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Working Paper No.1/2009-DeA

Working Paper No.1/2009-DeA

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 Working Paper No.1/2009-DEA
GST Reforms and IntergovernmentalConsiderations in India
Satya PoddarEhtisham Ahmad
 
March 2009Department of Economic AffairsMinistry of FinanceGovernment of India
 
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GST Reforms and Intergovernmental Considerations in IndiaSatya Poddar and Ehtisham Ahmad*
Content
1. Introduction ................................................................................................................. 32. The Current Taxes and Their Shortcomings ............................................................... 4A. Taxation at Manufacturing Level............................................................................ 5B. Exclusion of Services.............................................................................................. 5C. Tax Cascading......................................................................................................... 6D. Complexity.............................................................................................................. 73. Objectives of Tax Reform........................................................................................... 9A. Basic Objectives...................................................................................................... 9B. Fiscal Autonomy and Harmonization ................................................................... 10C. Centre and State Taxation Powers ........................................................................ 134. Options for the Centre and State GSTs ..................................................................... 14A. Concurrent Dual GST ........................................................................................... 15B. National GST ........................................................................................................ 16C. State GSTs............................................................................................................. 18D. Non-concurrent Dual VATs.................................................................................. 195. Tax Base and Rates ................................................................................................... 20A. Tax Rates............................................................................................................... 20B. Food ...................................................................................................................... 23C. Land and Real Property......................................................................................... 25D. Non-profit Sector and Public Bodies .................................................................... 27E. Financial Services ................................................................................................. 306. Treatment of Inter-State and International Trade ..................................................... 32A. Place of Taxation, International Transactions....................................................... 32B. Place of Taxation, Inter-State Transactions .......................................................... 37C. Taxation of Imports by the States ......................................................................... 38D. Monitoring of Inter-State Supplies ....................................................................... 397. Harmonization of Laws and Administration............................................................. 408. Conclusion ................................................................................................................ 42*Ernst & Young (India) and London School of Economics respectively. The authors arethankful to Peter Jenkins, Rebecca Millar, Dr. Govinda Rao, and office of the Chief Economist, Government of India, for helpful comments and suggestions on an earlierdraft of the paper. The views are personal.

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