The Modi government took a revolutionary step by bringing the new indirect tax regime into reality. The main intention behind this was to remove the cascading effect of taxation while subsuming the various indirect taxes under one head. The expectations associated with GST were skyrocketing as it was addressed as the biggest tax reform since the country’s independence. Considered as a possible game-changer, the new tax regime was known to unite the country into a common national market by eliminating the tariff barriers all at once.
After more than three months since its inception, the new tax system is still struggling to settle down. Anticipating the roll-out of GST, businesses ended up decelerating their production which had a significant impact on the economic growth for the quarter of April-June as it was recorded at 5.7 percent, which is the slowest in the span of past three years. The traders and businesses tried really hard to wrestle the tax-filing cycles in the first two months, but to everyone’s dismay the unpreparedness on the part of the government became evident.
“The disruption caused by implementation of GST was confined to the informal sector of the economy and it has largely bottomed out in July. Its effect will now taper off,” said Rajiv Kumar, vice-chairman of NITI Aayog.
D.K. Joshi, chief economist at credit rating agency Crisil Ltd stated that the impact of the Indian economy on account of destocking of merchandises preceding the launch of GST has started easing. “In sectors such as logistics, the benefit of GST is immediately visible in terms of efficiency, while a boost to the economic growth rate that GST is expected to fetch is a medium-term goal,” said Mr. Joshi.
Large business houses have the support of resources and advanced IT support systems which are necessary for adhering to the compliance set forth in GST. The ones who have suffered are actually the small and medium enterprises which belong to the informal segment of the economy.