GST REGIME: BASICS OF STATE GST (SGST) – Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 8-1-2016 – In State GST, the States alone can levy GST and the Centre withdraws from the field of GST or VAT completely. It can be a desirable option given the mismatch in resources and responsibilities of the States. In this case, the State GST will work as the redistributing mechanism. The loss to the Centre from vacating this tax field could be offset by a suitable compensating reduction in fiscal transfers to the States. This would significantly enhance the revenue capacity of the States and reduce their dependence on the Centre. The USA is the most notable example of such arrangements, where the general sales taxes are relegated t
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nd reduces their dependence on the Centre. Disadvantages It would seriously impair the Centre s revenues. The reduction in fiscal transfers to the States would offset this loss, but still the Centre would want to have access to this revenue source for future needs. Major amendments to the Constitution of India will be required. The option may not be revenue neutral for individual States. The incremental revenues from the transfer of the Centre s tax collection would benefit the higher-income States, while a reduction in fiscal transfers would impact disproportionately the lower-income States. Businesses will have to comply with tax laws of each State – which will definitely lack uniformity and harmony. At the same time, decision making will
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