It is uncertain that what if the implementation of the Goods and services tax (GST) goes expensive with inflation goes higher but the government is still assuring the fact, that it won’t be the case in the GST. The reason given by the government is that the central and the state level taxes and duties are to be included in the GST and in which the credit at full extend will be paid by the means of value chain to the business units. This has one thing cleared out that the cascading effect will get to end after the goods and services tax replaces the current prevailing tax regime.
The inflation would get an impact most specifically will get lowered as the cascading effects get cooled and thus lowering the prices strategically. Still, service sector would be juggling with the higher tax rates in order to take note of the services rendered and to put the inflation into perspective before making any step. However, it is taken that the consumption is held to the tax paid products and the services from the formal sector, and as widely known fact that the large extent of the economy is based on cash where the traders and sellers don’t circulate or offers invoices quickly for the products and services hired.
It is acknowledged from both businesses to consumer transactions as well as business to business transactions. This also tends the traders and business units to purchase the products and raw materials from the vendors not issuing invoices in order to obtain the products at a cheaper rate. But the goods and service tax will be increasing the compliance over such activities and will be decreasing such cases of tax evasion. Also, the GST mandates every business to register for GST in order to get the input tax credit, but if a business fails to get registered under the GST, it will be making a risk of losing the business thus making the business to undertake the GST.
The whole value chain would be benefiting with this ecosystem of the GST, while for all this good happening, one must take the take the weight on its shoulder. And for this part, the consumer will be handling the final tax, as the GST is a consumption based tax. As studies by experts and maintained with the analysis, it has been concluded that the GST will be inflationary but for the more household consumption and will be taking down the end consumers coming into the low-income groups which deal with informal sector a bit more.
