Given the present predicament hindering the green signal for the Constitution (122nd Amendment) Bill, without which GST remains only on paper, Dr. Rangarajan’s suggestion for a partial fulfillment of the promise on GST merits serious consideration. The way forward, as elucidated in the article, lies in a decision by the Centre to convert its “domestic indirect taxes into GST at the manufacturing stage.The number of issues to be discussed, debated and decided by the GST Council far exceeds what can be achieved within the “minimalist” mechanism provided in the Bill. No doubt, the best option for the Centre appears to be the one put forward by Dr.Rangarajan, the well-known economist.
The Goods and services tax has been in the news recently. Enforcing a national market by removing trade barriers through a synchronised commodity tax and reducing the fiscal autonomy of federal institutions is what the Goods and Services Tax system seeks to achieve in India.Goods and sales tax ( constitution 122th amendment bill), is a key proposed legislation, which would subsume all the prevailing indirect taxes like sales tax, central excise duty etc. Experts have opined that successful implementation of GST has the potential to increase the GDP by 2-3% points.
The structure of proposed tax regime is related to creating uniformity in taxation rates with the single rate of state, central and inter state sale of goods and services. It also aims at the creation of GST council comprising of union finance minister and state finance ministers to delineate on items to include, tax rates and other relating issues. It envisages the creation of GST network as a backbone for registration and tax filing.The primary objective of the act is to create a harmonized indirect tax structure in the country. Currently taxation on commodities vary from state to <g data-gr-id="36">state ,</g> creating the cascading effect and difficult compliance procedure.
This <g data-gr-id="35">act,</g> would definitely help in streamlining taxation procedure so as to increase ease to customers and business as well as greater tax collection.But there are some conflicting issues arising from the proposed <g data-gr-id="33">law :</g> States are apprehensive of ceding their fiscal autonomy. They are pitching for higher GST rate. The nature of representation in <g data-gr-id="30">get</g> council is also contested, as they want the voting power of centre to be reduced by 1/4. Items like alcohol are kept out of its ambit, and there is no clarity on petroleum products, which may hamper its desired impact.
There are questions about the feasibility of introducing the tax by April 2016. Given the number of hurdles, the Centre can partially fulfil its promise of introducing the GST by transforming its own domestic indirect taxes into the GST at the manufacturing stage. This can be achieved by working out a common threshold for excise duty and service tax, rationalising the excise duty by making all rates ad valorem, converging and unifying the rates into two — one for items of common consumption and the other, a standard rate to be applied to all remaining goods and services — and providing input tax credit for goods against services and vice versa.