The proposed tax reform Goods and Service Tax( GST) that will replace all existing central and state indirect taxes is bound to be implemented in the country soon.
This was stated by Sushil Kumar Modi, deputy chief minister of Biharand chairman of the Empowered Committee of state finance ministers for the implementation of GST. “I am of the opinion that nobody can put a hurdle (for implementation of GST). It is bound to come…It is at the last stage (before implementation),” said Modiwhile speaking at an interactive session on GSTat the Goa Chamber of Commerce and Industry on Sunday.
GST is regarded as a very important legislation that would free industry from multiple taxation benefit to industry, consumers and the government.
He said “on 80% of issues there is a broad consensus… In a country like India, 100% consensus is impossible. With 70% – 80% consensus, we can move forward. We are trying to build consensus on the other (unresolved) issues. Issues are not so big that they can’t be resolved.” Modisaid none of the states are totally opposing GST, that they were opposing certain issues in GST.
He observed that presently, there were so many taxes at the federal and state level. GSTwill integrate all taxes of the central government and all taxes of the state government into one tax. Most of the smaller taxes will be subsumed through GST. Instead of multiple levies will be only a single levy at the central and state level, he added.
“GST will also remove the cascading – tax on tax – effect from the value chain,” said Modi.
“As of today, the national market is fragmented and each state having its own taxation laws. States are suffering of the taxation front… Through GST, the government wants to create a national market. The entire country will become a single market,” he added.
Speaking of the benefits of GST, he said “through GST, the burden of taxes will be reduced, compliance will be easier, and Indian products will become more competitive in the international market.” Modireferred to the European Union’s Eurozone bloc and wondered “if 27 countries have formed a single market, why can’t India do the same?”
Referring to some of the issues that are presently associated with implementation of GST, he said states fear GSTwill affect their fiscal autonomy, as they would have to consult the centre if they want to increase taxes. They also fear legislative supervision.
“States are worried about the financial compensation, as some states will incur heavy losses once central sales taxes and cascading is removed. Hence, the states want a concrete assurance from the central government that for the first five years of GSTimplementation the central government will compensate 100% of the losses. States also want fiscal autonomy to raise revenue when required,” he said.
Modisaid the central GSTAct would be a model act for the states to follow. He also said there was a need for a common exception list to be created before implementation of GST. Robust IT infrastructure also needs to be in place first, he added.
“Prime Minister Manmohan Singhhas said that GSTwould be implemented from 2014-15 irrespective of the party ruling at the centre… Tax reforms are not issues which can fetch votes were political party. GSThas nothing to do with party ideology,” he noted.