According to a blog published on Asian Development Bank’s website, the lower and lower-middle income class people will get benefited from the recently implemented Good and Services Tax (GST) Regime in India. It is expected that the new regime reduces the tax rates on goods.
Blogpost written by Mukul Asher, Professorial Fellow, Lew Kuan Yew School of Public Policy stated that it will remove the negative impact of goods and services under the new regime on the ‘bottom half’ of the people.
According to the blogspot, it is expected that the new regime will bring down the tax rates on goods as compared to the previous tax regime, whereas tax rates on the services are likely to increase under the new indirect tax regime.
Asher said, “So, the above overall trend would exhibit the tendency towards lower burden for low and lower middle-income households, while the reverse is likely for upper middle income and high-income households.” He further added that, “This would significantly mitigate the negative impact of the GST on the bottom half of the population,”
GST which came into effect about six weeks before i.e from 1st July 2017, is expected to have a significant impact on economy business, households and government organizations in various ways, said Asher. He further opined that GST will have a dynamic impact on different sectors over varying periods in a non-linear pattern.
Income level, individual choices, preferences, and age are some of the factors which influence household goods and services, may ultimately result in varying impact of GST. He further stated that assessment of the impact of GST doesn’t solely depend on the absolute tax rate, there are other factors that matter.
According to global and domestic perspective, the timing of GST implementation has been conducive in minimizing the impact of GST on cost of living.
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Asher said,”The design of the GST and government initiatives have also helped in this respect. The media and other stakeholders, and the households themselves need to also play a constructive role in adjusting to GST,”.
Professional approach of GST tax authorities, use of technology and a more service – oriented culture altogether can definitely help to sustain the initial small impact of GST on the cost of living over a longer period of time.
