GST: Next tax reform

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Mohit Jalan, MBA 2015-17, Vinod Gupta School of Management, IIT Kharapur


Congress Vice President, Rahul Gandhi recently said that the Congress party is ready to lend support to GST bill if the government is ready to meet certain conditions. The three conditions put forward by the Congress party are:

Cap on the maximum tax a citizen can be charged with
Withdrawal of an additional one per cent tax on inter-state movement of goods
Dispute to be resolved by panel headed by a Supreme Court judge
The bill has been pending for quite a long time and is considered very necessary for streamlining the tax structure and to give boost to the Indian economy which has outpaced all the other economies. So, what is GST bill and why such a fuss about it?

As, the name suggests, GST, Goods and Service Tax is tax on all the goods and services produced in India. It is said to be one of the biggest reforms in financial sector post 1991 liberalization and would give India’s growth a big push. Apart from the conditions discussed earlier, the bill was impending for a long time because of the difference over the revenue sharing formula between state and central government.

The new government has tried to eradicate these differences and have come upon a formula which is acceptable to both state as well as central government. With GST implementation, excise duty, custom duty and octroi tax will be completely phased out. Though the state taxes on petroleum products will continue to be levied but those taxes will also be eventually be phased out and so the state government were concerned about their revenues.

The idea of replacing all the indirect taxes is not new and has been successfully implemented in many other countries. The industries and traders have also welcomed the move as this will help in removing bureaucracy and corruption at various levels. According to a survey, the trucks carrying goods from one state to another loses a lot of efficiencies at the borders of the state and are most vulnerable to corruption. Implementing GST will do away with such inefficient practices.

Replacing of the indirect taxes with a single tax can have positive effect on country’s economy so the central government, state government, opposition and other parties should come together to iron out the differences so that India could become an economic powerhouse in the years to come.


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