It will make indirect tax system simple and easily comprehensible
In a bid to simplify tax regime in the country, the Union government has been trying in the last few years to evolve and implement Goods and Service Tax (GST) across the country. This single tax is supposed to replace many of the existing taxes, like central excise duty, service tax, sales tax, CST, value-added tax (Vat), central value-added tax (CENVAT), luxury tax and transportation tax.
Since India is a federal country with many states, there is wide divergence of opinion. After evaluating the situation, the Union government has veered round to the idea of introducing a dual form of uniform tax structure: state GST and Central GST. The taxation power will neither be concentrated in the hands of the Centre nor the states; there will be federal control of taxation in dual GST system.
Under the existing taxation system, there are numerous categories of products and services. So, it is a cumbersome task for officers to levy taxes after calculating the stimulus package or incentives and exemptions. With multiplicity of tax rates for items as varied as cereals and other food items to IT products and medicines, one cannot but wonder how the government is planning to levy a single rate of tax!
However, there is no denying that dual GST will turn the Indian economy into a well-organised one and make the Indian taxation regime simple and homogeneous, from what is full of complexities.
What is so great about a single, uniform tax that the GST is supposed to be? We can take a common example of refrigerator which reaches consumers after passing through many levies. At present, refrigerator attracts excise duty (on manufacture), state Vat, CST, service tax (logistics-warehousing), entry tax and others. After implementation of dual GST only state GST and central GST will be levied.
Although this will make the Indian indirect taxation uniform and its enforcement easier for officers, there are many issues to be resolved. Sharing opinion with LR Thapar, director (projects), Hind Terminals, servicetaxonline.com found that railway freight service faces many uncertainties with the coming GST system. Apparently, there would be many problems in other sectors.
Thapar said, "Goods and Services Tax (GST) will affect the rail-borne freight traffic adversely. It will make rail transport costlier for shippers and consignees. Even at present, rail traffic is facing a serious challenge from the road sector. Railway is already taxing its freight customers high by subsidising passenger traffic and charging freight traffic for the same. This tax will only worsen the situation and make the railways less competitive."
Vijay Sati, vice-president, Integrated Supply Chain, Hindware, told servicetaxonline.com, "GST will smoothen the process of supply chain. It will simplify the tax structure, rationalise the state warehouses and improve the operations of supply chain by controlling costs. So, GST will be good for the growth of supply chain industry."
In a nutshell, GST will make indirect tax system simple and easily comprehensible to everyone. Government had decided previously to implement the GST by April 2010. But now because of various challenges, the schedule is slipping and it may be delayed by a few months.
GST