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GST: Key Issues and Analysis
An ideal GST regime intends to create a harmonised system of taxation by subsuming all indirect taxes under one tax. It seeks to address challenges with the current indirect tax regime by broadening the tax base, eliminating cascading of taxes, increasing compliance, and reducing economic distortions caused by inter-state variations in taxes.
An ideal GST regime intends to create a harmonised system of taxation by subsuming all indirect taxes under one tax. It seeks to address
challenges with the current indirect tax regime by broadening the tax base, eliminating cascading of taxes, increasing compliance, and
reducing economic distortions caused by inter-state variations in taxes.
aThe provisions of this Bill do not fully conform to an ideal GST regime. Deferring the levy of GST on five petroleum products could lead to cascading of taxes. The additional 1% tax levied on goods that are transported across states dilutes the objective of creating a harmonised national market for goods and services. Inter-state trade of a good would be more expensive than intra-state trade, with the burden being borne by retail consumers. Further, cascading of taxes will continue.
The Bill permits the centre to levy and collect GST in the course of interstate trade and commerce. Instead, some experts have recommended a modified bank model for inter-state transactions to ease tax compliance and administrative burden.
