Goods And Services Tax: Benefits And Its Impact On SME In India

ROHIT KUMAR TRIPATHI

M.COM. , L.L.B.
Department Of Commerce, Shmv Churk, Uttar Pradesh,
India Corresponding Author: rohitkumartripathi11@gmail.com

ABSTRACT
The Goods and Services Tax took effect on July 1, 2017. The new tax system was designed to replace all current indirect
taxes with a single, comprehensive tax. The Products and Services Tax (GST) is a consumption tax imposed on goods
and services depending on their final destination. GST is a single tax that applies to the delivery of goods and services
from the producer to the end user. In a nutshell, it's a tax imposed solely on value addition, with input tax credits
transferred to successive stages of value addition, implying that the ultimate tax burden would fall on the end user of
products or services. The anticipated advantages of implementing the GST are that it would decrease the cascading
impact of taxes, i.e. it will eliminate tax on tax. It was also anticipated to stimulate demand for products and the
elimination of several indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise, among others, which would
help to improve the Indian economy in the long term. This paper tries to highlight the cost and benefits bear by the
economy due to the implementation of the GST. The paper also tries to find out the expected rate of growth of the
economy after the GST. Finally, the study tries to conclude how it would be disrupted and benefits the economy in the
long run.

Keywords-- GST, Economic Growth, GST Collection

INTRODUCTION
The Goods and Services Tax (GST), the world's largest tax reform, is now a part of the Indian economy. The Products
and Services Tax (GST) is a tax imposed on the manufacture and sale of goods and services in the United States. Every
step of the production process is subject to tax. Both the consumer and the manufacturer are subject to GST. It's a tax
that's dependent on where you go. This indicates that GST will be collected at the time of sale. In 1999-2000, the GST
idea was conceptualised for the first time. The Kelkar Committee proposed implementing GST in 2004-05, as indicated
by the 12th Finance Commission. Finance Minister P Chidambaram suggested GST implementation by 1 April 2010 in
February 2006, based on the same suggestions. The reform was put on hold when Asim Dasgupta, the chairman of the
GST committee, resigned. On 8 August 2016, the Constitutional Amendment Bill for GST was passed by the Parliament,
followed by ratification of the bill by more than 15 states and its enactment in early September (Prabhash K Dutta
2017). The Goods and Services Tax was finally launched at midnight on 1 July 2017. The launch was marked by a
historic midnight (30 June – 1 July) session of both houses of the Parliament convened at the Central Parliamentary
Hall. With the implementation of the GST, all registered persons must file a monthly return by the 20th of the
succeeding month. The Goods and Services Tax, or GST, took effect on July 1, 2017. The tax was enacted to replace all
current indirect taxes with a single comprehensive tax. The Products and Services Tax (GST) is a consumption tax
imposed on goods and services depending on their final destination (Bhushan Satya). Simply said, GST is a single tax
that applies to the delivery of goods and services from the producer to the end user. In a nutshell, it's a tax imposed
solely on value addition, with input tax credits transferred to successive stages of value addition, implying that the
ultimate tax burden would fall on the end user of products or services. The Products and Services Tax (GST) has a
uniform taxation system for goods and services throughout India, with rates of 0%, 5%, 12%, 18%, and 28%. Some
commodities or products, such as gold, precious stones, and semi-precious stones, have a different tax rate than
others. These goods are subject to special tax rates. Luxury vehicles, cigarettes, fizzy drinks, and other items are subject
to a 22 percent extra cess. All indirect taxes were unified under GST, including the central excise tax, service tax, VAT,
and entertainment tax.
GST Advantages
The Goods and Services Tax (GST) replaced the Value Added Tax (VAT) system. It is a tax on products and services
manufactured, consumed, and sold in India. It replaced or consolidated all indirect taxes levied on products and
services by the federal government and state governments. The Goods and Services Tax (GST) prioritises long-term
gains. This new system has benefited a wide range of industries. The following are some of the benefits of the Goods
and Services Tax (GST): -
  This method aided in the reduction of tax evasion.
 Control over the circulation of black money
 Due to a lower burden of taxes, there is a reduction in overall costs.
 Goods and Services Tax (GST) merged all the indirect taxes into one. This made the tax system easier and
simpler for all services and businesses.
 The Goods and Services Levy (GST) consolidated all indirect taxes into a single tax. For every service and
business, this made the tax system easier and simpler.
 The Goods and Services Tax (GST) decreases non-receipted sales and lowers the incidence of corruption.
 Not only the removal of cascading tax effect, i.e. tax on tax but also an Increase in the production of goods and
services
 Expected to increase the revenue of the government.
 The burden has been decreased on the final taxpayer, i.e. Consumer at the end.
 Removal of multiple taxations.
GST Negative Effects
The Goods and Services Tax (GST) replaced the Value Added Tax (VAT) system. It is a tax on products and services
manufactured, consumed, and sold in India. It replaced or consolidated all indirect taxes levied on products and
services by the federal government and state governments. The Goods and Services Tax (GST) prioritises long-term
gains. Working hard for the future has its disadvantages as well. The following are some of the drawbacks of the Goods
and Services Tax (GST):-
1. The Goods and Services Tax (GST) has increased the cost of transactional fees between banking institutions.
Transaction costs have been raised from 15% to 18%.
2. The Goods and Services Tax (GST) has increased the cost of insurance premiums.
3. It has harmed the real estate market. Because of the Goods and Services Tax (GST) (GST). The price of real estate has
increased from 8% to 12%. It is anticipated, however, that it will not endure in the long run.
4. Because the Goods and Services Tax (GST) excludes fuel, the price of petrol constantly deviates from the principles
of commodity unification.
5. The Goods and Services Tax (GST) has progressed to a more complicated structure for company owners.
6. Before the Goods and Services Levy (GST), only a few retail items were subject to a tax of up to 4%. However, the
Goods and Services Tax (GST) has increased the cost of clothing and garments.
7. The Goods and Services Tax (GST) has an impact on the aviation industry. Before the introduction of the Goods and
Services Tax (GST), the service tax on airline tickets ranged from 6% to 9%. However, they have already been
surpassed, with tax rates ranging up to 15%, almost twice the rate set by the government before.
8. There was no change in the tax system with the introduction of the Central Goods and Services Tax (CGST) and State
Goods and Services Tax (SGST), which replaced the Service Tax or Central Excise, Value Added Tax (VAT), and Central
Sales Tax (CST). There are still numerous levels to the tax structure.

