ASSESSING THE IMPACT: INDIRECT TAXES VS. GST ON THE INDIAN ECONOMY

Abstract

GST has brought about significant advancements in the Indian taxation system. On a global scale, the adoption of the Goods and Services Tax (GST) indirect tax framework has gained momentum, with over 160 countries having implemented it by April 1, 2015, with Malaysia being the most recent addition. The inception of GST traces back to 2004 when it was conceptualized by the task force responsible for the Fiscal Responsibility and Budget Management Act of 2003 (commonly known as the Kelker Committee). Its primary objective was to replace the complex federal and state indirect tax systems. As per the Kelker Committee's recommendations, the nationwide implementation of GST, encompassing nearly all goods and services consumed within the economy, was envisioned to establish a unified market, broaden the tax base, enhance the revenue productivity of domestic indirect taxes, and optimize resource allocation for improved welfare. The GST model proposed is of a dual nature, akin to the system in Canada, where both the Union and State governments independently levy and collect taxes. GST operates as a consumption-based tax, meaning it assesses only the final consumption of goods and services. It stands as a unified tax applicable to both goods and services, enabling offsetting of taxes across the supply chain. This paper meticulously examines the proposed GST framework in comparison to the existing taxation structure, initially delineating the proposed GST and the current taxation system. Subsequently, it scrutinizes the distinctions between the two frameworks and concludes with a succinct exploration of their effects on employment and various sectors. It is noteworthy that previous studies have been taken into account. The Indian government has designated April 1, 2016, as the date for the rollout of GST.