Answer of the day-GST

Q-Recent government release shows that Indian GDp growth slowdown to 5.6% in last quarter.  One of the reason cited for such slow down is GST effect on businesses. What is GST? How does it effected the growth in short term? And what are the ways for its implementation for utilising maximum benefit? (12.5)

Sol-             CSO released last quarter growth rate as slowdown to 5.6%. Proposed reason for same demonitisation,  GST and reducing Investment by private sector. 

       As already stated,  one reason is GST. It is one nation one tax which replaces various taxes like sale tax,  excise tax,  service tax etc. Thus reducing cascading effect, aimed at increasing compliance and increasing growth

But growth got effected by GST in short term in following ways. 

1.Industries response to the new tax regime ----Companies are readjusting their operation, adapting to new rules, rates etc. Thus this process takes time and in the meanwhile they have reduce production and investment, effecting growth. 

2.consumer response to new tax - - - as they are apprehensive and not aware of new tax's affect on prices of goods and services. They are following wait and watch policy, thus reducing consumption demand and consequently growth. 

3.Government officials response to GST - - - as government is also new to this taxation system, official are still in learning phase and not able to respond to various need like queries of companies etc. Thus business and consumer can't transact smoothly and affecting growth. 

4.Various tax slab rather than just one - - - this make it difficult for companies as well as consumer to effectively respond. Thus hindering in growth process. 

5.GST technology readiness - - - - as observed that their are delays in various activities due to inefficient working of technology and thus affecting the smooth working of taxation system. 

Ways for its efficient implementation. 

1.reducing regular changes in tax slabs---as seen that government has changed tax rates of over 100 products in last 75 days.This changes should be as minimum as possible. 

2.faster improvement in the GST network and it's working - - - thus not effecting businesses,  as around $10 billion refund of exporter have been stuck due to inefficient working of GST network. 

3.emphasis on capacity building of taxation officials 

4.increasing awareness among consumers and small businesses using messages on phone. Thus building their confidence in the new system 

5.working on reducing numbers of tax slabs

GST gas been said as the biggest financial reform of independence India. To better utilise its potential,  we need to work on above stated steps and helps India walk toward high growth path.