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Introduction of a GST is very much essential in the

emerging environment of the Indian economy.

There is no doubt that in production and distribution of
goods, services are increasingly used or consumed and
vice versa. Separate taxes for goods and services, which
is the present taxation system, requires division of
transaction values into value of goods and services for
taxation, leading to greater complications, administration,
including compliances costs. In the GST system, when all
the taxes are integrated, it would make possible the
taxation burden to be split equitably between
manufacturing and services.
GST will be levied only at the final destination of
consumption based on VAT principle and not at various
points (from manufacturing to retail outlets). This will help
in removing economic distortions and bring about
development of a common national market.
It will also help to build a transparent and corruption-free
tax administration. Presently, a tax is levied on when a
finished product moves out from a factory, which is paid
by the manufacturer, and it is again levied at the retail
outlet when sold.

GST (Goods and Services Tax) is a tax levied when

a consumer buys a good or service.
The current tax regime is riddled with indirect
taxes which the GST aims to subsume with a single
comprehensive tax, bringing it all under a single
umbrella. The bill aims to eliminate the cascading
effect of taxes on production and distribution prices
on goods and services.
India is adopting a dual GST, wherein the Central
GST will be called CGST and state SGST. The main
road block is the coordination among states.
Centre and states have to come to a consensus on
uniform GST rates, inter-state transaction of goods
and services, administrative efficiency and
infrastructural preparedness to implement the new
tax reform.
How will GST remedy the situation?
GST will do away with Gordian knot of multiple taxrates which is a burden on the common man.
Dual GST means it will have a federal structure.
The GST will basically have only three kinds of
taxes - Central, state and another one called
integrated GST to tackle inter-state transactions.
Under the current GST tax reform, all forms of
'supply' of goods and services like transfer, sale,
barter, exchange, and rental will have a CGST
(central levy) and SGST (state levy).
GST will also help usher-in an era of a transparent
and corruption-free tax administration. It is set to
weed out the current shortcomings of the supply
chain owing to the complicated, multi-layered

First GST is fundamentally anti-federal. This is why

states have been resisting it so hard for years. Of course, they
can be compensated for any loss of revenue, as Arun Jaitley
has promised, but it still means they will not be able to raise or
lower taxes as they see fit politically. Also, once in, states will
not be able to opt out of GST.
Second GST more or less equalises taxation across products,
and hence may be iniquitous. For example, currently centre
and states can levy higher taxes on luxury goods and services
(five-star dinners, cars above a certain size) and this is fair.
Once GST kicks in, all goods and services may end up paying
the same tax. This means the rich who buy luxury goods may
pay less tax and the poor more than they should. This goes
against the basic tenets of taxing the rich more and the poor
Of course, states and centre will make exceptions (like food
items and drugs), but this cant be done endlessly. Too many
exemptions and low duties for some categories of products will
defeat the very purpose of having a simplified tax structure. It
will also create endless disputes between company and taxman
as companies try to show their products are entitled to lower
taxes and the taxman the reverse.
Third, if we assume that those evading excise (legally or
otherwise) currently will henceforth start paying the tax, it
means they have to raise prices to stay profitable. Taxes up,
prices up. In the short-term, GST may boost the prices of
some segments of the economy
Second, if the unorganised sector is going to lose some of its
competitive edge initially, it means there will be pressures
for layoffs in companies that cant compete as a result of
GST implementation. In the short run, GST may end up
costing jobs till the smaller companies learn to compete. And
small companies are the biggest job creators anywhere in the