Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 16-9-2011 Last Replied Date:- 30-12-1899 – The proposed GST Scheme has created a sense of fear among states that they will lose their autonomy over levy of taxes. Presently, states enjoy total autonomy atleast in respect of state taxes. It is upto state governments to decide – what to levy, type of levy, rate of tax and how to tax. Some state governments have expressed deep concerns that the introduction of GST regime will affect their fiscal autonomy. The reason behind this apprehension is that the design of GST is based upon a common base and an uniform rate across states. Also, after the implementation of GST, states would not have any power to make any unilateral changes. The Task Force on Goods and Services has defined the full autonomy in the exercise of taxation powers. It would mean that the centre or state, as the case may be: a) Retain the power to enact the tax; b) Enjoy the risks and rewards of ownership of the tax
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ue loss to the states. But the states are making it a political issue. Some states in their recent budget presentations have complicated the indirect tax regime by adding layers to tax slabs and raised taxes with an eye on enhancing the extent of compensation. So, the compensation has become a matter of grand bargain between centre and the states. Generally state governments use their fiscal policy as an instrument for the purpose of social welfare and sometimes for consolidating their vote bank. In fact, some of the state governments want to use the tool of taxation for maintenance of their vote bank. As per the recommendation of the Task Force, the present Empowered committee of state Finance Ministers may, upon the introduction of GST, be transformed into a permanent constitutional body known as the Council of Finance Ministers. This council shall comprise of the Union Finance Ministers and all State Finance Ministers. The Union FM would be the chairman of this council. The council
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the Indian economy and common man in the long run. Hence, both the centre and the states will have to show endurance upto some extent for better tomorrow. With the inclusion of the tax on services as well as tax on manufacture, the tax base of the state governments will increase significantly, whereas the taxbase of the centre on the other hand will increase only to the extent of tax on sales. Certainly, the widen taxbase would ensure more revenue for the states. Hence it is not right to say that the centre will be benefited more. State governments can achieve their objective of social and economic welfare through increased revenue and support inform of compensation by the centre. They shouldn t politicize this issue. Conclusion: The expected harmonious levy in GST regime across the states would lead to the unification of Indian market as the inter-state trade barriers would be removed. The uniform rate of tax, subsuming of major central and state taxes in GST, full set-off mechanism a
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