Exports play a prominent role in India’s economic scenario. To what extent, GST can play a role of the export multiplier? Discuss.

The economy of India is the 5th largest by nominal GDP and 3rd largest by purchasing power parity. It could be considered as a developing market economy. It is one of the fastest-growing sectors compare to other countries in the world. In order to evaluate the economic performance of a country the balance of payment could be the best indicative measure. BoP measures the balance between import and export of a country.

GST

The Goods and Service Tax was introduced in 2017 to reconstruct the entire tax structure of the country. It has already changed the market operation of the country as well as influenced the import-export sector.

Changes and benefits

• GST is leviable for the supplies of goods by the manufacturer exporter to the exporter for export purposes due to having two have different PAN. The concept of merchant exporter is no longer valid in the GST era. The system of refund has introduced a change in the way of export promotion schemes.
• The Duty Drawback Scheme helps to reduce the working capital needs of exporters.
• The subsumption of central and state taxes and at the same time phasing out of the Central sale tax will reduce the cost of locally manufactured goods. It will also open the international market for them.

Comment

GST based on the destination principle can work as a force-multiplier for export promotion as it waives the exports from the indirect tax burden on inputs. There is only one thing that could benefit the entire process is efficient administration.

Topics: GS-IV: Ethics and Human Interface