GST:TNewTDimensionsTinTIndianTTaxTSystem

Abstract

AnTattemptThasTbeenTmadeTunderTthisTpaperTtoTexamineTtheTmeaning,Tscope,TadvantagesTandTd
isadvantagesTofTtheTconceptTofT‘GoodsTandTServicesTTax’T(GST).TTheTneedTofTtaxTreformTinTIndia
nTtaxTsystemThadTrisenTfromTtimeTtoTtime.TVariousTtaxesThaveTbeenTimposedTonTgoodsTstarting
TfromTmanufacturingTtillTitTreachesTtoTconsumerT(especiallyTindirectTtax).TToTcurveTthisTmulti-
taxTsystemTtheTnewTconceptTofTGSTThasTbroughtTbyTtheTGovernment.TThisTpaperTalsoTstudiesTth
eTreformsTmadeTonTArticlesTofTtheTConstitutionTofTIndia.T

TaxTreformsTareTanTintegralTpartTofTtheTdevelopmentTprocessTofTanyTcountry.TOverTtheTyears,Ta
TnumberTofTtaxTreforms,TespeciallyTinTtheTIndirectTTaxTsystem,ThaveTbeenTinitiatedTbyTtheTgover
nmentTtoTmakeTIndiaTmoreTtax-
friendlyTasTwellTasTmakeTtheTtaxTsystemTlessTcomplicated.TToTfightTwithTblackTmoneyTtheTpresen
tTgovernmentTshownThisTcommitmentTthroughTtheTtaxTreformsTandTbyTdemonetizationTofTRs.T50
0TandT1000TfromT8TNovember,T2016TthroughoutTIndia.TAsTfarTasTtaxTreformsTinTtheTfieldTofTIndi
rectTTaxesTareTconcerned,TtheThistoricalTtaxTreformTbeingTundertakenTbyTtheTpresentTGovernmen
tTasTaTchallengeTisTtheTGoodsTandTServicesTTaxT(GST).

However,TitTisTnotTtheTfirstTtimeTinTtaxThistoryTthatTtaxTreformThasTbeenTmade.TInTtheTyearTofT
2005,TVATT(ValueTAddedTTax)TwasTimposedTinTplaceTofTtheTSalesTTax,TatTpresentTaTnumberTofTo
therTindirectTtaxesTareTleviedTinTadditionTtoTtheTVAT.TTheTmajorTtaxTreformsThadTbeenTmadeTin
T1991.TThisTleadsTtoTtheTproblemTofTcascadingTeffectTofTtaxes,TwherebyTanTitemTisTtaxedTsevera
lTtimesTfromTtheTproductionTtoTtheTfinalTretailTsalesTstage.TTheTGSTTisTtoTputTanTendTtoTtheTco
mplexTwebTofTmultifariousTindirectTtaxesTthatTexistTatTpresentTandTreplaceTthemTwithToneTindire
ctTtax:TTheTGST.TItTisTsimilarTtoTaTVATTandThence,TisTexpectedTtoTreduceTtheTproblemTofTcascad
ingTeffectTofTtaxes.

BeforeTIndia,T165TcountriesThaveTalsoTratifiedTtheTGSTTsystem.TAmongTtheseTcountriesTtheTGSTTr
atesTare:TNewzealand-15%;TAustralia-T10%;TFrance-19.6%;TGermany-19%;TSweden-25%;TDenmark-
25%;TPakistan-18%TandTCanadaTetc.

GenesisTofTTaxTReformTinTIndia:

TheTpathTinTtheTtaxTreformTinTIndiaTisTnotTnew.TSinceTindependenceTIndia’sTdecisionTtoTbeTaTfe
derationTwithTaTunitaryTbiasTwasTcolouredTbyTitsTownTexperiences.TManyTwhoTwereTinvolvedTinT
theTproceedingsTofTtheTConstituentTAssemblyTasTwellTasTindependentTobserversThaveToftenTopine
dTthatTtheTAssemblyTwasTpossiblyTobsessivelyTfocusedTonTtheTneedTforTensuringTtheTunityTandTi
ntegrityTofTtheTnewTnation.TInTfact,TinToneTlengthyTdebate,TSyamanadanTSahaya,TMPTfromTBihar
TarguedT“inTtheTmatterTofTfinancialTadjustmentsTbetweenTProvincesTandTtheTCentre,TITthinkTthat
TtheTProvincesThaveTnotTbeenTtreatedTasTwellTasTtheyTshouldTbe.TInTfact,TIThaveTaTfeelingTthatT
inTthisTmatter,TtheTProvincesTareTworseToffTthatTinTtheTdaysTofTtheT1935TAct.TTheTresponsibilitie
sTofTtheTProvincesTtheirTcommitmentsTandTtheirTsphereTforTintroducingTameliorativeTmeasuresTfo
rTtheTpeopleTareTgreaterTthanTevenTthoseTofTtheTCentreTandTasTsuch,TtheyTshouldThaveTbeenTgi
venTsufficientTscopeTinTtheTfieldTofTtaxation”.

