International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962

Volume-11, Issue-4 (August 2021)

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Goods and Services Tax: Benefits and its Impact on Indian Economy
Dr. Jamil Ahmad
Assistant Professor, Department of Economics, Aligarh Muslim University Aligarh, Uttar Pradesh, INDIA

Corresponding Author: jamilahmad786@gmail.com

ABSTRACT and its enactment in early September (Prabhash K Dutta

The Goods and Services Tax, or GST, took effect 2017). The Goods and Services Tax was finally launched
on July 1, 2017. The new tax system was designed to at midnight on 1 July 2017. The launch was marked by
replace all current indirect taxes with a single, a historic midnight (30 June – 1 July) session of both the
comprehensive tax. The Products and Services Tax (GST) houses of the Parliament convened at the Central
is a consumption tax imposed on goods and services
Parliamentary Hall. With the implement of the GST, all
depending on their final destination (Bhushan Satya).
Simply said, GST is a single tax that applies to the delivery registered persons must file monthly return by 20th of
of goods and services from the producer to the end user. In the succeeding month.
a nutshell, it's a tax imposed solely on value addition, with The Goods and Services Tax, or GST, took
input tax credits transferred to successive stages of value effect on July 1, 2017. The tax was enacted with the
addition, implying that the ultimate tax burden would fall intention of replacing all current indirect taxes with a
on the end user of products or services. single comprehensive tax. The Products and Services
The anticipated advantages of implementing the Tax (GST) is a consumption tax imposed on goods and
GST are that it would decrease the cascading impact of services depending on their final destination (Bhushan
taxes, i.e. it will eliminate tax on tax. It was also anticipated
Satya). Simply said, GST is a single tax that applies to
to stimulate demand for products and the elimination of a
number of indirect taxes such as VAT, CST, Service tax, the delivery of goods and services from the producer to
CAD, SAD, and Excise, among others, which would help to the end user. In a nutshell, it's a tax imposed solely on
improve the Indian economy in the long term. value addition, with input tax credits transferred to
This paper tries to highlight the cost and benefits successive stages of value addition, implying that the
bear by the economy due to implementation of the GST. ultimate tax burden would fall on the end user of
The paper also tries to find out the expected rate of growth products or services. The Products and Services Tax
of economy after the GST. Finally, the study tries to (GST) has a uniform taxation system for goods and
conclude that how it would be disrupted and benefits the services throughout India, with rates of 0%, 5%, 12%,
economy in the long run.
18%, and 28%. Some commodities or products, such as
gold, precious stones, and semi-precious stones, have a
Keywords-- GST, Economic Growth, GST Collection
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
I. INTRODUCTION cess. All indirect taxes were unified under GST,
including the central excise tax, service tax, VAT, and
The Goods and Services Tax (GST), the world's entertainment tax.
largest tax reform, is now a part of the Indian economy. GST Advantages
The Products and Services Tax (GST) is a tax imposed The Goods and Services Tax (GST) replaced
on the manufacture and sale of goods and services in the the Value Added Tax (VAT) system. It is a tax on
United States. Every step of the production process is products and services manufactured, consumed, and sold
subject to the tax. Both the consumer and the in India. It replaced or consolidated all indirect taxes
manufacturer are subject to GST. It's a tax that's levied on products and services by the federal
dependent on where you go. This indicates that GST will government and state governments. The Goods and
be collected at the time of sale. In 1999-2000, the GST Services Tax (GST) prioritises long-term gains. This
idea was conceptualised for the first time. The Kelkar new system has benefited a wide range of industries. The
Committee proposed implementing GST in 2004-05, as following are some of the benefits of the Goods and
indicated by the 12th Finance Commission. Finance Services Tax (GST): -
Minister P Chidambaram suggested GST 1. This method aided in the reduction of tax
implementation by 1 April 2010 in February 2006, based evasion.
on the same suggestions. The reform was put on hold 2. Control over the circulation of black money
when Asim Dasgupta, the chairman of the GST 3. Due to a lower burden of taxes, there is a
committee, resigned. reduction in overall costs.
On 8 August 2016, the Constitutional 4. Goods and Services Tax (GST) merged all the
Amendment Bill for GST was passed by the Parliament, indirect taxes into one. This made the tax
followed by ratification of the bill by more than 15 states

