Why is India's GST Such a Big Deal?

By Registrationwala

5th April 2017


The introduction of India’s latest nation-wide GST (Goods and Service Tax) is expected to be a game changer. It is set to bring greater transparency to India’s otherwise cumbersome taxation system. GST will provide the much-needed exemption limit to small traders and businessmen whose turnover shouldn’t go beyond 20 lakh or a government estimated threshold limit. GST tax will come into force this April 1st, 2017, after a long hiatus of 16-year of political debates, discussions and deliberations.

The GST is actually a step further to improve India’s cooperative federalism structure. A share of GST will go to both the state and central government’s treasury in a certain ratio. Former Prime Minister Atal Bihari Vajpayee first laid the foundation for a single effective taxation policy for traders in 2001. As per the current taxation policy, goods in India are taxed by the state governments while services are charged by the central government including Excise, surcharges and customs.

Multiple taxes often lead to a delay in supplying goods while discouraging the entrepreneurs to set up their own business ventures. Also, an accidental chance of double taxation erroneously is always prevalent in the current system. The Goods and Service taxation system is expected to include several other taxes too in a single tax. But traders and businessmen would need to pay just GST only.

The Importance of GST for India

India has always been a victim of license raj and red-tapism since time immemorial. In fact, taxation at multiple levels by the central and state authorities has only made the situation worse. In the post 1991 era, it was believed that after liberation India would stand tall as the leading economic superpower – to some extent it got that status – but not as per the people’s expectations.

It is because of the constant dilly-dally attitude of the administration towards the traders. The same product is taxed by the both central and the state government leading to further delay in supplying the good and avoidance of paying multiple taxes through black marketeering. GST will create a favorable investment climate in India and attract FDIs too.

Some Essential Facts of GST

  • Union Finance Minister Arun Jaitley expected that implementation of GST will boost country’s economy by 2 percent.
  • Goods and services of all types will be charged under GST barring a few exceptions.
  • Initially, companies will have to modify their existing tax calculation procedure. They have to now calculate GST too. The government is in the process of launching GST computer software shortly.
  • Some sort of inflationary pressure will be created within India’s economy after GST launch this year. Many countries have faced initial inflationary pressures in their economies in implementing GST. The same happened in Australia too – the island continent witnessed around 0.5 per cent inflation rise after implementation of the said tax.


Why is India's GST Such a Big Deal?