IMPACT OF GST IN ECONOMY
Title: Impact of GST in economy
Author: Ashwini Rathod (B),100
1.0 Introduction
India’s indirect tax system before 2017 was complex, consisting of multiple taxes such as VAT, Service Tax, Excise Duty, Central Sales Tax, and Entry Tax. These overlapping taxes created a cascading effect (tax on tax), increasing the cost of goods and services.
To address these issues, the Government of India introduced the Goods and Services Tax (GST), a destination-based indirect tax applied uniformly across the country. GST was designed under the principle of “One Nation, One Tax” to unify the Indian market and simplify the taxation structure.
The main objectives of this research are:
• To analyze the impact of GST on India’s GDP
• To examine changes in tax revenue after GST implementation
• To study sector-wise economic effects
• To evaluate the overall economic transformation due to GST
2.0 literature Review
Several researchers have studied the impact of GST on economic growth and tax administration.
Studies suggest that GST improves tax compliance and reduces tax evasion [1]. According to reports by the Reserve Bank of India, GST has increased transparency in indirect taxation and strengthened revenue systems [2].
Research also highlights that GST reduces logistics costs by eliminating interstate checkpoints, benefiting the manufacturing and transportation sectors [3]. However, some scholars argue that small and medium enterprises (SMEs) initially faced difficulties due to digital filing requirements and compliance procedures [4].
Overall, existing literature indicates a positive long-term impact of GST on economic efficiency and formalization.
3.1 Economic Implications of GST Implementation in India: An Analytical Study
Adesh, Upadhyay, and Negi (2025) examine the economic effects of the Goods and Services Tax (GST) implemented in India in 2017. The study highlights GST as a major tax reform that replaced multiple indirect taxes to create a unified national market and remove cascading taxation. The findings show that GST has improved tax compliance through digital systems, expanded the tax base, and enhanced revenue collection efficiency. It has also increased transparency and supported business formalization. However, the implementation phase created short-term challenges, particularly for MSMEs, due to compliance complexity and technical issues. Overall, the study concludes that GST has strengthened India’s fiscal structure and supports long-term economic growth, provided continuous reforms and simplified compliance measures are ensured.
3.2Impact of Goods and Services Tax on Sustainability in the Indian Handicraft Sector
The study conducted by Awasthi, Akhtar, and Khan (2023) examines the impact of GST on sustainability in the Indian handicraft sector. The authors review existing literature to assess economic and operational effects on artisans and small producers. The findings indicate that GST improved transparency and promoted formalization; however, digital compliance requirements and registration procedures created challenges for rural artisans. Certain tax rates initially affected product pricing and income levels. The study concludes that simplified compliance mechanisms and targeted policy support are essential to ensure sustainable growth of the handicraft industry.
3.3 Review on Impact of GST on Indian Economy
Budholiya and Yadav (2022) analyze the overall impact of GST on the Indian economy. The study identifies GST as a major indirect tax reform that replaced multiple taxes and eliminated cascading effects. The authors observe improvements in tax compliance, transparency, and revenue collection. Although the implementation phase involved administrative and operational challenges, the long-term economic outlook is positive. The study concludes that GST has strengthened fiscal stability and contributed to economic integration.
3.4 GST in India: Towards Sustainable Economic Growth
Gakhar (2019) examines GST as a reform aimed at promoting sustainable economic growth. The study highlights benefits such as simplified taxation, improved logistics efficiency, and enhanced interstate trade. While initial implementation challenges and rate complexities were noted, GST is considered a structural reform supporting long-term economic development and market integration.
3.5 Cost-Benefit Impact of GST Implementation in India
Gour and Kumar (2025) conduct a data-driven analysis to evaluate the cost-benefit impact of GST. The study finds that GST has improved revenue efficiency, expanded the tax base, and enhanced transparency through digital compliance systems. Although businesses faced short-term compliance costs, long-term fiscal and economic benefits outweigh initial disruptions.
3.6 Impact of GST on Agriculture Sector in India
Jadhav and Lad (2024) analyze GST’s impact on the agriculture sector. While many agricultural products are exempt, input taxation and supply chain costs have influenced farmers and agribusinesses. The study identifies both challenges and opportunities and emphasizes supportive policies to enhance sectoral efficiency and growth.