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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-11, Issue-4 (August 2021)
www.ijemr.net https://doi.org/10.31033/ijemr.11.4.17

system easier and simpler for all service and 15%, almost twice the rate set by the
business. government before.
5. The Goods and Services Levy (GST) 8. There was no change in the tax system with the
consolidated all indirect taxes into a single tax. introduction of the Central Goods and Services
For every service and business, this made the Tax (CGST) and State Goods and Services Tax
tax system easier and simpler. (SGST), which replaced the Service Tax or
6. The Goods and Services Tax (GST) decreases Central Excise, Value Added Tax (VAT), and
non-receipted sales and lowers the incidence of Central Sales Tax (CST). There are still
corruption. numerous levels to the tax structure.
7. Not only removal of cascading tax effect, i.e. GST's Expected Economic Benefits in India
tax on tax but also Increase in the production of  It eliminates the cascading impact of taxes, i.e.
goods and services it eliminates tax on tax.
8. Expected to increase the revenue of the  Goods demand and consumption are expected
government. to rise.
9. The burden has been decreased on the final  VAT, CST, Service tax, CAD, SAD, and Excise
taxpayer, i.e. Consumer at the end. are among the bundled indirect taxes that have
10. Removal of multiple taxations. been eliminated.
GST Negative Effects  When compared to the present tax system, there
The Goods and Services Tax (GST) replaced will be less tax compliance and a simpler tax
the Value Added Tax (VAT) system. It is a tax on policy.
products and services manufactured, consumed, and sold  Manufacturing costs are reduced as a result of
in India. It replaced or consolidated all indirect taxes decreased taxation in the manufacturing sector.
levied on products and services by the federal As a result, consumer goods prices are expected
government and state governments. The Goods and to fall.
Services Tax (GST) prioritises long-term gains. Working  Lower the burden on the ordinary man, i.e., the
hard for the future has its disadvantages as well. The general public will have to spend less money to
following are some of the drawbacks of the Goods and get the same expensive goods sooner. • More
Services Tax (GST):- demand will lead to increased supply. As a
1. The Goods and Services Tax (GST) has result, there will be an increase in the
increased the cost of transactional fees between production of products. • Control of black
banking institutions. Transaction costs have money circulation, as the system used by
been raised from 15% to 18%. merchants and shops would be subjected to
2. The Goods and Services Tax (GST) has obligatory scrutiny.
increased the cost of insurance premiums.
 Long-term boost to the Indian economy
3. It has had an adverse effect on the real estate
market. Because of the Goods and Services Tax
(GST) (GST). The price of real estate has II. REVIEW OF LITERATURE
increased from 8% to 12%. It is anticipated,
however, that it will not endure in the long run. The purpose of this article is to go through the
4. Because the Goods and Services Tax (GST) current literature on GST and its effects on the Indian
excludes fuel, the price of petrol constantly economy.
deviates from the principles of commodity Dr. Agrawal Yogesh Kailashchandra (2019)
unification. According to his research, "Goods and Services Tax and
5. The Goods and Services Tax (GST) has Its Impact on the Indian Economy," GST has both good
progressed to a more complicated structure for and bad effects on the Indian economy. The GST system
company owners. is structured in such a manner that it is anticipated to
6. Prior to the Goods and Services Levy (GST), produce a significant amount of income for both the
only a few retail items were subject to a tax of federal and state governments, according to the research.
up to 4%. However, the Goods and Services It will be advantageous in the long term for corporations,
Tax (GST) has increased the cost of clothing businesses, and service suppliers. It would increase
and garments. transparency in indirect tax collection, which will benefit
7. The Goods and Services Tax (GST) has an both the government and the people of India.
impact on the aviation industry. Prior to the Sandhu Vikram and Atwal Heena (2019), the
introduction of the Goods and Services Tax research "Goods and Services Tax: Issues and
(GST), the service tax on airline tickets ranged Challenges in India" finds that since GST is still in its
from 6% to 9%. However, they have already early stages, it has its own set of issues and challenges.
been surpassed, with tax rates ranging up to 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
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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-11, Issue-4 (August 2021)
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is said to be a more transparent and better version of the taxation structure in India would lead to fewer market
taxation system. However, only time will tell how much disruptions and a more effective allocation of resources
of an effect it has and how relevant it is. within the sector. The research also discovered that GST
Kumar, Mohan. R (2019) He concludes that would boost the country's GDP and exports, improving
