GOODS AND

SERVICES TAX
INTRODUCTION
What is GST?
It is an indirect tax that will lead to the abolition of all other taxes such as octroi,
central sales tax, state-level sales tax, excise duty, service tax, and value-added
tax (VAT). Both the state and the central governments will impose GST on
almost all goods and services produced in India or imported into the country.
What categories are exempt from GST?
Exports will not be subject to GST. Direct taxes, such as income tax, corporate
tax and capital gains tax will not be affected.
How will GST benefit the economy?
It will simplify India's tax structure, broaden the tax base, and create a common
market across states. This will lead to increased compliance and increase India's
tax-to-gross domestic product ratio. According to a report by the National
Council of Applied Economic Research, GST is expected to increase economic
growth by between 0.9 per cent and 1.7 per cent. Exports are expected to
increase by between 3.2 per cent and 6.3 per cent, while imports will likely rise
2.4-4.7 per cent, the study found.
How will GST benefit corporates?
It will be beneficial for India Inc. as the average tax burden on companies will
fall. Reducing production costs will make exporters more competitive. "The
most important reform for India, whether it is for our group, for India generally,
or for most businesses, will be the goods and services tax. It will add about two
percentage points ... to India's GDP growth," Rahul Bajaj, chairman of the Bajaj
Group, told Reuters in November 2012.
Will goods and services become costly?
The highest rate of taxation under GST will be around 15 per cent in the first
year, and eventually come down to 12 per cent in the second year. By
comparison, the current rate of the various indirect taxes levied in India
amounts to roughly 20 per cent. Goods deemed necessary or of basic
importance will be taxed at a lower rate.

Will state governments lose out?

Some states fear that a uniform tax rate, if lower than their existing rates, will
dent collections. However, the central government has said it will compensate
states for the potential revenue loss. Mr Chidambaram has set aside Rs. 9,000
crore towards the first installment of the balance of central sales tax (CST)
compensation. Also, instead of an earlier proposal for a uniform GST rates
across the country, the Union Government has agreed to have a floor rate of
taxation with a narrow band.
Can states decide to opt out of GST?
In a deviation from its earlier stand, the government has agreed for a phased
roll-out of GST. States will also have the flexibility to opt out of GST.
What's the latest on GST?
Three sub-committees have been formed to resolve all outstanding differences
and submit their reports in three months.
i)
ii)
iii)

One will look at the issue of integrated GST for inter-state movement
of goods and VAT on imports.
The second will decide on a revenue neutral rate on GST - one that is
not too high for the traders and not too low for states.
The third will look for a mechanism so that traders have to coordinate
only with one agency - centre or state. This committee will also decide
on a common exemption list and threshold for levying GST.

What's the roadmap for GST?

In his Budget speech of 2007-08, Finance Minister P Chidambaram had
announced the implementation of GST from April 1, 2010. The second deadline
for GST was April 2012. Now, there are hopes that the GST regime will come
into effect by 1 April 2014.
How will it become a reality?
The GST can be implemented only through a Constitutional Amendment Bill,
which means it needs to be approved by not less than two-thirds of the members
present and voting in each House of Parliament. The GST must also be ratified
by the legislatures of at least one-half of the states.

GST: What does it mean and what held it back?

One of the biggest Tax reforms, Central Goods and Services Tax, has been
about in this country for years now.
The UPA had introduced a Bill regarding the same in 2008 and was hoping to
implement it by 2011. However because of series of roadblocks which it faced,
mainly from state governments like MP, Gujarat, Chattisgarh among others, the
bill had been stuck.
It requires a constitutional amendment.
The GST would subsume many state and the central taxes like central excise
duty, service tax and additional custom duties, VAT, entertainment tax among
others.
However, according to the agreement reached between the Centre and the
States, petroleum products will be kept out of the purview of the GST.
Initially the debate about this was started in 2000.
Current breakthrough is attributed mainly to the three factors:
The flexibility shown by the Finance Minister in terms of completely
taking care of states concerns of loss of revenues.
Interim measure allowing Petroleum products to keep out of the purview
of the GST.
In terms of staggered approach which had been articulated. It is being
said that this is expected to add 2% increase to the GDP.
The implementation issues are enormous.
It is difficult to put in place this bill by 2016.
By implementing GST the cascading effect of taxes will be removed. The whole
country will have a uniform tax system. States can now charge service tax.
Capacity building processes required for implementation have not received
much attention.
There may be inflationary impact on services.
The tax base is likely to be enhanced.

