The Goods And Services Tax In Indian Economy

1. Introduction:

Indian Economy depends more on agricultural in earlier days, now it depends more on the service sector as it is second largest country in the population. Indian Economy is divided in three sector-primary, secondary and Tertiary sectors. The service sector has gained momentum after New Industrial policy of 1991. Impact of Industrial policy was witnessed in 2000-01. Liberalization, Privatization and Globalization (LPG) was need of the hour in 2000-01 for all the countries of the world. Every country had to adopt a standardization policy in sales, marketing, accounting and taxation. If Countries have to survive in International market. In India, Two types of taxes are imposed by the government, one is direct tax (Income tax, Wealth tax) and the second one is indirect tax (Sales tax, VAT, Excise duty, Service tax). Service tax is an indirect tax imposed by central government after 1995 and MVAT in 2005 in Maharashtra. Businessmen and Traders were finding difficulty in business as they were not earning huge profits because of heavy taxes. The concept of GST was invented by a French tax official in the 1950s. In some countries, it is known as VAT, or Value-Added Tax. Today, more than 160 nations, including the European Union and Asian countries such as Sri Lanka, Singapore and China practice this form of taxation. About 90 percent of the world’s population lives in countries with VAT or GST. Goods and Services Tax (GST) is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of the Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. India’s biggest tax reform in 70 years of independence, the Goods and Services Tax (GST) was finally launched on the midnight of 30 June 2017. GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

The Goods and Services Tax (GST) is an indirect tax levied by India on the sale of goods and services to the final consumers. Goods and services have been bifurcated the rates into five categories such as 0%, 5%, 12%, 18% and 28%. Petroleum products and alcoholic beverages are separately taxed by the state governments. The special rate for rough gemstones and semi-precious gemstones is 0.25% and gold is 3%. In addition, the rate of tax above 28% of consumption tax is 22% or other tax rates apply to a few items such as inflatable drinks, luxury cars and tobacco products. In the pre-GST, the statutory tax rate for most products was approximately 26.5%. After GST, most products are expected to be within the 18% tax rate.

2. Review of Literature:

Impact of GST on Indian Economy Meenakshi Bindal1 and Dinesh Chand Gupta International Journal of Engineering and Management Research Page Number: 143-148

Products that have become cheaper after GST

FMCG products like Bathing & Washing soaps, Hair oil, Detergent powder, Tissue papers, Napkins, Matchsticks, Kerosene, LPG domestic, Agarbatti, Toothpaste. Stationery items like pens, books, pencils School Bags, Printers, Papers. Healthcare items like Insulin, X-ray films for medical use, Diagnostic kits Glasses for corrective spectacles, Medicines for diabetes, cancer. Apparels like Silk, Woollen fabrics, Khadi yarn, Gandhi topi, Footwear below Rs 500, Apparel up to Rs 1,000.

Products that have become dearer after GST

Ghee, Cold drinks, Chocolate, Packaged chicken, Ice cream, Ayurvedic medicines, Movie tickets greater than Rs 100, AC restaurants, Electronic Home Appliances, Furniture, Cell phone bill, Insurance premiums, Bank services, credit card services, IPL tickets, AC train tickets, Business class air travels, Advertising services, Motorbikes with more than 350 cc engine, Telecom, Hotel room more than Rs 5,000, five-star hotel restaurants.

3. Methodology:

A Google form was used to collect data from Chartered Accountants, Advocates and Professor in Economics and Accountancy of different colleges of Mumbai city.

Sample and Sample size:

The sample size was 49 Chartered Accountants, Advocates and Professor in Economics and Accountancy of different colleges of Mumbai city.

Sampling technique:

Simple random sampling techniques were used for data collection.

Tools used:

This is a Likert type scale with 5 options ranging from strongly agree, agree, neutral, disagree and strongly disagree.

Statistical techniques used:

Mean, Standard Deviation Likert Scale, Pie Chart and Percentage were used for data analysis.

For each question, mean, standard deviation and Z score was calculated [Z score was calculated by the following formula, Z = (Mean -0)/S.D. The expected mean is 0 because the scale has been created on 2 agree, 4 strongly agree, -1 disagree and -2 strongly disagree].

With 95% confidence level Z=1.96. If the score is positively more than 1.96, then total result is general agreement. If score is negative and less than 1.96, there is general disagreement.

If the score is between +1.96 and -1.96, respondents are neutral.