GST would also reduce the cascading effect of taxes, as economic welfare and returns on the inputs of
he examines the "Impact of Goods and Services Tax on production, such as land, labour, and capital.
the Indian Economy." India is expected to play a Pallavi Kapila (2018)A study on "GST: Its
significant role in the global economy in the coming Impact on the Indian Economy" In this study paper, an
years. GST is expected to be implemented not just in the effort is made to show how GST, which includes VAT,
nation, but also in neighbouring countries and developed Excise Duty, Service Tax, and Sales Tax, would assist in
economies across the world. Only when the whole nation reducing the current complexity of taxes in India.
works together to make it a success will it become nice According to research, the introduction of GST had a
and easy. In addition to the current situation, the new significant impact on the development of the Indian
taxing system has a slew of other effects on the economy economy. In the near future, a unified and reasonable
that may help businesses thrive. taxation structure in India would lead to fewer market
Ajeev, Kiran; T M.Somasekharan (2019) The disruptions and a more effective allocation of resources
researchers claim in the current study, "A Study on the within the sector. The research also discovered that GST
Impact of GST: Business Review," that the introduction would boost the country's GDP and exports, improving
of GST would result in lower product prices. It's still economic welfare and returns on the inputs of
unclear if the government established GST Sava Kendra production, such as land, labour, and capital.
to help businesses. Furthermore, the government is better Jayalakshmi (2018) Her research, "Customers'
able to handle various problems related to taxes, input Awareness of Goods and Service Tax (GST)," focuses
tax credit, refund systems, exports and imports. on MSMEs' GST awareness and the impact of GST on
Companies must modify their accounting systems due to them. India's primary development engine has long been
the periodic changes in GST legislation. The technical identified as small and medium-sized businesses
and legal costs of GST are extremely expensive, and the (SMEs). All GST compliance processes —
necessary GST services are not accessible. As a result, identification, refunds, reimbursements, and returns —
the GST changeover is very challenging. With the are now carried out solely via online platforms, and
assistance of GST, the country's taxation structure has SMEs no longer have to deal with department
improved, and the government should devote more employees, which is regarded as one of the most
resources to public training and education. inconvenient aspects of the new fiscal system.
Kaur, Harjinder (2018) The researchers B, Mitra Priya, (2017) GST has been
discuss public awareness, knowledge, and understanding described as a game changer in the Indian economy. The
of GST in India in this study, titled "Public Awareness, study found that the GST simplified different taxes and
Knowledge, and Understanding of GST in India." The eliminated their cascading impact. A tax system with
government should adequately plan and prepare for the different tax rates is shown on paper. Various industries
successful implementation of GST, public education, and have an impact on tax incidence, including
community participation, according to the findings. The telecommunications, e-commerce, automobiles,
goal of GST is to make the existing indirect tax system realestate, finance, and consumer goods. Cross credit
easier to understand and comply with. usage would be available in CGST and SGST, according
M. Rajeshwari M. Shettar, (2018) The to the impact of the input tax credit.
researchers discuss public awareness, knowledge, and Jadhav Bhika Lala (2017) "The Impact of
understanding of GST in India in this study, titled GST on the Indian Economy" is the title of the article.
"Public Awareness, Knowledge, and Understanding of The purpose of this paper is to shed light on GST, its
GST in India." The government should adequately plan characteristics, and the impact of GST on the pricing of
and prepare for the successful implementation of GST, products and services. According to the research, the
public education, and community participation, GST system has been rebuilt to simplify India's existing
according to the findings. The goal of GST is to make vital indirect tax system. The research also discovered
the existing indirect tax system easier to understand and that a well-designed GST is an appealing way to avoid
comply with. the deformation of the current multiple-taxation system
Pallavi Kapila (2018) In the article "GST: Its and minimise compliance costs.
Impact on the Indian Economy" The purpose of this Jain, Vasundhara. & Aggarwal, Reema
study paper is to show how GST, which includes VAT, (2017) In "Impact of GST on the Indian Economy-
Excise Duty, Service Tax, and Sales Tax, would help to Opportunities and Challenges," the impact of the Goods
reduce the current complexity of taxes in India. and Service Tax (GST) on the Indian economy is
According to research, the introduction of GST had a addressed, as well as why it is necessary to change the
significant impact on the development of the Indian taxation system from the existing tax structure to the
economy. In the near future, a unified and reasonable GST model. GST offers a comprehensive income tax