Q: The new federalism, comprising the combination of the GST (Goods and
Services Tax) and the FFC (Fourteenth Finance Commission), creates the
framework for both mobilising more resources by government and spending
them with greater impact. However, like all good things, realising these
potential benefits will require several conditions to be fulfilled. Examine these
conditions and explain how they can be fulfilled.
Answer type:1
The new federalism directs the central to increase the share of revenue with the
provinces as they show higher impact on social welfare through better
programme execution, implementation and monitoring. The combination of the
GST(Goods & Services Tax) and the FFC(14th Finance Commission), does
create the framework for both mobilising more resources by government and
spending them with greater impact with some conditions.
CONDITIONS
1. Different states have different capacity to hold and utilise resources optimally
due to vast developmental disparity among states, thus central needs to focus on
capacity building.
2. With capacity building needs freedom of expenditure, without which
developmental rate will be regressive.
3. Reorientation of the roles and responsibilities of central ministries and other
institutions for greater coordination with the states.
4. Needs to improve the structure of bureaucracy and civil service reform to
increase accountability.
HOW THEY CAN BE FULLFILLED
1. PMO and NITI aayog together can act as coordinating instruments for
formulation of neo-federal policies and as think tank of the states.
2. Formulation of policy that incorporates the idea of one state helps another
state to reduce the disparity.
3. by reorienting the roles and responsibilities of the central ministries to act
streamlining with NITI aayog and PMO.
4. Focus on less spending and more effective spending in states.
5. Bureaucratic reform, increase the dimension of inter-state mobility of experts
for national interest not for personal interest.

In sum, the new federalism provides an opportunity to significantly improve the

effectiveness of public finances, both in terms of revenues and expenditure.
However, its full potential will only be realised if appropriate institutional
mechanisms and capacities are created both at the centre and the states. These
are as necessary as they will be challenging.
Answer type-2
The 14th Finance Commission's recommendations accepted by government
increases both the resources and autonomy of the states to use those resources
depending on local requirements. with this comes the greater responsibility on
states to use this resources effectively with possible interventions as following:
1. With the history of some states running revenue surpluses, Institution
capacities of the states must be enhanced to use the resources effectively. This
can be done by central ministries and NITI-Aayog coordinating with states to
build expertise.
2. Transfer of successful comparative experiences among states must be
encouraged through exchange of information, personnel among states.
3. Strict monitoring of resource utilization is to be taken up by by center given
states are relatively new and lesser efficient in this aspect. NITI-Aayog or an
other new institution should be initialized for this purpose.
4. States must devolve this autonomy and resources to local governmnets in true
spirit of 73rd and 74th amendments for better results.
5. More cooperation among states is more necessary than before so that policies
of each other will lead to congruence than collisions for common benefits.
6. Central government should not completely retreat this space for states but
must act as s a facilitator till states acquire expertise.
In the times of 'competitive federalism' where states have thoroughly
understood the importance of development, this devolution of resource and
responsibilities to states will usher a new era in Indian federalism.
Answer Type-3
Cooperative federalism which is in focus at this moment in India by giving
states more and more powers. Fourteen finance commissions recommended to
give states more money to states which they can spend at their pwn discretion
without nay interference by centre. This is a chance for India to build a strong
development base for long time to come but this will only happen if certain
conditions are fulfilled.

