Problems and Prospects of Goods and Services Tax (GST) in India

In India, there exists a number of indirect taxes that are either levied by the central government or by the state government such as excise duty, custom duty, service tax, sales tax, stamp duty, octroi and many more. There have been various attempts of reforming the indirect tax structure for making tax system simple, stable and burdensome. In this process of reform we have already implement vat and service tax. For further significant improvement the next logical step towards a comprehensive indirect tax reforms in the country will be to implement GST.

GST is a tax on goods and services with comprehensive manner. It is a multi-tier tax where ultimate burden of tax fall on the consumer of goods or services. It is called as value added tax because at every stage tax is being paid on value addition. The introduction of GST at the central level will not only include comprehensively more indirect central taxes and integrated goods and services tax for the purpose of set-off relief, but may also give revenue gain through widening the base. It will redistribute the burden of taxation equitably between manufacturing and services brining about a qualitative change in the tax system. The GST at state-level is also justified:

a) It gives additional power of levy of taxation of services for the states,

b) Removal of burden of CST

c) Subsuming of several taxes in the GST,

With the minimization of exemption it will broaden the tax base and lower the tax rates. The compliance cost will also go down. GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of various central and state taxes in the GST and phasing out of CST. The transparent and complete chain of set-offs which will result in widening of tax base and better tax compliance may also lead to lowering of tax burden on an average dealer in industry, trade and agriculture. The subsuming of major centre and state taxes would reduce the cost of locally manufactured goods and services. This is likely to increase the competitiveness of Indian goods and services in the international market and to boost Indian exports.