Goods and Services Tax: Part iii

Continued

Benefit’s of GST:

The cost reduces the customers that buy these things end up saving more, means saving rate in this country would increase when saving rate would increase the government would use these funds for infrastructure projects that means GDP will grow and also Tax collections will be huge. There will e tax buoyancy that means tax to GDP ratio will also increase. So this is a win win situation for Indian economy. And as per various estimates if GST is introduced in this country the Indian economy is to grow anywhere between .9-1.5% and that is a huge growth. As we talked, in India we don’t follow an ideal VAT we follow a central and state level VAT same is the case with the GST. We won’t be following the ideal GST where all these indirect taxes would be subsumed as one but we will be following an Indian version of GST.

Issues Regarding GST:

There are more 100 countries in the world that have GST implemented. A constitutional amendment is required to give concurrent power to both centre as well as states to make laws for the taxation of Goods and Services. Now in Indian case we would have a dual GST, the central GST imposed by the centre, the state GST imposed by the state that means CEN VAT would come under Central GST, the state level VAT would come under state GST then we also have integrated GST. That means only the centre may levy and collect GST on supplies in course of interstate trade and commerce. This tax will be divided between the centre and the states in a manner provided by the parliament based on the recommendation of GST council.

GST council says that within 60 days of the bill coming into power, The President of India have to form a GST council.

The main difference between Indian and GST from other countries is, all the indirect taxes are not subsumed into GST. The central sales tax which is the tax imposed on the movement of goods from one state to the other would continue in a different form that is what we call integrated GST. So the central government will levy this GST on the interstate movement of goods and services at one percent. But the central government is saying that we are going to levy this TAX only for 2 years or whatever time the GST council will prescribe so it can well might extend the duration of 2 years which will defeat this very purpose of GST.

Not only this there are certain things exempted from GST like Alcoholic liquor for human consumption. Also there are other items like Aviation Turbine Fuel, High speed diesel, Petrol. On these three items the GST council will decide when these items would be taken under GST. But if these items are exempted from the GST this will defeat the very purpose of GST because 40% revenue state government revenue get from these items.

SO these are some of the issues with GST.

Thank you for reading.