Goods and Services Tax in India: The Short-run and Long-run Implications

Abstract

Goods and Services Tax subsumes all the indirect taxes other than customs duty levied by the centre and state governments. By amalgamating a large number of indirect taxes, it mitigates the ill effects of cascading and pave the way for a common national market.  GST is based on the principle of destination based consumption taxation as against the principle of origin based taxation under pre- GST regime. The GST regime seeks to replace excise duty, import duties, VAT and service tax regulations with three separate legislations namely CGST, SGST and IGST. There are advantages and disadvantages of the implementation of GST. It is expected that with implementation of GST, it would earn more tax revenues to the government, there will be increase in the volume of exports, act as impetus for poverty alleviation etc. The present paper is an attempt to study the probable short run and long run implications of GST in India.