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How GST Will Impact To Middle Class

6/12/2017
How GST Will Impact To Middle Class

Goods and Services Tax will bring a reform in the indirect tax regime of the country. It is a noteworthy step in unifying all indirect taxes and removing the cascading effects of the tax burden on the common man. By blending a number of Central and State taxes, GST will remove double taxation and bring into picture a single national market. For end consumers, GST will minimize tax burden and make Indian products competitive in international market. GST would be easier to administer because of its transparent structure.

GST has been tried and tested in many countries, but in India, it will subsume many taxes such as Service Tax, VAT, Central Excise Duty etc. This simplified structure will be very easy for a layperson to understand, rather than the previously complex structure which he had no idea of.

Prices of FMCG to dip

Indian Economy will also see a boost by 2 percent in the long run. Although, inflation is expected to rise in the initial stage, in the long run it will benefit both the government by generating revenue for common man by reducing the price of food grains and Fast Moving Consumer Goods. (FMCG).

No additional tax burden

Today, the taxation powers are divided between centre and state. Thus, both has their set of taxes which the consumer is unaware of. Direct taxes such as income tax is levied by the central government. Indirect taxes are applicable on manufacture of goods and services. Taxes on manufacture of goods are levied by the central government while taxes on consumption is levied by the state government. For example, products such as clothes are manufactured in one state and sold in another. This causes additional tax burden which have to be bore by the end consumer.

Wil create single market

Inevitably, goods and services tax will create a single market in the country. All the taxes will be collected on the point of consumption. Consumers will be well aware of the taxes that they pay. It will also remove tax on tax.

It will increase production by providing tax credit to manufacturers. It will also increase the overall economic growth of the country. Transportation costs would reduce with breakdown of transport barriers such as check posts and toll plazas. Consumers will benefit from a single final selling price. Export duties will be removed and competition in the market will increase.

With five percent tax on goods of mass consumption, common man will breathe a sigh of relief and save some amount of food grains and essential items which is taxed at zero percent. But this is not true in case of luxury products as taxes are set higher on those goods. Also, real estate price will increase which will be a discomfort for the middle class.

Thus GST will bring a chain of mixed impact on the middle class.