Goods and Services Tax or GST is an indirect tax that is expected to change or revive the fortunes of the Indian economy. The central idea behind this form of taxation is to replace existing levies like value-added tax, excise duty, service tax, turnover tax by levying a comprehensive tax on the manufacture, sale and consumption of goods and services in the country. It is being hailed as one of the biggest tax reforms in India and will be levied by both, the Central and the State governments.
Also read: Union Budget
GST is touted to be one of the triggers that could help boost the country's economic fortune. Economists are of the view that it will unite the country economically as it will remove various forms of taxes that are currently levied at different points. GST will help in widening the coverage of tax base, improve tax compliance, remove existing unhealthy competition among states and re-distribute the burden of taxation equitably among manufacturing and services. Overall, it will result in increasing revenue at the Centre.
Also read: Highlights of Union Budget 2019
For the tax to be implemented, the Constitution has to be amended and a consensus must be reached within states. While earlier the State Governments were not keen on the GST as they were of the view that it could lead to revenue losses for them, recent developments indicate that most States have agreed to a 'Compensation Formula' that will compensate them for their losses. A final consensus is awaited.
The implementation of the GST may now happen from Fiscal Year 2014-15.
According to the International Monetary Fund (IMF), "India's revenue-to-GDP ratio has fallen below its peers. The GST would be the most important reform, and would boost growth through the creation of a single Indian market". However, it further added that while there are encouraging signs of a possible GST compromise, the needed legislative changes require a qualified majority, and implementation is not feasible even in 2013 - 14.
Also read: Union Budget 2019 vs. 2018
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