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How Taxation Helps in the Growth of a Country ( like India )

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Economic growth is categorized by the supply chain of the financial division, the measurement being GDP or Gross Domestic Product. We all know without setting goals nothing can be achieved. So there is a scale in case of GDP. There is a potential or desired GDP calculated as per the economic scenario, and there is the actual GDP which is the turnover in practice. Our economy runs to bridge the gap between the potential and the actual GDP. Estimating a potential GDP is what imbibes focus and action to achieve it. That is where taxation comes in. Taxation involves the citizens of India paying the government a fixed amount in accordance to their earnings as PF and gratuity that is income tax in layman language. Taxation plays the essential role in economic growth and is the primary reason why the economy of India is growing and striving with increased GDP rates at the time of world recession.

Income Taxes And Growth

Taxation can make or break an economic system, so a lot of attention is given to it. Proper taxation is the primary necessity which will satisfy both citizens and the growth scale which the government is aiming at. Proper taxation involves a two-fold advantage. It creates a kind of economy termed as “slack-economy”.¬† This is an economy where the demand increases at a steady rate due to the mass scaleability by the citizens to meet the supply. Thus there is a synchronization in the demand and supply chain. This synchronization is what raises the GDP. Therefore with taxation it is crystal clear how revenue generation is working for the growth of the country.

GST And Economic Growth

Another angle of taxation has been recently introduced. It is the GST or the Goods And Services Tax. GST aims at creating a unified market. The GST is one common tax rate that will be applied to individual products being sold in the market. It will be independent of state-level VAT(Value Added Tax), state level sales tax and state level service and duty taxes. A central tax called GST will be imposed on all goods being produced and imported to India. This GST will be agreed upon by all state government and will be the autonomous tax throughout the country. It should be noted that GST will not negatively affect capital, corporate and income tax figures. It simply aims at creating a broader, simpler and unified economy. The entire concept has been designed to improve the ratio of tax to GDP by equalizing it all over the country. This concept of a unified market will go a long run as far as economic growth is concerned, as studies suggest that with the introduction of GST there will be an average increase in growth rate by 1.3%.

To summarize the benefits of taxation: Taxes are being used to manufacture products. Proper taxation is raising the demand for the product. Meanwhile, there is an equivalent supply to meet the demand. Therefore both in turn function to raise the revenue. The result is a steady growth of the country.

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