GST: The dawn of a new era

GST: The dawn of a new era

Submitted by alvin on Wed, 2016-08-10 10:08 The GST is a tax system meant to bring together the state economies into a single taxation system.  It is an accepted system with France being the first country to have introduced it. The assumed GST rate is to be between 16 and 17 percent as against the current 35 to 40 percent.A significant feature of GST is that exports would be exempted and imports would attract the same rate of tax as applicable to domestic goods and services. The major beneficiary would be free movement of goods among states. This will definitely help the transport sector.There are many exemptions in GST, for instance to commodities such as alcohol, petrol, etc, thereby defeating the idea of a uniform tax structure across the country.Another oddity is that there is no upper limit, which is against the basic concept of reducing taxes.  Income costs can go beyond the present proposal limit without any Parliament approval.It was the Congress Party which first proposed a uniform tax through the country.  In 2000, the Vajpayee government proposed the GST model. On Feb 28, 2006, P Chidambaram, the then finance Minister, announced 1 April 2010 as a target date. However, the GST has been used as a political tool to settle scores in the present Parliament. It finally dawned on the Narendra Modi government that they need to work with the opposition to make it work.The 2014 bill had a Central CGST and the states were permitted to levy a state GST.  The states were to be given compensation for any revenue losses from the Centre.The downside of GSTIt is a regressive taxation system that affects the lower income earners because the tax consumes a higher portion of their income as opposed to large corporates.A study commission by Curtain University of Technology in Perth argued in 2000 that the GST would negatively impact the real estate market as it would add up to 8 percent of the cost of new homes and reduce demand by about 12 percent.India has opted for a dual GST model. What it really means is that there is a new name for Central Excise, Service Tax, Vat and CST.AIDMK vehemently opposed the bill because their taxation structure on alcohol is used to fund freebies to the people of Tamil Nadu.ConclusionLike all taxation regimes, the entire mechanism has generally been to provide better rationalisation of taxes for big businesses and higher income groups. All tax regimes historically have never taken care of the middle-class or the poor in any way.  It is they who have to pay indirect taxes at every turn because they are the consumers. The mantra of helping the poor and needy means a smaller tax burden on lower income groups and higher taxes on large corporate houses. This may sound socialist but in reality the million dollar question will always be as to how the government will offer an equitable re-distribution of wealth to all its citizens..