With the enactment of the 6th amendment to the GST Act, the GST rates for both the general sector and tourism sector will increase from 6% to 8%, and 12% to 16% respectively, from 1 January 2023 onwards.
The goods and services tax (GST) is a type of indirect tax that is imposed on the supply of goods and services in many countries around the world. It is designed to be a comprehensive tax that applies to most goods and services, although there are often exemptions for certain items such as food, education, and healthcare.
The Maldivian government has stated that the increase in GST is necessary to help fund various public sector projects and to improve the overall quality of public services. The additional revenue generated from the higher GST rate is expected to be used to fund infrastructure projects, healthcare, and education.
One of the major impacts of increasing GST is that it can lead to higher prices for consumers. When the GST rate is increased, businesses are required to charge more for their goods and services to cover the additional tax. This means that consumers may end up paying more for the things they purchase.
Another impact of increasing GST is that it can affect the competitiveness of businesses. If the GST rate is increased, it may make it more expensive for businesses to produce and sell their goods and services, which could lead to reduced competitiveness in the market. This could potentially result in a decline in the demand for certain goods and services, leading to a reduction in the overall level of economic activity.
On the other hand, increasing GST can also have some positive impacts on the economy. For example, it can help to raise additional revenue for the Maldivian government, which can be used to fund public services and infrastructure projects. This can help to stimulate economic growth and create jobs.
It is important to note that the GST increase in the Maldives is only one part of a broader fiscal reform plan. The government is also planning to introduce other measures to boost economic growth and improve the overall business environment in the country.