Goods And Services Tax (GST) is a broad-based consumption tax. It is an indirect tax which a person pays when he spends money. It is a multistaged value added tax, which means tax is charged on every supply of taxable goods and services at all levels in the supply chain i.e. production, manufacturing, wholesale and retail. More than 120 countries have already implemented GST which is paid by customers when they purchase goods and services are more sophisticated than the tax on retail sale. Even though GST is charged at each level of the supply chain, each business in the supply chain will charge tax only for the value he adds to the product in the supply chain. It will not become part of cost of the product as GST paid on business inputs is a tax credit claimable by registered business.
The main issues concerning about the implementation of GST is the costs of the goods will increase which will burden the people in the country. Although the government claim that the implementation of GST will not hurt the businesses and people as the tax paid on the inputs at the previous stage is claimable or deductible, overall the the cost of goods will still increase as the producers-pass the full value added to the end consumers at the final stage.
Consequently, there might have inflation effect since the GST is applied to the prices of all goods, at every stages which result in inflation as the general products prices may go up and the hyperinflation might occur from the continuously of inflation. There might have continuously effect from the products prices go up. The demand of the market might substantially decrease due to the limited purchasing power of households. Many people argue against the GST is that the people would not have the ability to pay for it as the high cost of living can not be met by their current income needs and GST would unduly burden the low income