1) Capacity Building- Many states in India dont have the capacity to use the
resources and to use the money they have. The financial resources which are
now given to them should be used optimally to get them real benefit of it. Niti
Ayog can be used to monitor it and help states in building the capacity. Also, it
can help in solving the inter-state issues.
2) Bureaucracy reforms: The state cadre-central rotation system is a hub-andspoke system that presumes that knowledge and experience has to be
intermediated by the central government. This goes against the very grain of
devolution. Civil servants should be able to go to other states and help in
utilising their expertise rather than by just one state.
3) Reorganisation: Reorientation of the roles and responsibilities of central
ministries and other institutions.
Central ministries should be more used as monitoring and helping the states.
Focus should be on delivering and accountability. Here Again Niti Ayog can
help. The new federalism provides an opportunity to significantly improve the
effectiveness of public finances, both in terms of revenues and expenditure.
However, its full potential will only be realised if appropriate institutional
mechanisms and capacities are created both at the centre and the states.

Q. The finance minister of India called GST as the biggest tax reform
measure since independence. Analyse the benefits that can incur to the Indian
economy with its introduction.
Answer t-1
GST BILL proposed will be a win win situation to both center, state and to
bring the economy on more sustainable and accelerated path of development.
GST benefit to indian economy. ....
1. The proposed GST will do away present complex indirect tax structure by
making unified tax rate I.e dual GST ( centre GST and state GST) which
ensures both to legislate, levy in their respective jurisdiction.
2. As unified tax will subsumes all indirect taxes I.e excise, central vat, state vat
etc and tax rate will be kept minimum which consequently spur the
manufacturing sector which in turn bring more competitive prices, hence crates
huge demand and hence vicious cycle of development starts.
3 . As there is no entry tax in inter state hence hence manufacturing entity
located in one part of country find huge market in other part of country at
competitive prices.
4. Benefit multinational due to unified tax rate all over country, which earlier
has to compete with competitive prices set by UNorganised sector,
consequently more encouragement to FDI inflow hence realisation of expedite
make in india campaign in real spirit.
5 . Consumers will get competitive price.
6. Simple tax structure will arrest evasion of tax which consequently raise
revenue of govt. Thus GST will be definitely benifit various stakeholders of
indian economy I.e manufacturers, consumers, business people and and make in
india will turn in to build india campaign I.e on social , economic front.
Answer t-2
Goods and Services tax is an indirect tax which aims to replace all the indirect
taxes on goods and services levied by the Centre(like excise duty,services tax)
and the States(like state VAT,sales tax).
Benefits of GST to the Indian economy includes:1)It will improve tax collection by broadening the tax bases along with increase
compliance as tax evasion will be difficult in GST.This will increase tax to GDP
ratio of the government which dip to 10.1% low in the last fiscal year.Therefore

will more revenue with the government it will result in reduced fiscal
deficit,more investment,social reforms etc.
2)It will integrate the country through a uniform tax rate and will facilitate
common market across states.It will also do away with entry tax thereby giving
boost to trade between the states.
3)GST is expected to build a transparent and corruption free tax
administration.It will give boost to entrepreneurship by reducing tax on
individuals along with doing away with confusion among the private sector
regarding taxes and cost of doing business will be lower.This will enthuse the
private sector leading to more investment giving push to Make in India
initiative.Along with this it will also give boost to exports.All this will also
create more employment opportunities.
4)Further GST is also expected to bring down inflation in the economy as the
prices of the goods and services will be reduced because of a uniform tax rate.
5)Equitable division of tax burden between manufacturing and services without
giving any advantage to any sector.This will increase in efficiency in the
respective sectors ultimately benefiting the economy.
All these benefits of GST make it a more desirable reform needed by the
country in immediate future.Therefore the Central government should try their
best to bring the 122nd constitutional amendment bill(GST) into the form of act
by having discussions with states and stakeholders.Addressing to their concerns
and demands on merit basis will be a important breakthrough in its success.
Answer t-3
Goods and services tax (GST) is an indirect tax which is based on the principle
of VAT.If it is applied then all major domestic taxes like cen-vat,service
tax,entertainment tax etc would be merged in it.The producer then has to pay
tax according to it's output but the tax on input will be re-imbursed to him.The
benefits that GST can have on our economy are :
1)It will reduce tax evasion because-a)it enables tax officials to cross-check the
records of various firms b)It will encourage firms to purchase inputs from the
firms who have paid their taxes in order to reduce their tax liability.
2)It eliminates cascading burden of multiple taxation.
3)It will promote specialisation becuase total tax liability remains same
irrespective of number of production-distribution stages.
4)It will unify the indirect taxation system across states.