GST's Expected Economic Benefits in India

 It eliminates the cascading impact of taxes, i.e. it eliminates the tax on tax.
 Goods demand and consumption are expected to rise.
 VAT, CST, Service tax, CAD, SAD, and Excise are among the bundled indirect taxes that have been eliminated.
 When compared to the present tax system, there will be less tax compliance and a simpler tax policy.
 Manufacturing costs are reduced as a result of decreased taxation in the manufacturing sector. As a result,
consumer goods prices are expected to fall.
 Lower the burden on the ordinary man, i.e., the general public will have to spend less money to get the same
expensive goods sooner. More demand will lead to increased supply. As a result, there will be an increase in
the production of products. Control of black money circulation, as the system used by merchants and shops
would be subjected to obligatory scrutiny.
 Long-term boost to the Indian economy
REVIEW OF LITERATURE
The purpose of this article is to go through the current literature on GST and its effects on the Indian economy.
Dr Agrawal Yogesh Kailashchandra (2019)
According to his research, "Goods and Services Tax and Its
Impact on the Indian Economy," GST has both good and bad effects on the Indian economy. The GST system is
structured in such a manner that it is anticipated to produce a significant amount of income for both the
federal and state governments, according to the research. It will be advantageous in the long term for
corporations, businesses, and service suppliers. It would increase transparency in indirect tax collection, which
will benefit both the government and the people of India.
Sandhu Vikram and Atwal Heena (2019),
the research "Goods and Services Tax: Issues and Challenges in
India" finds that since GST is still in its early stages, it has its own set of issues and challenges. However, if this
system is executed correctly and efficiently, it may aid in the improvement of our country's financial and
economic standing. This method is said to be a more transparent and better version of the taxation system.
However, only time will tell how much of an effect it has and how relevant it is.
Kumar, Mohan. R (2019)
He concludes that GST would also reduce the cascading effect of taxes, as he
examines the "Impact of Goods and Services Tax on the Indian Economy." India is expected to play a significant
role in the global economy in the coming years. GST is expected to be implemented not just in the nation, but
also in neighbouring countries and developed economies across the world. Only when the whole nation works
together to make it a success will it become nice and easy. In addition to the current situation, the new taxing
system has a slew of other effects on the economy that may help businesses thrive.
Ajeev, Kiran; T M.Somasekharan (2019)
The researchers claim in the current study, "A Study on the Impact
of GST: Business Review," that the introduction of GST would result in lower product prices. It's still unclear if
the government established GST Sava Kendra to help businesses. Furthermore, the government is better able
to handle various problems related to taxes, input tax credits, refund systems, exports and imports. Companies
must modify their accounting systems due to the periodic changes in GST legislation. The technical and legal
costs of GST are extremely expensive, and the necessary GST services are not accessible. As a result, the GST
changeover is very challenging. With the assistance of GST, the country's taxation structure has improved, and
the government should devote more resources to public training and education.
Kaur, Harjinder (2018)
The researchers discuss public awareness, knowledge, and understanding of GST in
India in this study, titled "Public Awareness, Knowledge, and Understanding of GST in India." The government
should adequately plan and prepare for the successful implementation of GST, public education, and
community participation, according to the findings. The goal of GST is to make the existing indirect tax system
easier to understand and comply with.
M. Rajeshwari M. Shettar, (2018)
The researchers discuss public awareness, knowledge, and understanding
of GST in India in this study, titled "Public Awareness, Knowledge, and Understanding of GST in India." The
