What are the benefits of the GST?
At the simplest level, the GST reduces the number of instances where taxes need to be paid thus reducing the possibility of manipulation on the part of tax authorities and is hence assumed to be a much transparent mode of administering taxes. It will alleviate the burden of cascading taxes for individuals. It is also expected to boost revenue collection in certain states and to reduce the prices of goods.
What are the difficulties involved?
The fundamental problem involved is the decision of a revenue-neutral rate for the GST that will be acceptable to all those involved and also whether there will be a single rate or two rates at state and Central level. The federal nature of the country also accounts for its own share of complications and delays. For the Centre to be able to impose tax at the retail level and for states to be able to tax services will require constitutional amendments, which will further need to be passed by the Parliament and state legislatures.
GST for ‘sin’ products will benefit the economy
By bringing alcohol within the ambit of GST, both the states and the Centre would be empowered to levy tax, states though may be reluctant to accept this jurisdictional encroachment by the centre
The so-called sin products, such as alcohol and tobacco, are singled out for taxation at high rates in virtually all jurisdictions around the world. The high rates serve the double purpose of yielding extra revenues to the government and discouraging consumption of such products, which are harmful to health.
In India also, these products attract high and multiple taxes in the form of excise duties, licence fees, cess, inter-state import and export fees, and bottling fees. Should these products then be left out of the ambit of the goods and services tax (GST)? If not, how would the tax be structured for them?
The blueprint for GST prepared by the empowered committee of state finance ministers suggests that, following the current practice under the state value-added tax, or VAT, these excisable products, including petroleum, would remain outside the scope of GST. While the reasons for this treatment are not fully articulated, it is contrary to international best practices and warrants reconsideration.