5)Allocation of resources will be based on comparative advantages of various

states.i.e under it states will produce those commodities in whose production it
is most efficient.
So GST will ensure transparency,it will enhance country's economic resources
because of lack of tax evasion.But there are some issues in implementing it so
govt should resolve these issues and implement it as soon as possible.
Answer t-4
Current indirect tax regime is like a unique tapestry of various state and union
taxes which vary from state to state.
The taxes levied by center (e.g. Excise, Service Tax, CST etc.) and state (VAT,
Entry tax, entertainment tax etc.) are derived from the duties mentioned in state,
union and concurrent list of the constitution, which lead to a conundrum of tax
regime in which both union and state tries to earn best possible statutory taxes.
All this leaves the manufacturers, service providers and investors in a state of
consistent confusion and severely disenchant them.
What is GST:
GST is a like an umbrella tax regime which will contain all the major state and
union levied indirect taxes. The GST, which is legislated by 122nd constitution
amendment bill will bring about a unified tax regime which will comprise of a
central and a state GST, which will be legislated, levied and administrated by
respective Govt. over the same taxable base.
Benefits:
Some benefits which will boost economic conditions of the Nation are:
1. One tax, it will lead to a simplified tax regime as it will subsume various
taxes. This will make favorable conditions for various multinational to invest
which were in unfavorable condition as they had to compete with companies in
unorganized sectors.
2. Equitable levying of taxes, burden will be distributed equitably among
manufacturers and services.
3. Abolition of entry tax will be a great boon for movement of goods by road
transport.
4. In the absence of central sales tax, goods produced in States will find a wider
domestic market which will boost their sales and this will strengthen the
economy.
5. Both Central and State taxes will be collected at the point of sale. Both
components (the Central and State GST) will be charged on the manufacturing

cost. This will benefit individuals as prices are likely to come down. Lower
prices will lead to more consumption, thereby helping companies.
6. Transparent and corruption free tax administration
It is estimated the India will gain 15 billion $ annually by implementation of
GST, it will promote exports, raise employment and boost growth. So no reason
why is a candidate for one of the biggest tax reform since independence.

Q. Examine the concerns of state governments with regard to structure and

implementation of goods and services tax (GST).
Answer t-1
GST have been in debate for last few years, center wants to introduce GST for
various reasons like, it will ease down the entire indirect tax systems, strengthen
the center's position, create a positive environment for business, estimated to
add $ 15 billion in GDP, it will be in line with international best practices and
will be a stepping stone for DTC.
However, it doesn't include two important subjects, which are land and liquor,
as these are very sensitive issues for state due to major revenue earner and
provisions in constitution which empowers state to handle these subjects. But,
inclusion of these two are needed for the below reasons
Land
1) Black Money: Land has proved to be a safe investments for the black money.
GST will bring transparency into the system and would help stop this corrupt
practice.
2) Stamp duty and Registration: Most of the state facilitated stamp duty and
registration are grossly undervalued; GST would help in better reporting.
3) Ease: The current tax structure makes the entire real estate tax system a
nightmare and cause of litigation for seller as well as buyer. GST will make the
entire system lean, which will help in faster delivery.
4) Industry: In absence of GST Industries are unable to claim the credit for the
construction work (office, factory etc.) done on the land.
Liquor
Illicit Trade: Liquor have flourished as huge illicit market in many states which
causes heavy revenue loss for the Government. GST would help stop the tax
evasion.
GST is a progressive step, the not only states should cooperate in implementing
it but also the center should ensure justice with states in sharing tax proceeds
after GST.
Answer t-2
The current design of the GST exclude land and liquor which is detrimental to
economy due to the following reasons

