As the Narendra Modi government at the Centre tabled the landmark Goods and Service Tax (GST) bill in Rajya Sabha on Tuesday, it is time for some knowledge sharing on this tax system. Let’s get to know all about GST is and how it is going to function.
Nagpur Today brings to you a brief lowdown on the pros and cons of GST,
GST is the tax which will integrate the union Excise duties, additional Custom duties (CVD), service tax and state VAT into a single levy known as GST. It may be rightly termed as national level VAT on goods and services. The central taxes to be included under GST are Central Excise Duty, Additional Excise Duties, the Excise Duty levied under the Medicinal and Toiletries, Service Tax and Additional Customs Duty, commonly known as Countervailing Duty (CVD). The State taxes and levies to be included under GST are VAT/Sales tax, Entertainment tax (unless it is levied by the local bodies), Luxury tax, Taxes on lottery, betting and gambling and State Cesses and Surcharges as they relate to supply of goods and services.
GST will simplify the tax structure, broaden the tax base, and create a common market across States. Also, GST will lower the average tax burden for goods and services as currently companies pay”cascading” taxes on top of taxes, through the production process.
The GST was initially intended to be revenue-neutral but is now expected to increase the tax takeby following the unitary system for collection of Indirect Taxes levied on manufacture, sale and consumption of goods as well as services, thereby reducing burdensome compliance, high cost of transaction and nagging uncertainty in tax liability for a business. By lowering business costs, it would boost economic growth and increase exports.This will help to bring India in line with practices in many developed economies. Reducing production costs would make exports more competitive.
The main flaw of the Bill is that it excludes important sectors such as petroleum, natural gas, real estate and alcohol from its ambit. Keeping sectors, which are foundation of all commercial and industrial activity, out would have serious implications for the industry. As their exclusion would result in considerable cascading of taxes. Exclusion of these sectors serves no social, economic or fiscal policy objectives. The second major flaw is that certain taxes such as the entry tax and octroi, and the entertainment tax, would be kept alive to the extent levied and collected by a Panchayat or Municipality.
Further,reducing cost of tax compliance, better revenue collection, an efficient and harmonised consumption tax system in the country, all this looks good on the card, but is it really so easy to implement? Keeping the various constitutional, technological, procedural and political barriers, the job seems easier said than done.
—- By CA Sidharth Gupta