Goods and Services Tax
The other ground work done for implementation of GST is the unification of rate structure in goods and services by keeping the standard rate of Central excise duty and services tax at 10%. The Constitution of India does not vest power on the centre and states to levy tax on ‘supply of goods and services’ to the Centre and the States. The 115th Amendment Bill was introduced in the Parliament which seeks to insert Art. 246 (A) that give the Parliament and State Legislatures ‘power to make laws with respect of goods and services tax’. GST is expected to be rolled out by April 2012.
Adam Smith, father of economics, has laid down four cannons of taxation which are equality, certainty, convenience and economy. A tax can be tested on these four criteria. The ongoing tax reform in India is an endeavour in this direction. The Good and Services Tax (GST) is one such effort. It would subsume under it many indirect taxes levied by the Central and State government. It aims at unification of taxation system and removal of any cascading of taxes (“tax on tax”). At every stage, from production to retail, the purchaser of any goods and services will only pay the GST charged by the immediate seller. This will reduce the burden of tax and benefit the consumer. As such the tax seems to achieve the cannons of certainty and convenience.
The tax unification process has been going on in India for some time now. There have been efforts to improve upon the Central excise duty and States sales tax regime starting with the introduction of MODVAT in 1986. CENVAT, at the central level, is a valued added tax that provides credit on tax paid on inputs was an improvement over Central excise duty. At state level, the state VAT was an improvement over sales tax regime. However, there have been some problems associated with the present taxation system like; the CENVAT is confined only to the manufacturing stage and it has not included several Central taxes. Similarly, the State VAT is paid on the value of goods that includes the CENVAT already paid. It is thereby a “tax on tax”. There is also burden of Central Sales Tax (CST) on the inter-state movement of goods. Further, ‘setting-off’ service tax has been a difficult proposition especially at the state level and taxes like luxury tax, entertainment tax etc are still out of the purview of State level VAT. The GST is thus an overarching and overhauling effort in the Indian taxation system to unify the process and reduce the multiplicity of taxes.
Source : arthapedia.in
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