Need of GST in land and liquor:

a) Tax evasion: Only the tax on value of the land, goods and services are
considered leaving the tax on the transaction of the land to manipulation of
contractors encouraging tax avoidance. If the GST applies to liquor, it will
significantly reduce tax evasion.
b) To curb black money: Land and liquor are the two major store houses of
black money. Taxation of these items in transaction is imperative for cleansing
this system of black money
c) Improper taxation: Taxation on land if excluded would treat machinery in
factories as property rather than treating it as goods encourages unnecessary
taxes. Further companies cannot claim tax benefits for their infrastructure
construction in manufacturing process thereby increasing domestic production
cost and encouraging imports.
d) Increased revenue: GST can increase the state revenue significantly if these
sectors are included where in Gujarat the magnitude of illegal liquor sale is Rs
30,000 crore.
e) Less burden on people: GST revenue from land and liquor will reduce other
taxes in goods and service increasing the capacity of the people with cascading
effects on growth in economy.
Central and state government should consider these factors in line with
cooperative federalism and try to include land and labour under GST for
economic well being of our nation.

GST Bill to be first off the block

The Union government has decided to give the long-pending Goods and
Services Tax (GST) Constitution Amendment Bill precedence over the
controversial Land Acquisition (Amendment) Bill, sensing a better chance of
passing the former if sequenced that way.
The GST Bills passage will require a constitutional amendment, which means a
two-thirds majority is required in Parliament. The Assemblies too will have to
approve the Bill ahead of the April 2016 deadline.
GST:
The goods and services tax (GST) is a comprehensive value-added tax (VAT)
on goods and services. It is an indirect tax levy on manufacture, sale and
consumption of goods as well as services at a national level.
Through a tax credit mechanism, this tax is collected on value-added goods and
services at each stage of sale or purchase in the supply chain.
The system allows the set-off of GST paid on the procurement of goods and
services against the GST which is payable on the supply of goods or services.
However, the end consumer bears this tax as he is the last person in the supply
chain.
Experts say that GST is likely to improve tax collections and boost Indias
economic development by breaking tax barriers between States and integrating
India through a uniform tax rate.
What are the benefits of GST?
Under GST, the taxation burden will be divided equitably between
manufacturing and services, through a lower tax rate by increasing the tax base
and minimizing exemptions.
It is expected to help build a transparent and corruption-free tax administration.
GST will be is levied only at the destination point, and not at various points
(from manufacturing to retail outlets).
Currently, a manufacturer needs to pay tax when a finished product moves out
from a factory, and it is again taxed at the retail outlet when sold.
How will it benefit the Centre and the States?
It is estimated that India will gain $15 billion a year by implementing the Goods
and Services Tax as it would promote exports, raise employment and boost

growth. It will divide the tax burden equitably between manufacturing and
services.
What are the benefits of GST for individuals and companies?
In the GST system, both Central and State taxes will be collected at the point of
sale. Both components (the Central and State GST) will be charged on the
manufacturing cost. This will benefit individuals as prices are likely to come
down. Lower prices will lead to more consumption, thereby helping companies.
Why are some States against GST; will they lose money?
The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that the
information technology systems and the administrative infrastructure will not be
ready by April 2016 to implement GST. States have sought assurances that their
existing revenues will be protected.
The central government has offered to compensate States in case of a loss in
revenues.
Some States fear that if the uniform tax rate is lower than their existing rates, it
will hit their tax kitty. The government believes that dual GST will lead to
better revenue collection for States.
However, backward and less-developed States could see a fall in tax collections.
GST could see better revenue collection for some States as the consumption of
goods and services will rise.
Sources: The Hindu, gstindia.com.

