GROWING CHORUS

Evidently, the chorus on GST is growing louder by the day. The president of the Asian Development Bank, Mr Takehiko Nakao, has pitched for a roll out of the GST, and said that its introduction will integrate India as a “truly one single economy” and help attract more foreign investments. He has quite unambiguously observed that the rationalization of tax such as the GST which the Government is seeking would be a very important reform. 

Even the British Government views India’s plans to open up its defence and insurance markets and rolling out GST as critical. “The GST that aims to create a single market is highly desirable and will indeed serve to create wealth and jobs and increase the quantum of trade between India and Britain,” British Government’s Minister of State for Trade and Investment noted during the opening of the India-UK Business Convention. According to a report produced by the Confederation of British Industry, PwC UK, and the UK India Business Council, between 2000 and 2015, the UK invested USD 22.2 billion in India, i.e. 9 per cent of all FDI in the country. Significantly enough, this makes the UK the largest G20 investor, outpacing the US and Japan, and substantially ahead of many other nations. Its voice on GST, therefore, needs to be taken seriously. 

HOW IT WORKS

The current indirect tax system is plagued with a multiplicity of taxes—at different rates—at multiple points. Further, absence of any setting off mechanism, results in a cascading effect of these taxes. This is accentuated by a huge compliance cost that is incurred in respect of each of the taxes. The proposed GST is a destination based indirect tax that will be levied on supply of goods and services, which is set to subsume the various indirect  taxes currently levied by the Centre and states including excise duty, service tax, value added tax (VAT), Central Sales Tax (CST), purchase tax, octroi, entry tax, and others. These are levied at various stages, i.e.  manufacture, sale, entry of goods, rendition of services.