Vol 3 | Issue 3 | July 2016

INTERACTION WITH :-
Mr. Arvind Kumar, Deputy Secretary, Ministry of
Heavy Industries & Public Enterprises, Govt of India
Q: How difficult and challenging would it be to
implement GST in a large federal system like India?
A federal polity like India is characterised by diverse socio-economic and cultural ethos. While
states like Maharashtra, Gujarat and Tamilnadu are at one end of the development continuum;
North eastern states, Hill states stand at the other end. Implementation of a uniform GST across all
states becomes challenging to that extent. GST implementation envisages a robust IT platform.
Each participating state has to provide IT support on real time basis. In other words, the most
laggard state will decide the pace of GST implementation and its functioning. Nevertheless,
India is determined to take up the challenge and put GST in place very soon.
Q: GST being a destination based tax, what will be its impact on the
revenues of manufacturing states?
GST, by virtue of being destination based tax, does not encompass in its fold the origin based
tax like Central Sales Tax (CST). It is true that in the GST regime the manufacturing states or
the producing states may lose CST revenue, but it is also true that generally these are the very
states that also have large volume of service transactions. Under GST, these states will collect
enough revenue by taxing services. It is also a fact that buoyancy of service tax is much more
than that of CST, VAT (Value Added Tax) or Excise duty. In any case, Central Govt has promised
to compensate those states which report fall in revenue by implementation of GST.
Q: GST will make India one common market. How will it affect our
international trade?
A common market under GST would mean that one buys some inputs from one state, some
from other and sells it in third state, yet he is reimbursed his ITC (Input Tax Credit). In a similar
fashion, one can produce in any state, export from any port and can claim reimbursement from
any state. Under GST, with the removal of cascading effect, the net indirect tax ceteris peribus
will be lower than before, hence the product pricing becomes more competitive in international
market. As far as imports are concerned, GST envisages abolition of CVD (Countervailing Duties)
and SAD (Special Additional Duty) on imports, hence it may be the case that in the short run
imports would rise but in the long run it will adjust to market forces since the Excise duty too is
abolished and manufacturing becomes cheaper.
Q: Will there be less corruption once GST is implemented? What are your
views?
The genesis of corruption perhaps lies in the human interface and exercise of discretionary
powers. GST is expected to avoid human interface and is to work mainly though IT module, for
which Government is designing GST network. The taxes can be filed objectively while sitting at
Vol. 3 | Issue 3 | JULY 2016 | SAMVAAD 5