GST Bill: States to get relief

Union Finance Minister will seek the Cabinets nod on Wednesday for the
122nd Constitutional Amendment Bill on the Goods and Services Tax.
The Constitutional Amendment Bill proposes to empower both the States and
the Centre to levy the GST. At present, the Centre can tax services but not sales
and distribution of goods. States can currently tax sales and distribution of
goods but not services. The Bill proposes that the Centre be empowered to tax
sales of goods and States get to tax services.
The States have consistently demanded that the GST regime exclude real estate
transactions and stamp duties. But the central government has said that
extending the GST to real estate transactions will reduce black money
generation in the sector. Consequently, low-cost housing will become more
affordable.
Modifications in the Bill:
-The Ministry has inserted into its draft Bill a provision guaranteeing
compensation to States for losses of revenues owing to the transition to the
GST.
-Now, it is proposed that the Constitution itself will provide that the Centre
transfer funds to States to make good their losses of revenue owing to the shift
to the GST over the first five years of the transition.
-The Bill provides further comfort to States by allowing them to charge
additional 1 to 2 per cent GST to cover up for losses. This provision will have a
sunset clause and will be available only for two to three years.
Several GST rollout deadlines have been missed over the lack of consensus
between the Centre and the States over a number of issues. Since the GST will
be levied on consumption of goods and services, States that are net producers
stand to lose revenue.
A study commissioned by the Thirteenth Finance Commission had estimated
that the simplification, efficiency and savings consequent to shift to a welldesigned GST regime can boost Indias growth by up to 2.5 percentage points.
The GST will subsume into one levy all indirect taxes imposed by the Centre
and the States. These include entry tax. The GST will subsume the services tax,
excise duties, stamp duties, entry tax, central sales tax etc.
Sources: The Hindu.

How is GST different from VAT?

What is the grand bargain suggested by the Thirteenth Finance Commission for
implementation of GST?
GST refers to the Goods and Services Tax while VAT refers to the Value
Added Tax (VAT). GST is usually applied to the end products while VAT is
applied at the intermediate stage.
GST and VAT also differs in the incidental effects of the taxation. VAT is
usually less regressive as it is implemented on the difference in the values of the
products between any two stages. It is implemented on the value added at each
stage. So it is independent of the number of the intermediaries as the ultimate
impact of the taxation will be dependent on the value added rather than on the
number of intermediaries in the chain. GST will be implemented by the GOI in
the year 2015. It seeks to integrate the whole goods and services market across
whole of India.
Grand Bargain is an incentivising mechanism to ensure the faster compliance of
the GST. Thirteenth Finance commission has suggested for faster
implementation of the GST by seeing monetary incentives. It sets aside 50,000
crore in the case of any revenue loss to the states while implementing the
scheme in 2013. However the amount will reduce further if the states do not
implement the model GST. The other characteristic of Grand Bargain is that it
will finalize the modalities and will ensure that the appropriate steps are taken
to ensure inter-state compliance. Since the model GST could not be introduced
in the year 2013, so the amount of this fund was reduced. Some states such as
Gujarat are working towards implementing the effective governance mechanism
for implementing GST. Many states are complaining towards loss of autonomy
in imposing taxation which should be looked into

Opposition(BJP) stalls GST Bill

The GST Bill has met with stiff resistance from the opposition parties in the
Lok Sabha.
-The Congress-led Opposition wants the bill to be sent to a parliamentary panel
called the standing committee for scrutiny of the changes made in it before the
house debates and votes on it.
-The bill amends the Constitution and so requires a two-thirds majority in both
houses to vote for it, already has the consent of states, who are key stakeholders.
-The bill on GST, which will be the biggest tax reform after 1947, was
introduced in the Lok Sabha in December last year. A single rate of GST will
replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax
and purchase tax on goods and services to ensure seamless transfer of goods and
services.
-While liquor has been completely kept out of the GST, petroleum products like
petrol and diesel will be part of the new regime from a date to be decided at a
future date by the GST Council, which will have two-third of its members from
states.

