Economics For Sustainable Business Report GST In Indian Economy
Added on -2020-02-19
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Running head: ECONOMICS FOR SUSTAINABLE BUSINESSEconomics for Sustainable BusinessName of the Student:Name of the University:Author note:
1ECONOMICS FOR SUSTAINABLE BUSINESSAnswer 1GST stands for Goods and Services Tax. It is a revolutionary action in the taxationsystem of the Indian economy. This is a comprehensive, destination-based, multistage, indirecttax, to be imposed on every value addition of the goods and services produced in the country.The main purpose of this law is to replace the previously existing several indirect taxes andintroduce a unified tax system. This tax system came into effect on 1st July, 2017. There are fewslabs for the GST rates, and those are 0%, 5%, 12%, 18% and 28% (Roy, 2017). According to the report by Mishra (2017), the solar energy store manufacturers and thepower sector of India have urged the government to reduce the GST on batteries from 28% to5%, as this is a vital component for power generation, sustainable energy and Electric Vehicles.Since, it is an indirect tax, the burden is shifted onto the customers by the producers throughhigher price of the product (Thorat, 2017).
2ECONOMICS FOR SUSTAINABLE BUSINESSPriceOutputSD3D1D2P2P5P4P3P1P6DCBAE*Q2Q3Q1Figure 1: Impact of GST on the price of the battery(Source: Author)From the above diagram, it can be explained that, initially, the demand and supply of thebatteries was D1 and S respectively and initial equilibrium was at E*. After the imposition of28% GST on the batteries, the demand for the batteries falls to D2, while supply remains fixed.The line AD denotes the tax amount, i.e. 28% tax. It is levied on the price. The consumers arepaying a higher price due to GST, which is denoted by P5 and the producers are getting a lowerprice, denoted by P2. Hence, consumer surplus is denoted by the triangle P6P5D and producersurplus is denoted by P1P2A. The tax revenue is denoted by the rectangle AP2P5D. Thedeadweight loss is the area ADE*. The quantity sold would be reduced from the initial quantity.
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