Vol 3 | Issue 3 | July 2016

ALL ABOUT GST BILL
Robin Manocha*
GST or the Goods and Services Tax is an indirect tax that brings
together most of the taxes that are imposed on all goods and
services (except a few) under a single banner. This is in contrast
to the current system, where taxes are levied separately on goods
and services. The GST is a comprehensive form of tax based on a uniform rate of tax for both
goods and services. However, the GST is payable only at the final point of consumption.
Touted as the “single most important tax reform since 1947”, the Goods and Service
Tax (GST) has been in the offing for a decade and continues to be the top priority on the
economic agenda of the government. Although GST has been the subject of wide scrutiny
and debate, most of the discussions have been centered on its road to passage or on its
larger form and structure.
Much emphasis has been placed on the benefits of uniformity that the GST would
usher in. Accordingly, GST would comprise an equal Central GST (CGST) and State GST
(SGST), with no deviations from the rates/exemption lists, so as to obviate potential “rate
wars” between States. Even in terms of the model law, the potential for deviation stems
from the concurrent powers of the Centre and States to enact their own GST legislation,
compounded by the inheritance of the existing disjointed tax structure. It may be recalled
that even the Value Added Tax regime began with a pledge of uniformity, but devolved over
time as each State formulated different tax events, rates and exemptions.
Most crucially, the GST Dispute Settlement Authority, which would have reined in any
deviations affecting the harmonized structure of the GST, has been done away with. The
existing tax system has typically followed a model of rewarding States where production
activity is based (origin States), as opposed to States where consumption is high (destination
States). Accordingly, most States have incentivized the setting up of local industries in order
to drive growth and augment tax collections. While origin States may chalk out measures to
redress the imbalance, consumption and production patterns will not alter overnight, and
industrialized States could be left in the lurch, at least in the immediate aftermath of the
GST. Interestingly, there seems to be no globally available precedent which offers a solution
to such an imbalance. In the inevitable shift which the Indian GST necessitates, destination
States such as Bihar and Kerala clearly stand to gain in terms of revenue, while origin States
such as Gujarat and Maharashtra stand to lose, and had expectedly put up more initial
opposition to GST. In order to partially level the playing field, the Centre proposed a 1 per
cent origin-based additional GST.
Along the road to GST, it is also critical that these issues are subjected to the same level
of governmental and public scrutiny so that the implementation of GST is a success in letter
as well as in spirit.
*Robin Manocha is a student of Class of 2017 at IBS Gurgaon
Vol. 3 | Issue 3 | JULY 2016 | SAMVAAD 17