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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-11, Issue-4 (August 2021)
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credit that covers virtually all state and municipal Nintin Kumar (2014) The Goods and Services
indirect taxes. In India, an integrated GST framework Tax (GST) is one of India's greatest tax changes,
will be implemented to more effectively distribute input according to "Goods and Services Tax in India: A Way
components, resulting in increased GDP and exports. Forward." The fundamental concept behind this kind of
The new tax policy shift will not be easy for everyone, taxation is to replace current taxes such as VAT, service
but the new structure, which is contemporary, coherent, tax, excise duty, and sales tax with a single tax on the
and open, will attract international investment and production and consumption of products and services in
provide many additional benefits. It would expand the the nation. The GST is intended to economically unify
base for taxpayers and boost the competitiveness of the nation by removing numerous kinds of taxes that are
Indian industry, which is the duty of non-organized currently imposed at various locations.
companies. People and small merchants, for example,
will benefit from several industries and sectors, while III. OBJECTIVE OF THE STUDY
others, such as individuals and small traders, will lose
out. This paper tries to highlight the cost and
Khurana, A. & Sharma, A., (2016) The benefits bear by the economy due to implementation of
research "Goods and Services Tax in India – A Positive the GST. The paper also tries to find out the expected
Return for the Indirect Tax System" was done with the rate of growth of economy after the GST. Finally, the
goal of examining the different advantages and study tries to conclude that how it would be disrupted
possibilities of GST by examining its history, planned and benefits the economy in the long run.
GST plan goals, and effect on the Indian tax situation.
They found that the adoption of GST would benefit both IV. METHODOLOGY OF THE STUDY
producers and consumers, but it would require concerted
efforts from all stakeholders, particularly the federal and The current study focuses on the GST and its
state governments. effect on different sectors of the Indian economy from
Shefali Dani, (2016) "An Impact of Goods and July 1, 2017 to July 1, 2021. The approach is
Service Tax on the Indian Economy," one of her studies, straightforward and analytical, relying mostly on
stated the impact of GST on the Indian economy in the secondary data sources. The information was gathered
study, which looked at some of the benefits of GST, such from a variety of sources, including the Economic
as one nation, one tax, no cascading effect, increased Survey, MOSPI, relevant websites, government
consumption due to cascading effect, transparency, and publications, national and international journals and
GDP growth. GST is not charged on petroleum goods, articles, publications, conference papers, government
real estate, or liquor. reports, newspapers, and magazines that focused on
Srinivas K. R (2016) According to the Indian various aspects of the tax structure and GST.
constitution, the federal and state governments are
allowed to impose respective taxes, which is expected to
alter the whole situation of the current indirect taxation V. GST'S EFFECT ON THE INDIAN
system, according to his essay "Issues and Challenges of ECONOMY
GST in India." The GST would replace the numerous
indirect taxes imposed by both governments and would GST (Goods and Services Tax) is very
be a compressive indirect tax system on the production, beneficial to India's economy in the long run. Because of
sale, and consumption of goods and services across the universality of taxation, the Good and Services Tax
India. (GST) provides an advantage. It combines all indirect
Nishita Gupta (2014) The goods and services taxes that existed in India prior to the implementation of
tax (GST) would be a major advance towards complete the Value Added Tax (VAT).
indirect tax reforms in India, according to his study The Goods and Services Tax (GST) provides
"Goods and service tax: its effect on Indian Economy." It transparency to the business sector, allowing it to
will offer India a world-class tax structure and increase develop and become stronger. When the business sector
tax revenues. It would put a stop to differential sector grows, it will help to create more jobs, which will
distortions. It is also expected to result in the elimination eventually contribute to a reduction in the tax burden.
of taxes such as the central sales tax, state sales tax, The goal of adopting GST throughout the
octri, entrance tax, stamp duty, telecom licencing fees, nation is to create a win-win scenario for all parties
and consumption tax. Because of the application of an involved. Fewer tax filings and clear regulations would
unified tax rate, GST is anticipated to promote a help manufacturers and merchants. The customer had a
business-friendly climate in India, lowering price levels far greater expectation of paying less for products and
and inflation rates over time. Furthermore, it will services, while the government expected to earn more
enhance the economic health of the government by money. GST will make Indian goods more competitive
making the tax collecting system more transparent, in both the local and foreign markets. However, reality
making tax evasion more difficult. differs significantly from expectations. Let us now look
at how GST has affected the Indian economy.
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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
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The Indian economy has been destroyed and solve a variety of problems and concerns in order to
decimated as a result of two corona pandemics. The create a healthy tax system. While the government was
combined effect of the two waves on earnings and addressing the negative effects of GST on the Indian
consumer mood, along with the second wave's rise in economy, the COVID-19 epidemic exacerbated the
household medical costs, is expected to influence situation. (AmitMundra,2020)
consumer demand for some time, says the report. The collections of GST during three academic year
(Subodh, Kumawat, 2021). indicate the impact on the Indian economy.
The GST system in India has now been in place Trends of GST Collection
for three years, according to the GST Council of India. Goods and Services Tax (GST)
The government, on the other hand, is still working to

