Goods and Services Tax – A Roadmap for India
Sarkar Subhrangshu Sekhar
Over the years, tax policy in the country has evolved in response to the development strategy and its changes. In the initial years, the tax policy was directed to increase the level of savings, transfer available savings for investment as envisaged by plan strategy and the need to ensure a fair distribution of incomes, to correct inequalities arising from the oligopolistic market structure created by the co-existence of private and public sector and the existence of other instruments of planning such as licensing system, exchange control, administered price determination. Introduction of the Value Added Tax (VAT) at the Central and the State level has been considered to be a major step – an important breakthrough – in the sphere of indirect tax reforms in India. If the VAT is a major improvement over the preexisting Central excise duty at the national level and the sales tax system at the State level, then the Goods and Services Tax (GST) will indeed be a further significant improvement – the next logical step – towards a comprehensive indirect tax reforms in the country (The Empowered Committee of State Finance Ministers, 2009). II. HISTORY OF TAX REFORMS IN INDIA The history of taxation dates back to time immemorial and it is not a recent development by any account. A thorough research on the history of taxation system shows that taxes were levied on either on the sale and purchase of merchandise or livestock. Further, the history of taxation suggests that the process of levying and the manner of tax collection were unorganized. But it suggests that all historical leaders and head countrymen collected taxes to run its authority. In other words taxes on income, sale, purchase and properties were collected to run the ruling Government machineries. Further, these taxes were collected to meet their military and civil expenditure and also to meet the common needs of the subjects like maintenance of roads, drainage system, government buildings, administration of justice and other functions of the region. Today India tax machinery is very much based on that laid down foundation. Although, there were no homogeneous tax rate structures but it depended on the production capacity and commodity of that particular country and/or region. Moreover, the tax rates and quantum varied according to the annual production. These taxes were collected in cash or in kind and it entirely depended on the type of commodity or service on which it was levied upon. For example, there was a very common practice of selling food crops and cash crops to government machineries against no money. The history of taxation suggests these were done to store government buffer stocks to meet emergencies. Taxes were levied on all classes of citizens, like actors, dancers, singers and even dancing girls. Taxes were paid in 226
Abstract-- India, being one of the largest democracies in the world, has to follow the convention of welfare state. The federal structure of the country provides a relatively powerful government at the centre accompanied by 28 state governments. All of them require finance to govern the country and the states. Indirect tax is one of the major sources of revenue. India has been experimenting with the tax structure since independence. After introduction of Value Added Tax (VAT) from 2005, the country is going to experiment with Goods and Services Tax (GST) from April 1, 2013. This paper puts an attempt to explore the pros and cons related to the issue of introduction of GST in India. Keywords—Goods, Services, Tax, India.
I. INTRODUCTION N announcement was made by the then Union Finance Minister in the Central Budget (2007-08) that GST would be introduced with effect from April 1, 2010. The General Budget 2009-2010 also proposed to integrate the tax on goods (cenvat)...