GST
The goods and services tax (GST) is a comprehensive value-added tax (VAT)
on goods and services. It is an indirect tax levy on manufacture, sale and
consumption of goods as well as services at a national level.
-Through a tax credit mechanism, this tax is collected on value-added goods and
services at each stage of sale or purchase in the supply chain.
- The system allows the set-off of GST paid on the procurement of goods and
services against the GST which is payable on the supply of goods or services.
However, the end consumer bears this tax as he is the last person in the supply
chain.
-Experts say that GST is likely to improve tax collections and boost Indias
economic development by breaking tax barriers between States and integrating
India through a uniform tax rate.
What are the benefits of GST?
-Under GST, the taxation burden will be divided equitably between
manufacturing and services, through a lower tax rate by increasing the tax base
and minimizing exemptions.
-It is expected to help build a transparent and corruption-free tax administration.
GST will be is levied only at the destination point, and not at various points
(from manufacturing to retail outlets).
-Currently, a manufacturer needs to pay tax when a finished product moves out
from a factory, and it is again taxed at the retail outlet when sold.
How will it benefit the Centre and the States?
It is estimated that India will gain $15 billion a year by implementing the Goods
and Services Tax as it would promote exports, raise employment and boost
growth. It will divide the tax burden equitably between manufacturing and
services.
What are the benefits of GST for individuals and companies?
In the GST system, both Central and State taxes will be collected at the point of
sale. Both components (the Central and State GST) will be charged on the
manufacturing cost. This will benefit individuals as prices are likely to come
down. Lower prices will lead to more consumption, thereby helping companies.
Why are some States against GST; will they lose money?

-The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that
the information technology systems and the administrative infrastructure will
not be ready by April 2016 to implement GST. States have sought assurances
that their existing revenues will be protected.
-The central government has offered to compensate States in case of a loss in
revenues.
-Some States fear that if the uniform tax rate is lower than their existing rates, it
will hit their tax kitty. The government believes that dual GST will lead to
better revenue collection for States.
- Some states also say that the information technology systems and the
administrative infrastructure will not be ready by April 2016(deadline) to
implement GST.
However, backward and less-developed States could see a fall in tax collections.
GST could see better revenue collection for some States as the consumption of
goods and services will rise.
Sources: The Hindu, gstindia.com.

Q. Why does India want to introduce a national goods and services tax
(GST) replacing all indirect taxes? Explain the rationale behind this and also
examine its advantages and disadvantages.
Answer
The Goods and Service Tax has been long pending implementation in India
regardless of various benefits it had to offer. The GST is a unified tax system
for all the states in the country to make the laws simpler and at the same time
obtain greater levels of tax collection. The new indirect tax regime will subsume
most of the taxes levied by the Centre, such as excise duty and service tax,
besides the state-imposed ones like the value-added tax and sales tax.
The Goods and Service Tax has various advantages and a few disadvantages.
The advantages of Goods and Service Tax are:
1. There will be a unified tax system reducing the complexity of different tax in
different states.
2. All the goods and services will have a single tax hence ensuring uniformity
and wider coverage.
3. GST will decrease the indirect tax rate to 12% and at the same time increase
the earnings to government coffers.
4. GST has already been implemented in many countries with very high success
rate. It will bring uniformity of Indian laws with world standards.
5. The GST will reduce the corruption that is associated with VAT
6. More suitable for Industries due to uniformity in tax.
There are also some disadvantages of GST. They are:
1. Implementation of GST will require strong IT infrastructure to implement it
effectively
2.There are reservation among states about ceding ground in the matter of tax
collection that may lead to loss in state exchequer.
3. The GST will reduce state's revenue from petroleum as the tax will reduce
and hence loss in tax revenue. Petroleum is a major source of tax for states
The implementation is already much delayed and needs to be implemented in a
fast phase. At the same time the states should be taken on board before
implementing GST.