Is Gst Actually Going To Affect General Indian Public? Will Gst Leads To A Hyper Inflation In India?

By Author: Mohit Yadev
Total Articles: 74
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The Goods and Services Tax (GST) is likely to have minimal direct impact on the consumer price index(CPI) basket, a report said. This is because most of the tax rates for the items in the CPI basket are likely to be taxed at a lower rate under the GST as compared to the existing levy, it said.
However, assuming that GST does have the intended effect of increasing tax compliance, the tax burden would increase. This could lead companies to pass the costs of higher tax compliance on to the consumer at a later stage.
The multi-layered structure along with a large number of exemptions could mean that the goods and services tax may not be inflationary as some feared. Nearly half of the items in consumer price index (CPI) basket, including cereals, will not be taxed under the new levy that will replace a plethora of indirect taxes. Besides that all other essential commodities will come under 5% tax bracket, down from initially proposed 6%.
However, there could be an impact on services that make up 30% of CPI.
Many services are proposed to attract 18% tax, up from 15% now.
With a standard rate of 18%, we ...
... had expected a 20 basis point impact on CPI headline inflation. However, with the two rates of 12% and 18%, the impact will be lower. It would depend on the extent to which firms pass through the tax changes into final prices for consumers.
With Slabs Of 5%, 12%, 15% & 28%, GST will eliminate the inflation cause of standard rate. While the exemption limit is made for 20Lakh, which was 5 lakhs for VAT and 10 Lakhs for service tax.
Therefore, We can Conclude that GST will cause for inflation initially due to changes in tax system, but not in long term.