it's important to know that GST isn't a tax concession scheme where the govt has reduced the tax rates and hence all the products and services would become cheaper once GST is implemented.

IMPACT ON THE INDIAN FINANCIAL SYSTEM

The GST Council has finalized a four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent, with lower rates for essential items and therefore the highest for luxury and demerits goods, including luxury cars, SUVs and tobacco products, that might also attract a further cess. there's also a special rate for precious metals. the speed of 18% would, however, be applicable for many goods and services. Most goods would become costlier since the GST rate of 18% or 24% is far quite this VAT rates which are around 12-15 %. Some goods would become cheaper thanks to lower rates levied on such items.

However, soon the buyer would reap the benefit and therefore the prices would come down. All the services would become costlier immediately since this Service rate is merely 15% which is now raised to 18% in GST. Most analysts forecast the economy to grow on the brink of 7.4% in 2017-18, the primary year of GST rollout, which is slightly above 7.1% in 2016-17, but less than 7.9% of 2015-16. While GST is unlikely to be a “positive” for economic process within the short term.

GST (GOODS AND SERVICES TAX) is understood as Goods and Services Tax applicable to both goods and services, are going to be levied in the least the stages of supply. Tax are going to be charged on all taxable goods and services in India. There are two components included in GST: CGST and SGST charged by Central and government respectively. within the interstate transaction, central government will collect GST and distribute it to the importing states.

SHORT-TERM IMPACTS Of GST

A more complicated GST, very similar to the one we've now, is probably going to yield less favourable returns, more within the range of half a decimal point to at least one decimal point increase in GDP within the short-term. The proposed GST regime, which can cover the foremost taxes at central and state level, is predicted to possess one list of concessions/exemptions against the present gigantic exemptions and concessions for goods and services. Simple living for Indian taxpayers: In India, a complete of 17indirect taxes are levied on the products and services sector, and thus the collection system is complex. The GST measure replaces all indirect taxes and reduces compliance costs. Opportunities for underdeveloped or underdeveloped countries: the present 2% rate of exchange is imposed on all production and thus agricultural products are kept within the state itself. the gathering of GST legislation is often distributed because it'll provide a national market. it'll be a chance for others. Increased income collection: tax reductions are reduced and supplier tax deductions make sure that suppliers pay fair taxes. the bulk of everyday consumables now draw an equivalent or a rather higher rate of tax. Furthermore, the GST implementation features a cost of compliance attached thereto. It seems that this cost of compliance is going to be prohibitive and high for the small-scale manufacturers and traders, who have also protested against an equivalent. They'll find yourself pricing their goods at higher rates.

IMPACTS OF GST ON INDIAN ECONOMY IN THE LONG RUN

The impact of GST after implementation, it is often understood clearly from the table which shows the speed of products increasing and decreasing after implementation of GST this table also shows some goods on which there's no implementation of GST. the primary row shows the products whose rate will decrease after GST and therefore the second row shows a rise in rates of products after GST. Thus, these were a number of the things which are affected after the implementation of products and Services Tax.

GST may be a unified legal system removing the bundle of tax like VAT, CST, Service Tax, CAD, SAD, and Excise Duty which can have a positive impact on the commoner. there'll be less tax compliance and a simplified tax program as compared to earlier tax structure, GST will reduce the cascading effect of taxes i.e., tax on the legal system, it'll help in removing the manufacturing cost which can bring the worth of commodity down, the lower cost will further cause a rise in demand/consumption of products, increased demand will cause increase supply hence this may ultimately cause rising in production of products. The increased production will cause more job opportunities. GST will curb the circulation of black money. Thus, GST will have a positive impact on the commoner in some ways.

Banking and financial services: fee-based services currently account for 18%, not 15%. When the bank delivers to the buyer, the processing costs of the loans, premiums and MasterCard costs increase. It can therefore be neutral for the world, but consumers can enter there.

The stock exchange may have reacted negligently to the change of Rajya Sabha's constitution to introduce the GST into the account. this is often because the GST implementation can have a mixed effect in multiple sectors. The direct impact would in fact be a rise or decrease within the rate compared to what each sector currently pays. However, the indirect impact is going to be a bigger but more efficient supply chain management economy. The latter are going to be a game changer within the sense that the world makes optimum use of this efficiency. Let's check out the impact of GST in some areas.

• INCREASE PRODUCTION: Reduce tax burden on producers and foster growth through more production. This double taxation prevents manufacturers from producing to their optimum capacity and retards growth. GST would look out of this problem by providing decrease to the manufacturer.

• ELIMINATES TAX BARRIERS: Various tax barriers like check posts and toll plazas cause tons of wastage for perishable items being transported, a loss that translated into major costs through higher need of buffer stocks and warehousing costs also. one taxation system could eliminate this roadblock for them.

• REDUCE PRICES: one taxation on producers would also translate into a lower final asking price for the buyer.

• TRANSPARENCY: Also, there'll be more transparency within the system because the customers would know exactly what proportion taxes they're being charged and on what base.

• WIDEN TAX BASE: GST would increase government revenues by widening the assets.

• INCREASES THE COVERAGE AREA OF TAXATION: GST provides credits for the taxes paid by producers earlier within the goods/services chain. this is able to encourage these producers to shop for staple from different registered dealers and would usher in more and more vendors and suppliers under the purview of taxation.

• INCREASE COMPETITIVENESS: GST also removes the custom duties applicable on exports. Our competitiveness in foreign markets would increase on account of lower cost of transaction.

SUMMARIZATION AND CONCLUSION

The GST System is essentially structured to simplify current tax system in India. A well- designed GST is a beautiful method to urge obviate deformation of the prevailing process of multiple taxations also the govt has promised that GST will reduce the compliance burden at the present there'll be no distinction between imported and Indian goods & they might be taxed at an equivalent rate. Many Indirect Taxes like nuisance tax, VAT etc., are going to be finished because there'll be one legal system i.e., GST, which will reduce compliance present burden. GST will face many challenges after its implementation and can result to offer many benefits. In overall we conclude that GST plays a dynamic role within the growth and development of our country.

From the buyer point of view, the most important advantage would be in terms of reduction within the overall tax burden on goods and services. Introduction of GST would also make Indian products competitive within the domestic and international markets. Last but not the smallest amount, this tax, due to its transparent character, would be easier to administer. However, once implemented, the system holds great promise in terms of sustaining growth for the Indian economy. While comparing challenges with its advantages, it's clearly visible that its advantages are more compared to challenges. GST will give Indian economy a robust and smart legal system for economic development. except for gaining those benefits country will got to build a robust mechanism.