Indeed,TPt.THridayanathTKunzru,TMPTfromTtheTUnitedTProvincesTplacedTtheTunitaryTdebateTinTfoc
usTinTtheTsameTdebateTarguing:T“theTfinancialTandTadministrativeTstabilityTofTtheTProvincesTdepe
ndsTtoTnoTsmallTextentTonTtheTpositionTofTtheTCentre.TItTwouldTbeTshortTsightedTofTtheTProvinc
esTtoTdemandTaTlargeTshareTfromTtheTCentre,TregardlessTofTtheTeffectTthatTtheirTclaimsTwouldTh
aveTonTtheTpositionTofTtheTCentralTGovernment”.

InTtheTearlyTyears,TwithTmostTstatesTrunTbyTCongressTMinistriesTinTsyncTwithTtheTUnionTGovern
mentTledTbyTPanditTJawaharlalTNehruTneverTsoughtTtoTquestionTthisTarrangement.TFromTtheT196
0’sTwhenTalternateTGovernmentsTemergedTinTStates,TthereThaveTbeenTchallengesTwhichTsoughtTg
reaterTpowersTforTtheTfederalTunits.

InT2005,TVATT(ValueTAddedTTax)TwasTintroducedTinTtheTtaxTsystemTinTwhichTsaleTtaxThasTbeenTs
ubsumedTintoTVAT.TButTitTimposesTlengthyTprocessTofTtaxTintoTgood’sTstartsTfromTmanufacturing
TtoTproductionTandTendedTwhenTitTreachesTuptoTconsumer.

TheTGoodsTandTServicesTTaxT(GST)TisTnotTaTnewTconcept.TFranceTwasTtheTfirstTcountryTtoTimple
mentTGSTTinT1954,TfollowedTbyTGermanyTinT1968TandTtheTUnitedTKingdomTinT1973.TInTCanada,T
theTGSTTwasTintroducedTinT1991.TSimilarly,TinTIndiaTtheTimplementationTofTGSTTwasTstartedTsixte
enTyearsTbackTduringTAtalTBihariTVajpayee’sTGovernment.TAgain,TinT2007,TP.TChidambaramTwasTa
lsoTsuggestedTtoTimplementTGSTTtillT2010,TbutTwasTnotTimposedTdueTtoTpoliticalTconundrum.TFin
ally,TduringTBJP’sTGovernmentTtheTConstitutionT(122ndTAmendment)TBillTwasTfirstTpassedTbyTtheT
LokTSabhaTinTMayT2015,TthenTtakenTupTagainTbyTtheTLowerTHouseTtoTapproveTtheTchangesTmad
eTinTitTbyTtheTRajyaTSabha.TFinally,TRajyaTSabhaThasTpassedTitTbyT203/203TmemberTpresentTand
TvotingTinTfavourTofTGSTTonT3TAugust,T2016TandTinTLokTSabhaTonT8TAugust,T2016.TTheTGovern
mentThadTmovedTsixTofficialTamendments,TincludingTscrappingTofT1%TadditionalTtax,TtoTtheTbillT
whichTwasTapprovedTbyTtheTUpperTHouse.TTheTGSTTisTexpectedTtoTbeTaTlegislativeTmeasureTthat
TwillThelpTtransformTtheTeconomyTusheringTinTtransparencyTandTmostTofTall,TbringTtheTconceptT
ofT“oneTcountryToneTtax”TintoTfruition.TTheTtaxTrateTunderTtheTGSTTregimeTwillTbeTkeptTatT“min
imumTworkableTrate”TsoTthatTnoTStateTGovernmentTendsTupTannoyingTitsTpeopleTwithTaThigherT
taxTrate.TTheTfinalTrateTisTtoTbeTdecidedTbyTtheTGSTTCouncil.TTheTBillTwillTnowThaveTtoTbeTratifi
edTbyTatTleastT16TofTtheT29TStateTAssembliesTandT2TUnionTTerritories.TFortunately,TallTtheTState
sThaveTratifiedTtheTBillTwithTmajority.TAssamTwasTtheTfirstTStateTwhoTratifyTtheTGSTTinTLegislativ
eTAssemblyTandTBiharTwasTtheTsecondTState.THimachalTPradeshTwasTtheT5thTStateTtoTratifyTGST
TonT22ndTAugust.

AsTfarTas,TGSTTratesTareTconcerned,TtheTratesThaveTbeenTfinalizedTwithTaTfour-
tierTstructureTofT5,T12,T18TandT28TpercentTwhileTbasicTconsumptionTitems,TsuchTasTfoodgrains,T
willTbeTtaxedTatTzeroTpercent.TTheTmainTobjectivesTofTtheTGSTTratesTareTtoTmaintainTrevenueTa
ndTtoTminimizeTtheTinflationaryTimpact.TTheTlowestTrateTofT5TpercentTwillTbeTforTitemsTofTmass
Tconsumption,TthereTwouldTbeTtwoTstandardTratesTofT12TandT18Tpercent.TTheThighestTtaxTslabTo
fT28TpercentTwillTbeTapplicableTtoTitemsTsuchTasTwhiteTgoodsT(electricalTgoodsTusedTdomestically
TsuchTasTrefrigeratorsTandTwashingTmachinesTwhichTareTcurrentlyTtaxedTatT30-
31%TincludingTexciseTdutyTandTstateTlevies).

