Economy and Business

Benefits of GST

One thing clearly emerging from the draft proposals on the goods and services tax (GST) submitted by a panel headed by chief economic adviser Arvind Subramanian is that consumers will benefit only if retailers and manufacturers pass on the benefits of GST to the consumers.

Dec 7, 2015
One thing clearly emerging from the draft proposals on the goods and services tax (GST) submitted by a panel headed by chief economic adviser Arvind Subramanian is that consumers will benefit only if retailers and manufacturers pass on the benefits of GST to the consumers.
 
The GST is to replace all other taxes, like sales tax, excise duty and VAT. This would enable the seller to bring down prices and pass on the benefit to the consumer. There is no reason why retailers and manufacturers would not want to pass on the benefits as it would increase their volumes. This, in turn, means more revenue for the government and, eventually, higher GDP growth. The implementation of GST is expected to add between one and a half to two per cent to GDP growth, which is why it is important for retailers and manufacturers to pass on the benefits to the consumers, and for the government to see that it happens. Services, however, would be two to three per cent more expensive, according to some estimates.
 
The fine print will reveal which services would be exempt, etc. It is interesting that the panel has recommended a 40 per cent tax on the so-called sin goods, like tobacco, aerated drinks and luxury goods. In the case of those services that enjoyed taxes between two and six per cent the panel has suggested a 12 per cent tax rate. This seems a bit steep as it would affect equipment for the handicapped and sections like bangle-makers. It is now over to the government to accept these recommendations in toto, or make changes.
 
The Asian Age, December 8, 2015

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