Impact of goods and service tax (GST) in the economy.

Dear Student

GST ( Goods and Service Tax ) is a kind of tax that is levied on manufacture , sale and consumption of goods and services at a national level . Generally the GST ranges between 15% to 20% in most countries . The impacts of GST on the economy can be summarised as follows :

a) The GST will reform the indirect tax structure by subsuming major indirect taxes like excise , sales , service taxes . This will reduce the complexities of the indirect tax structure of the country hence leading to an easy path of doing business .
b) Exports will become competitive in nature as the GST will eliminate the cascading impact of taxes .
c) GST would create an unified market and reduce the transaction cost of businesses . It will also help bring down logistical cost .
d) Manufacturers will receive credit for all taxes paid earlier in the good/service chain , this will provide incentives to firms to source more inputs from other registered dealers . This will result in increase of government revenue as the unorganized sector will also be drawn into the tax net .
e) If implemented effectively GST can also bring down corruption as each dealer has an incentive to request documentation from the dealer behind him in the value chain .
f) Tax evasion can also be reduced effectively by implementation of GST .

Regards .

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