Gst Hurting Poor More Than the Rich

 1. GST: Hurting Poor More than the Rich?

Tax policies play an important role on the economy through their impact on both efficiency and equity. A good tax system keep in view issues of income distribution and at the same time, also endeavor to generate tax revenues in order to support government expenditure on public services and infrastructure development. GST or Goods and service Tax was first implemented in France. In India, GST was proposed by P. Chidambaram in 2004 and got shelved for a decade due to oppositions from states fearing loss in total revenues. With some amendment and offerings to states for the lost revenue, GST will be implemented in India from 1 April, 2016. GST will merge all central indirect taxes like excise duty, countervailing duty and service tax. State levied taxes like VAT, entry tax and luxury tax will also be merged to form a common and uniform tax rates. As a result final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits set at all the previous stages. GST will help in promoting transparency as Customer will know exactly how much tax they paid on the product bought or services consumed. Business houses will also need to show the tax applied in the sales invoice. So, I think it won’t hurt poor more than the rich.

But question is who’s going to benefit from it the most?

Government of India has estimated that GST will improve the Tax Revenue by $15 billion contributing to rise of GDP between 0.9% and 1.5% as this measure will promote more exports. If tax levied is going to benefit Government by large, how can poor or middle class benefit from it! But applying economics, we get the answer. Though the rate charged through GST will be low compared to cumulative tax paid by consumers on products, it will lead to increase in demand of that particular product due to low price and increase in demand will lead to more productions, thus resulting in increased total revenue of producers,...