Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 23-10-2011 Last Replied Date:- 30-12-1899 – The actual challenge before the Finance Minister is not of drafting a model GST but of its proper implementation and smooth transition from the prevailing system. The challenges which the Government has to face in introducing GST are as follows: * Rapid increase in Assesses: The dual GST model will widen the tax net by taxing every economic supply in the distribution network. This will lead to rapid increase in assesses. It will require some of the businesses to restructure their distribution network to reduce additional tax burden on the consumer with a view to be price competitive. Though it will generate revenue in a neutral and transparent way, the Government will have to ensure that the ultimate consumer is not burdened with tax beyond his capacity. * Place of Supply: One of the main challenge in introducing in GST is defining the place of supply in respect of certain services a
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from bringing about any change in this structure. In order to enable the Centre and the State Governments to levy GST, the Constitution of India requires amendment to provide for powers to levy and collect GST both by the Union and the States. However, in a landmark decision, the UPA Government has resolved to amend the Constitution to enable states to have the same powers as the Centre in administering the proposed Goods and Services Tax (GST). For the purpose, a new Fourth List is proposed to be created in the Seventh schedule of the Constitution. The Fourth List visualises a governing council headed by Union Finance Ministry and comprising state finance ministers as its members. The council will have overriding powers on issue of indirect taxes. * Improvement in Banking System: In case of destination based principle of taxation, the recipient State will have to levy the tax as per the law of the dispatching State. This is bound to create problems if there is no uniform law and rate
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st track. IT infrastructure will play a huge role in interstate GST. IGST will be collected and passed on the states. It will have to be transferred electronically . * Effective Credit Mechanism: The success of dual GST model will depend on effective credit mechanism to avoid cascading effect of multi-stage taxation in the supply chain. The credit mechanism is the lifeline of GST. As far as Central GST is concerned, there is no difficulty in giving credit of Central GST anywhere in India as is evidenced by success of the present CENVAT scheme. But, in case of State GST presently there are issues in giving credit in relation to inter-State transactions. The challenges posed by GST are no different from what other countries have faced while implementing major tax reforms. Despite the various impediments to the proposed transition, once implemented GST is likely to usher in a more taxpayer friendly regime that could help make various business decisions 'tax neutral' . Until the ti
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