Impact of GST on Indian Economy.
                     I M PA C T  O F  G S T  O N  I N D I A N  
E C O N O M Y
I N T R O D U C T I O N
The Goods and Services Tax or GST came into effect on the 
1st of July 2017. The aim of introducing the tax was to 
replace all the existing indirect taxes with a single 
comprehensive tax. 
Through GST, all indirect taxes such as central excise tax, 
service tax, VAT and entertainment tax were consolidated. 
S O U R C E :  W W W . K A R V Y . C O M 2
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W H AT  I S  G S T ?
Goods and Services Tax is levied on the manufacturing and 
sales of goods and services across the country. 
The tax is charged at every stage of the manufacturing 
process. GST is applicable for both the customer and the 
manufacturer. It is a destination-based tax.
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T H E  T Y P E S  O F  G S T
• CGST (Central Goods and Services Tax): The tax is 
collected by the central government on the intrastate sale 
of goods and services.
• SGST (State Goods and Services Tax): The state 
government collects this tax based on the intrastate 
supply of services and products.
• IGST (Integrated Goods and Services Tax): The tax is 
charged on the supply of products and services between 
two states. The taxes are shared between the central and 
state governments.
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EFFECT OF GST 
ON THE INDIAN 
ECONOMY
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S I M P L I F I C AT I O N  
O F  T H E  TA X  
S T R U C T U R E
• GST has simplified the taxation system of the country. As GST is a 
single tax, calculating taxes at the multiple stages of the supply 
chain has become easier. 
• Through this, both customers and manufacturers get a clear idea 
of the amount of tax they are charged and its basis. Further, 
hassles of handling tax officials and authorities can also be 
avoided.
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F O S T E R I N G  
P R O D U C T I O N
• As per the Indian retail industry, the total tax component is 
around 30% of the product cost. 
• Due to the impact of GST, the taxes have gone down. So, the end 
consumer has to pay lesser taxes. The reduced burden of taxes 
has enhanced the production and growth of the retail and other 
industries.
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S M E  S U P P O RT
• Small and medium enterprises can now register under the 
Composition Scheme introduced by GST. 
• Through this scheme, they pay taxes according to their annual 
turnover. Therefore, businesses having an annual turnover of Rs. 
1.5 crores only have to pay 1% GST. 
• Moreover, other enterprises having a turnover of Rs. 50 lakh are 
required to pay 6% as GST.
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E N H A N C E D  PA N  
I N D I A  O P E R AT I O N S
• Companies can now avoid taxation roadblocks, such as toll plazas 
and check posts. Earlier, these created problems, including 
damage to unpreserved products while transporting them. 
• So, manufacturers had to keep buffer stock to make up for the 
damages. These overhead costs of storing and warehousing 
hampered their profit. A single taxation system has reduced these 
problems.
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I N C R E A S E  I N  
E X P O RT S
• GST has reduced the customs duty on exporting goods. The cost 
of production in the local markets has also decreased due to GST. 
All these factors have increased the rate of exports in the country. 
• Companies have become more competitive when it comes to 
expanding their businesses globally.
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N O  M O R E  
C A S C A D I N G  E F F E C T
• With GST, taxes of the State and Central Government have been 
merged. This has removed the cascading effect of taxes, reducing 
the burden on the buyer and the seller. 
• So even if it may look like one big chunk of tax to be paid, you 
pay lesser hidden taxes.
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T H A N K  
YO U
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