GST and its implication for the Indian economy

By Aditya Kumar, Ashwani & Associates

The current indirect tax structure is the major impediment to India’s economic growth and competitiveness. Tax barriers in the form of CST, entry tax, and restricted input tax credit (credit) have fragmented the Indian market. Cascading effects of taxes on cost make indigenous manufacture less attractive. Complex multiple taxes also increase the cost of compliance.

In this scenario, the introduction of GST is considered crucial for economic growth. GST will have quite a favourable impact on the Indian economy. With the Government paving the way for its implementation, it should be a reality by July 2017.

Removal of tax barriers on the introduction of uniform GST across the country with seamless credit will make India a common market leading to an economy of scale in production and efficiency in supply chains. It will expand trade and commerce. GST will have a favorable impact on the organised logistics industry and modernised warehousing. GST will remove the cascading effect of taxes embedded in the cost of production of goods and services, and will provide seamless credit throughout the value chain. This will significantly reduce the cost of indigenous goods and will promote ‘Made in India’. The sectors which have a long value chain from basic goods to final consumption stage, with operations spread in multiple states such as FMCG, pharma, consumer durables, automobile and engineering goods, will be the major beneficiaries of GST. It will facilitate ease of doing business in India. Integration of existing multiple taxes into a single GST will also significantly reduce the cost of tax compliance and transactions. A stable, transparent and predictable tax regime will encourage local and foreign investment in India, thereby creating significant job opportunities.

Electronic processing of tax returns, refunds, and tax payments through ‘GSTNET’ without human intervention will reduce corruption and tax evasion. Built-in checks on business transactions through seamless credit and return processing will reduce the scope for “black” money generation leading to the productive use of capital.

Aditya Kumar

Aditya Kumar

Ashwani & Associates, Ludhiana, India
T: +91-98554-00428
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Aditya Kumar is a Chartered Accountant and a Lawyer who specialises in VAT/GST as the Indirect Tax Partner of Ashwani & Associates. He provides consulting in cross-border business to clients in India and abroad. He has a vast experience and working knowledge of all aspects of service tax, trade law, VAT, GST and the like. Serving clients from national and international companies and having worked in every existing kind of indirect tax branch, he offers pragmatic solutions on a cost-effective basis. He is also the author of the first book to be published on GST in India.

ashwani & associates is an audit, tax and consulting firm in India with three offices. Our clients range from emerging entities to large corporations with billions of dollars in revenue. They include privately-held businesses, not-for-profit organisations and publicly-traded companies. They support a local, national and international client base.

Published: Spring 2017 l Photo: Big Rolo Images -

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