government should adequately plan and prepare for the successful implementation of GST, public education,
and community participation, according to the findings. The goal of GST is to make the existing indirect tax
system easier to understand and comply with.
Pallavi Kapila (2018)
In the article "GST: Its Impact on the Indian Economy" The purpose of this study paper is
to show how GST, which includes VAT, Excise Duty, Service Tax, and Sales Tax, would help to reduce the
current complexity of taxes in India. According to research, the introduction of GST had a significant impact on
the development of the Indian economy. Soon, a unified and reasonable taxation structure in India would lead
to fewer market disruptions and a more effective allocation of resources within the sector. The research also
discovered that GST would boost the country's GDP and exports, improving economic welfare and returns on
the inputs of production, such as land, labour, and capital.
Pallavi Kapila (2018)
A study on "GST: Its Impact on the Indian Economy" In this study paper, an effort is made
to show how GST, which includes VAT, Excise Duty, Service Tax, and Sales Tax, would assist in reducing the
current complexity of taxes in India. According to research, the introduction of GST had a significant impact on
the development of the Indian economy. Soon, a unified and reasonable taxation structure in India would lead
to fewer market disruptions and a more effective allocation of resources within the sector. The research also
discovered that GST would boost the country's GDP and exports, improving economic welfare and returns on
the inputs of production, such as land, labour, and capital.
Jayalakshmi (2018)
Her research, "Customers' Awareness of Goods and Service Tax (GST)," focuses on
MSMEs' GST awareness and the impact of GST on them. India's primary development engine has long been
identified as small and medium-sized businesses (SMEs). All GST compliance processes — identification,
refunds, reimbursements, and returns — are now carried out solely via online platforms, and SMEs no longer
have to deal with department employees, which is regarded as one of the most inconvenient aspects of the
new fiscal system.
B, Mitra Priya, (2017)
GST has been described as a game changer in the Indian economy. The study found
that the GST simplified different taxes and eliminated their cascading impact. A tax system with different tax
rates is shown on paper. Various industries have an impact on tax incidence, including telecommunications, e-
commerce, automobiles, real estate, finance, and consumer goods. Cross-credit usage would be available in
CGST and SGST, according to the impact of the input tax credit.
Jadhav Bhika Lala (2017)
"The Impact of GST on the Indian Economy" is the title of the article. The purpose of
this paper is to shed light on GST, its characteristics, and the impact of GST on the pricing of products and
services. According to the research, the GST system has been rebuilt to simplify India's existing vital indirect tax
system. The research also discovered that a well-designed GST is an appealing way to avoid the deformation of
the current multiple-taxation system and minimise compliance costs.
Jain, Vasundhara. & Aggarwal, Reema (2017)
In "Impact of GST on the Indian EconomyOpportunities and Challenges," the
impact of the Goods and Service Tax (GST) on the Indian economy is addressed, as well as why it is necessary
to change the taxation system from the existing tax structure to the GST model. GST offers a comprehensive
income tax credit that covers virtually all state and municipal indirect taxes. In India, an integrated GST
framework will be implemented to distribute input components, resulting in increased GDP and exports. The
new tax policy shift will not be easy for everyone, but the new structure, which is contemporary, coherent, and
open, will attract international investment and provide many additional benefits. It would expand the base for
taxpayers and boost the competitiveness of the Indian industry, which is the duty of non-organized companies.
People and small merchants, for example, will benefit from several industries and sectors, while others, such
as individuals and small traders, will lose out.