4. Data Analysis and Interpretations:

Objectives:

1. To understand Goods and Service Tax Act- Secondary Data
2. To study the impact of GST on Indian Economy- Primary Data

Hypotheses:

Mean

1.86

H0: GST doesn’t improve national income of the country.

H1: GST improve national income of the country.

SD

2.00

Z

1.86

Z Score is 1.86, which is less than 1.96. Hence, respondents were neutral.

Mean

0.73

H0: GST doesn’t improve per capita income of the country.

H1: GST improve per capita income of the country.

SD

1.82

Z

0.73

Z Score is 0.73, which is less than 1.96. Hence, respondents were neutral.

H0: GST doesn’t reduce inflation in India.

H1: GST reduce inflation in India.

Mean

0.08

H0: GST doesn’t reduce inflation in India.

H1: GST reduce inflation in India.

SD

1.55

Z

0.08

Z Score is 0.08, which is less than 1.96. Hence, respondents were neutral.

Mean

0.14

H0: GST doesn’t enhance productivity of manufacturing industries in India.

H1: GST enhance productivity of manufacturing industries in India.

SD

1.43

Z

0.14

Z Score is 0.14, which is less than 1.96. Hence, respondents were neutral.

.

Mean

1.02

H0: GST doesn’t enhance GDP of India.

H1: GST enhance GDP of India

Z 1.02 Z Score is 1.02, which is less than 1.96. Hence, respondents were neutral.

From the above analysis, it is clear that respondents were neutral when different questions were asked relating to different parameters of the Indian economy such as GDP, Per Capital Income, National Income, and Productivity. They were having a mixed opinion regarding GST whether it will have a positive impact or negative on the Indian Economy in future.

[image: Forms response chart. Question Title: Is GST improve the national income of the country?. A number of responses: 49 responses.]

65.30% of respondents agreed that GST will improve the national income of the country.

[image: Forms response chart. Question Title: Whether GST improves per capita income of the country?. A number of responses: 49 responses.]

38.80% of respondents agreed that GST will improve per capita income of the country but 38.80% were neutral and 22.50% disagreed when the above question was asked by the research scholar.

[image: Forms response chart. Question Title: Is GST reduce inflation in India?. A number of responses: 49 responses.]

53% of respondents were disagreeing and 34.70% respondents were neutral when research scholar asked GST will reduce inflation in India.

[image: Forms response chart. Question Title: Is GST enhances the productivity of manufacturing industries in India?. A number of responses: 49 responses.]

32.70% of respondents were neutral and 30.60% of respondents disagreed on the question of GST will enhance the productivity of manufacturing industries in India.

[image: Forms response chart. Question Title: Is GST enhances the Gross Domestic Product of India?. A number of responses: 49 responses.]

48.90% of respondents were agreed and 30.60% of respondents were neutral when the above question was asked by a research scholar. So we may conclude that GST may enhance the GDP of India.

5. Findings & Recommendations:

Indian Economy largely depends upon different parameters such as national income, GDP, per capita income, production of manufacturing industries and performance of the service sector. When research scholar asked different questions from the sample population on the research topic “GST and Indian Economy”, he found that:

1. GST is the biggest indirect tax reform in India.
2. GST will help the country in improving the national income of the country.
3. It will not improve the per capita income of the country, which is an important parameter of the Indian Economy.
4. GST is not a Good and Simple Tax as suggested by respondents as there are 5 tax slabs and the procedure for registration/filing of returns is also complicated.
5. Respondents were of having an opinion that GST will not reduce inflation in India as claimed by various economic and financial experts.
6. GST will have a negative impact on manufacturing industries in India, it affected the unorganized manufacturing sector drastically.
7. It has impacted positively service sector industries in India as suggested by respondents. Hotel Industries particularly as early they have to pay 12.50% service tax now they have to pay 5% GST (Composition Scheme).
8. Quality of services has not increased in service industries in India after the implementation of GST.
9. Research scholar has concluded that GST has increased the rate of services in India. Services have become more costly in India after the implementation of GST.
10. GST may enhance the Gross Domestic Product of the country as it has affected service sector industries and manufacturing industries in India positively.

6. Conclusion:

Unity and Peace is important for any country. GST helps India to achieve both objectives. The concept of sharing the tax revenue among the state government and central government is a new concept and it will be good for stabilizing our economy and peace in India as both governments will depend on each other. GST may have a positive impact on the Indian Economy, if it is implemented appropriately with people’s expectations, without any greed on the part of the Government and in a gradual and pace manner.