Clamorworld Exclusive: How GST Impacts Long-term Economic Efficiency?


The GST is no longer a matter of deliberation. One of the biggest economic measures in the history of the country is now a reality for all. Well as we grapple with this bittersweet experience, the question is how does it impact our economy over the longer term? The buzz around corporate circles will tell you that the digitisation of our economy at large is perhaps one of the biggest step forward. Accountability, efficiency and removal of supply chain bottlenecks are seen as some of the most meaningful outcomes of this new tax regime.

I feel a case of forced morality and better tax collection could be in place. Companies would insist on invoices from suppliers and vendors. With GST in place, tax avoidance might not be that easy. While big companies with supply chains might not face a lot f problem, smaller ones might have to fork out a considerable sum in paying compliance costs. But all in all, GST is expected to make the shift from unorganised to organised trade a lot simpler. It is set to also introduce supply chain efficiencies.

The jury is still out on how effectively the anti-profiteering clauses would be implemented. While on the one hand, experts say, corporates might be quick to pass on the direct benefits of GST, like lower taxes, it is too soon to expect the impact of the indirect benefits. Moreover, forceful implementation of such measures could be seen as retrograde and more like putting price controls in place. There is one group of market veterans who however believe that competition more than price control and GST will keep a check on prices.

However, one of the most telling impacts is likely to be seen on the inflation element in the economy. Analysts across the board believe that inflation will no doubt be very low. Rates on essential goods like food grains, consumer goods and essential services would be under control.

But one basic concern that remains is who bears the tax burden after all. Many experts feel if tax compliance is a primary motive than corporates may figure out a way of passing on the impact of higher taxes on the consumers after all? Some of the key sectors like heath, education and transport are outside the ambit of GST. Most importantly, if you thought the GST implementation will get the economy a jump-start, you are in for a rude shock. But it is sure to bolster sentiment over the longer-term.

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