PROPOSED CGST MODEL
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 13-1-2016
There are three prime models of GST which have been decided to be implemented in India, viz,
* GST at Central (Union) Government level only
* GST at State Government level only
* GST at both, Union and State Government Leve
Canada has GST at Union level extending to all goods and services covering all stages of value addition. In addition, there is tax at province (State) level in different forms which include VAT, Retail Sales tax and so on. European Union (EU) Nations (each one is independent Nation but, part of a Union and have agreed to adopt common principles for taxation of goods and services) have adopted “classic” VAT.
In the Indian context, Constitution of India specifically reserves the power to impose tax on specific activities to specific level of Government, e.g., tax on import of goods can be imposed by Union Government only whereas tax on sale of goods inv
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enue sharing arrangements among them. The tax could be controlled and administered by the Central Government. There are several models for such a tax. Australia is the most recent example of a National GST, where it is levied and collected by the Centre, but the proceeds are allocated entirely to the States.
In the case of a Central GST (where all goods and services are taxed by the Central government only), the Centre will collect most of the country's total tax revenue, leaving very little for the sub-national Governments. As against this, the present proposal is to have a dual GST.
A single national VAT has great appeal from the perspective of establishment and promotion of a common market in India. However, the States may worry about the loss of control over the tax design and rates. Indeed, some control over tax rates is a critical issue in achieving accountable sub-national governance and hard budget constraints. The States may also be apprehensive that the revenue sharing arra
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* Two Governments will combine their various levies into single GST.
* Proceeds to be shared between Centre and States .
Advantages
* If levied on a comprehensive base at a single rate, it would clear the system of virtually all economic distortions and classification disputes.
* Replacing 36 taxing Statutes (of the Centre and 35 States and Union Territories) with only one would lead to a substantial reduction in compliance costs and free up resources for other more productive pursuits.
* It would make common market for India a reality. Goods and services would move freely within India with no check-posts, internal-tax frontiers or other barriers to trade.
Disadvantages
* Near impossibility of achieving the structure – It will require drastic modification to the Constitution of India.
* It might upset the present concept of fiscal federalism, which is the cornerstone of Indian polity.
* Entire infrastructure developed for taxation at both levels will have to undergo h
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