In the recent Vibrant Gujarat Summit, Finance Minister Arun Jaitley stated that the government is expected to implement a common Goods and Services Tax across the country in the course of next year. This piece of legislation will simplify the process of collecting government revenue and broaden the tax base. Currently the central government charges excise duty and service tax, while the state government charges sales tax or VAT. Due to the prevalence of numerous levels of tax, there are complications and issues.
What the present administration is trying to achieve, in line with other countries like Canada and Australia, is a seamless tax structure, where both the central and state governments acquire revenue from all transactions. Consequently, what this would mean is that when supplies of goods/services occur between various businesses, these will be charged the Central and State GST.
The consequent revenue will be equally shared between the Centre and the states. Simply put, there will be no separate excise duties, service tax, sales tax, etc. Of course there are complications that arise from implementing such a tax regime. However, the benefits of introducing GST will include augmenting the ease of doing business, ‘a more seamless taxation regime, reduction in black market activities and minimal cascading effects of different tax levels’, according to a reputed web portal run by the Indian Institute of Management, Bangalore.
Despite the benefits accruing from introducing GST, there is a dire need for better infrastructure to help effectively implement GST, besides cooperation from other states. Introducing the GST does look like a good move on paper, although doubts have arisen whether the government has the political wherewithal to get it passed in both houses of Parliament. Despite going ahead with the ordinance route, the government must get the GST bill passed in both houses of Parliament before we can hope to accrue any long term benefits.