3.7 Evaluating the Effects of GST on Consumers
Lakshmi and Gomathi (2025) examine consumer perceptions of GST through an empirical study. The findings show mixed responses, with improved price transparency but varying effects on product costs. The impact differs across income groups and consumption patterns, highlighting the need for balanced tax policies.
3.8 GST – One Nation, One Tax: A Review
Mukherjee and Sen (2018) review GST as a reform aimed at unifying India’s indirect tax system. The study discusses benefits such as elimination of cascading taxes and national market integration. Despite early implementation challenges, GST is recognized as a significant structural reform.
3.9 GST: Opportunities and Challenges for Indian MSMEs
Pandit (2017) evaluates GST’s impact on MSMEs. The study highlights compliance complexity and digital filing requirements as major challenges. However, benefits such as input tax credit and improved market access are noted. The paper suggests supportive measures to ease MSME transition.
3.0 Impact of GST on Indian Stock Exchanges and Various Sectors
Sharma and Sain (2017) analyze the impact of GST on Indian stock markets and sectoral performance. The study reports short-term market volatility following GST announcements. However, long-term expectations were positive due to anticipated improvements in transparency and fiscal reform.
4.0 Conclusion
Based on the review of ten research studies, it can be concluded that the Goods and Services Tax (GST), introduced by the Government of India, is a major reform that transformed India’s indirect tax system. By replacing multiple taxes with a unified structure under the principle of “One Nation, One Tax,” GST reduced the cascading effect of taxes and improved transparency. The literature indicates that GST has positively impacted tax revenue, compliance, and economic integration. It has strengthened the tax base, improved digital monitoring, and enhanced fiscal stability, as also reflected in observations aligned with the Reserve Bank of India. Many sectors such as manufacturing and services have shown improved efficiency, though MSMEs, agriculture, and lower-income consumers faced short-term challenges due to compliance costs and price sensitivity. Overall, despite initial implementation difficulties, GST is a transformative reform with strong long-term benefits for economic growth, formalization, and sustainable development in India. Continuous policy improvements and simplification measures will further enhance its effectiveness.
5.0 Reference
1. Adesh, Upadhyay, A., & Negi, A. (2025). A study on the economic implications of GST implementation. International Journal of Engineering, Knowledge and Sciences (IJEKS), 4(7), 1058–1068. https://doi.org/10.71329/IUPJARAP/2025.24.2.77-89
2. Awasthi, R., Akhtar, M., & Khan, F. S. (2023). The impact of Goods and Services Tax on sustainability in the Indian handicraft sector: A mini-review. Journal of Computers, Mechanical and Management, 2(4), 29–34. https://doi.org/10.71329/IUPJARAP/2025.24.2.77-89
3. Budholiya, B., & Yadav, S. K. (2022). A review on impact of GST on Indian economy. International Journal of Innovations in Science, Engineering and Management (IJISEM), 1(1), 37–40.
4. Gakhar, D. V. (2019). Goods and Services Tax (GST) in India: Towards sustainable economic growth. IUP Journal of Accounting Research & Audit Practices, 18(1), 7–14.
5. Gour, D. S., & Kumar, M. (2025). Cost-benefit impact of GST implementation in India: A data-driven analysis. IUP Journal of Accounting Research & Audit Practices, 24(2), 77–89. https://doi.org/10.71329/IUPJARAP/2025.24.2.77-89
6. Jadhav, S., & Lad, R. (2024). The impact of GST on agriculture sector in India: Challenges and opportunities. Research Journey, 345, 70–74.
7. Lakshmi, S., & Gomathi, A. (2025). Evaluating the effects of Goods and Services Tax on consumers: An empirical study from Thoothukudi. Advances in Consumer Research, 2(6), 1100–1105.
8. Mukherjee, T., & Sen, S. S. (2018). Goods and Services Tax (GST) – One nation and one tax: A review. International Research Journal of Management and Commerce, 5(4), 81–93.
9. Pandit, S. (2017). GST: Opportunities and challenges for Indian MSMEs. Inspira-Journal of Commerce, Economics & Computer Science (JCECS), 3(3), 208–214.
10. Sharma, P., & Sain, M. (2017). A review of Goods and Services Tax (GST): Impact on Indian stock exchanges and various stock sectors. International Journal of Scientific Research and Management, 5(11), 7418–7422.