Alike mirage, GST(Goods and Service Tax) in India with such high rates is not portraying a real image before us.
Consolidation of all the indirect taxes into a single tax, i.e GST, will surely be beneficial for the citizens, but not with such high rates. Taxes on the manufacture of durable goods will be lowered while the taxes on services will be increased, forming a tax rate for GST.
As the tax rate will be less on durable goods, their prices will also be reduced which will have a good result on consumer’s budget while increased taxes and prices of services will adversely affect the consumer’s budget.
Ali Mahdi Naqvi
Moreover, durable goods are purchased less frequently, having a less share on consumer’s budget while on the other hand services are purchased more frequently, thus having the larger share on consumer’s budget, therefore, a slight increase in the tax will rise the price of the services which will disturb the consumer’s budget to a larger extent.
Along with this, the constitution amendment to roll out GST provides for the compensation to the states for five years but details are not been mentioned. “
Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years,” the amended law says.
Multiple tax rate system is prevalent in India. Different states in India are charging indirect taxes with different rates, but after the implementation of single tax rate throughout India, some states will face revenue losses so the government is likely to bring a separate law which shall explain the method of compensating states for the loss in their revenues due to the low rate of GST.
As it is obvious that the Government pays such compensation out of its treasury and the taxes are having the maximum share in it. No sooner, the burden of compensation falls on the shoulders of the Government, it will be shifted on the consumers in the form of high taxes.
Thus, if the consumer is feeling secure by the introduction of GST and assuming it to be their saviour it is only an illusion, in reality consumer should prepare themselves for high rate of taxes and their empty bread baskets.
Deptt. Of Applied Economics,
University of Lucknow