OBJECTIVE OF THE STUDY

This paper tries to highlight the cost and benefits bear by the economy due to the implementation of the GST.
The paper also tries to find out the expected rate of growth of the economy after the GST. Finally, the study
tries to conclude how it would be disrupted and benefits the economy in the long run.

METHODOLOGY OF THE STUDY

The current study focuses on the GST and its effect on different sectors of the Indian economy from July 1,
2017, to July 1, 2021. The approach is straightforward and analytical, relying mostly on secondary data sources.
The information was gathered from a variety of sources, including the Economic Survey, MOSPI, relevant
websites, government publications, national and international journals and articles, publications, conference
papers, government reports, newspapers, and magazines that focused on various aspects of the tax structure
and GST.
GST'S EFFECT ON THE INDIAN ECONOMY GST
(Goods and Services Tax) is very beneficial to India's economy in the long run. Because of the universality of
taxation, the Goods and Services Tax (GST) provides an advantage. It combines all indirect taxes that existed in
India before the implementation of the Value Added Tax (VAT). The Goods and Services Tax (GST) provides
transparency to the business sector, allowing it to develop and become stronger. When the business sector
grows, it will help to create more jobs, which will eventually contribute to a reduction in the tax burden. The
goal of adopting GST throughout the nation is to create a win-win scenario for all parties involved. Fewer tax
filings and clear regulations would help manufacturers and merchants. The customer had a far greater
expectation of paying less for products and services, while the government expected to earn more money. GST
will make Indian goods more competitive in both the local and foreign markets. However, reality differs
significantly from expectations. Let us now look at how GST has affected the Indian economy. The Indian
economy has been destroyed and decimated as a result of two corona pandemics. The combined effect of the
two waves on earnings and consumer mood, along with the second wave's rise in household medical costs, is
expected to influence consumer demand for some time, says the report. (Subodh, Kumawat, 2021). The GST
system in India has now been in place for three years, according to the GST Council of India. The government,
on the other hand, is still working to solve a variety of problems and concerns to create a healthy tax system.
While the government was addressing the negative effects of GST on the Indian economy, the COVID-19
epidemic exacerbated the situation. (AmitMundra,2020) The collections of GST during the three academic
years indicate the impact on the Indian economy.

CONCLUSION
The current article examines the Goods and Services Tax (GST), India's most significant reform. The Indian
economy was anticipated to benefit from the introduction of GST, which was expected to boost economic
growth, capital investment, expenditure, consumption, and employment. The administration is working to
establish a "One Nation, One Tax, One Market" structure in the nation. The research shows that the GST has
had a mixed impact on the Indian economy. In the fiscal year 2018-19, the total income collected was Rs.
1177370 crores. The overall collection for the fiscal year 2019-20 rose by 3.8 percent to Rs. 1222131 crores.
However, in the fiscal year 2020-21, overall revenue fell by Rs. 1012901 crores. GST has a major
macroeconomic effect in terms of growth. India's GDP growth rate declined from 8.26 per cent to 4.04 percent
in the year 2019-20 and further declined to -7.26 per cent in 2020-21. The main reason for the declining GDP
growth rate is the TWO corona Pandemics. A shift in the tax structure from income to consumption in a
developing nation like India with a rising service sector is expected to be a lucrative source of revenue. Finally,
GST seems to eliminate all tax differences, putting small and medium-sized companies on a level playing field.
The GST rate, it has been proposed, should be addressed in the long term. The study further suggested that
the LTC cash voucher scheme, Atamnirbhar Bharat Yojana should be continuing till the improvement in the
GST revenue collection as well as to achieve a higher GDP growth rate. However, India's economy can be
uplifted in the long run which requires to have patience and implementing of the GST forcefully.

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