Table 1: Trends in GST collection in Rs. Crore (Inter-Year comparison)

MONTHS/YEAR 2018-2019 2019-2020 2020-2021
APR 103459 113865 32172
MAY 94016 100289 62151
JUN 95610 99939 90917
JUL 96483 102083 87422
AUG 93960 98202 86449
SEP 94442 91916 95480
OCT 100710 95380 105155
NOV 97637 103492 104963
DEC 94726 103184 115174
JAN 102503 110818 119875
FEB 97247 105366 113143
MAR 106577 97597
Total 1177370 1222131 1012901
% change 3.801779 -17.1201
Source: Ministry of Finance Government of India.

Data is collected for the period 2018-2021. In amounts to Rs. 1222131 crores. However, in the year
the year 2018-2019, the total collection of GST 2020-2021 total collection declined by was Rs. 1012901
amounted to Rs. 1177370 crores. In the year 2019-2020, crores.
the total collection was increased by 3.8 percent which

Figure 1: Trends in GST collection

Trends in GST collection

140000
120000
100000
80000
60000
40000
20000
0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

2018-19 2019-20 2020-21

Source: Ministry of Finance Government of India.

The GST collection for the selected period has has shown linear trend throughout the year with
shown multiple variation in different years. In the first variations, in the beginning and in the last month of both
two years of 2018-2019 and 2019-2020, the collection

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the years. While, in the year 2020-2021, GST collection has shown a nonlinear trend throughout the year.

Figure 2: A monthly comparison of GST collection

A monthly comparison of GST collection

140000
120000
100000
80000
60000
40000
20000
0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

2018-19 2019-20 2020-21

Source: Ministry of Finance Government of India.

In the above table the total collection of GST Impact on Gross Domestic Product
was taken for the period 2018-2021. An intra year It is predicted that the GST will boost India's
comparison was done, it was found that for the year GDP by 1.0 to 3.0% after adoption. In 2019-2020,
2018-2019 the maximum amount of GST was collected India's GDP growth rate has dropped to a six-year low of
in the month of March which amounted to Rs. 106577 4.04 percent. The GST, which went into effect in July
Cr. And minimum amount was collected in the month of 2017, has mostly fallen short of expectations.
August Rs. 93960 Cr. While in the year 2019-2020, the The Indian economy has been destroyed and
maximum amount of GST was collected in the month of decimated as a result of two Corona pandemics. India's
April which amounted to Rs. 113865 Cr. and minimum GDP growth rate will drop from 8.26 percent to 4.04
amount was collected in the month of September which percent in 2019-2020, and then to-7.26 percent in 2020-
amounted to Rs. 91916 Cr. Moreover, in the year 2020- 2021. GDP at constant (2011-2012) prices was Rs 36.08
2021, the maximum amount of GST was collected in the lakh crore in Q3 of 2019-2020, according to data
month of January which amounted to Rs. 119875 Cr. and published by the ministry of statistics and programme
minimum amount was collected in the month of April implementation. However, in Q3 of 2020-2021, it is
which amounted to Rs. 32172 Cr. Throughout the estimated to be worth 36.22 lakh crore, representing a
period it can be concluded that the months of 0.4 percent increase. After two gruelling quarters, a GDP
November, December, January and February observed increase of 0.4 percent was eventually recorded in the
an increasing trend while the other months observed third quarter of 2020-2021. The country's economy is
variations in the collections. now out of a technical slump as a result of this.

Figure 3: India’s GDP Growth Rate during 2016-7 to 2020-2021

G D P G R O W T H R AT E ( % ) AT 2 0 11 - 1 2 P R I C E S

10 8.26 6.8 6.53

4.04
5
0
2016-17 2017-18 2018-19 2019-20 2020-21
-5
-10 -7.96

Source:Ministry of Statistics and Programme Implementation (MOSPI) Government of India, New Delhi.

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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
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VII. CONCLUSION [3] Kumar, Mohan. R (2019). Impact of goods and

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