GST WAS LAUNCHED ON JULY 1, 2017 with the promise that it would transform the Indian economy. It was characterized as a second freedom since it would unify the nation. Eight years later, it is time to assess its performance. While the Prime Minister has lauded the tax, the Leader of Opposition in the Lok Sabha Rahul Gandhi, has criticised it since it marginalises the marginals.
Benefits
GST supposedly subsumed seventeen different taxes, thereby simplifying indirect taxation. Further, with a common tax rate applicable across the country, India was to become one unified market, leading to ease of doing business. The cascading effect of taxes was expected to be eliminated, resulting in lower incidence of taxes and reducing inflation. Black income generation was expected to decline, leading to additional tax collection which could help social development. So, growth was expected to accelerate leading to creation of more jobs.
It was slated to reduce inequality by benefiting the poorer states. GST is collected at the last point of sale even though it is applicable at every stage of production and distribution. The consumer pays the entire amount when the final sale occurs. Since the poorer states produce proportionately less than the better off states, their share of consumption in their state GDP (‘GSDP’) is higher, so they were expected to collect proportionately more of GST, thereby causing inter-state disparities to decline.
