The Goods &
Services Tax (GST) has been rolled out from 1st of July 2017 in
order to make the previous cumbersome indirect tax regime less complex, while
replacing the bunch of taxes with a single GST.
However, to cover a
wide range of goods and services we have four rates of 5%, 12%, 18%, and 28%,
instead of a single rate, and 0% tax on the food items which might lower food inflation
and inflation expectations and that is likely to boost demand of food and food
products in the economy which would be a plus for the food-industry and employment
and growth.
Lower inflation and inflation expectation and
interest rate and interest rate expectations would help strengthen growth.
Improved flow of goods
and services across all the states would also increase supply and lower the
price-level.
Taxes are often passed
to the consumers which is called profiteering for which the government has made
provisions for anti-profiteering rules to reduce the incidence of taxes on the
consumers to not to stroke consumer demand negatively.
Nonetheless, taxes
should be neutral in the sense that they should not affect either demand or
supply so that growth and growth expectations are not disrupted, but taxes are
an effective tool to incentivize or disincentivize demand and supply.
Lower inflation and
inflation expectations due to better supply or flow of goods and services could
increases interest rate cut and rate cut expectation to improve growth and
growth expectations…
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