GSTTandTtheTConstitutionTofTIndia:

IfTtheTConstitutionT(OneTHundredTandTTwenty-
SecondTAmendment)TBill,T2014ThasTbeenTassentedTbyTtheTPresidentTthenTitTwouldTbeTneededTto
TamendTtheTConstitution.TInTConstitutionTnotTonlyToneTArticleTwouldTamendTbutTaTbundleTofTArt
iclesTtoTbeTamended.TTheTfollowingTArticlesTwouldTamendTafterTTheTConstitutionT(OneTHundredT
andTTwenty-SecondTAmendment)TBill,T2014TbecomeTAct:

1.TAfterTArticleT246TofTtheTConstitution,TtheTfollowingTArticleTshallTbeTinserted,Tnamely:—

"246A.T(1)TNotwithstandingTanythingTcontainedTinTArticlesT246TandT254,TParliament,Tand,Tsubject
TtoTclauseT(2),TtheTLegislatureTofTeveryTState,ThaveTpowerTtoTmakeTlawsTwithTrespectTtoTgoodsT
andTservicesTtaxTimposedTbyTtheTUnionTorTbyTsuchTState.

(2)TParliamentThasTexclusiveTpowerTtoTmakeTlawsTwithTrespectTtoTgoodsTandTservicesTtaxTwhere
TtheTsupplyTofTgoods,TorTofTservices,TorTbothTtakesTplaceTinTtheTcourseTofTinter-
StateTtradeTorTcommerce.

Explanation.—
TheTprovisionsTofTthisTArticle,Tshall,TinTrespectTofTgoodsTandTservicesTtaxTreferredTtoTinTclauseT(
5),TofTArticleT279A,TtakeTeffectTfromTtheTdateTrecommendedTbyTtheTGoodsTandTServicesTTaxTCo
uncil.’’.

2.TInTArticleT248TofTtheTConstitution,TinTclauseT(1),TforTtheTwordT"Parliament",TtheTwords,Tfigure
sTandTletterT"SubjectTtoTArticleT246A,TParliament"TshallTbeTsubstituted.

3.TInTArticleT249TofTtheTConstitution,TinTclauseT(1),TafterTtheTwordsT"withTrespectTto",TtheTwords
,TfiguresTandTletterT"goodsTandTservicesTtaxTprovidedTunderTArticleT246ATor"TshallTbeTinserted.

4.TInTArticleT250TofTtheTConstitution,TinTclauseT(1),TafterTtheTwordsT"withTrespectTto",TtheTwords
,TfiguresTandTletterT"goodsTandTservicesTtaxTprovidedTunderTArticleT246ATor"TshallTbeTinserted.

5.TInTArticleT268TofTtheTConstitution,TinTclauseT(1),TtheTwordsT"andTsuchTdutiesTofTexciseTonTme
dicinalTandTtoiletTpreparations"TshallTbeTomitted.

6.TArticleT268ATofTtheTConstitution,TasTinsertedTbyTSectionT2TofTtheTConstitutionT(Eighty-
eighthTAmendment)TAct,T2003TshallTbeTomitted.

7.TInTArticleT269TofTtheTConstitution,TinTclauseT(1),TafterTtheTwordsT"consignmentTofTgoods",Tthe
Twords,TfiguresTandTletterT"exceptTasTprovidedTinTArticleT269A"TshallTbeTinserted.

8.TAfterTArticleT269TofTtheTConstitution,TtheTfollowingTarticleTshallTbeTinserted,Tnamely:—

‘‘269A.T(1)TGoodsTandTServicesTtaxTonTsuppliesTinTtheTcourseTofTinter-
StateTtradeTorTcommerceTshallTbeTleviedTandTcollectedTbyTtheTGovernmentTofTIndiaTandTsuchTta
xTshallTbeTapportionedTbetweenTtheTUnionTandTtheTStatesTinTtheTmannerTasTmayTbeTprovidedTb
yTParliamentTbyTlawTonTtheTrecommendationsTofTtheTGoodsTandTServicesTTaxTCouncil.

Explanation.—
ForTtheTpurposesTofTthisTclause,TsupplyTofTgoods,TorTofTservices,TorTbothTinTtheTcourseTofTimpor
tTintoTtheTterritoryTofTIndiaTshallTbeTdeemedTtoTbeTsupplyTofTgoods,TorTofTservices,TorTbothTinT
theTcourseTofTinter-StateTtradeTorTcommerce.

(2)TParliamentTmay,TbyTlaw,TformulateTtheTprinciplesTforTdeterminingTtheTplaceTofTsupply,TandTw
henTaTsupplyTofTgoods,TorTofTservices,TorTbothTtakesTplaceTinTtheTcourseTofTinter-
StateTtradeTorTcommerce.’’

9.TInTArticleT270TofTtheTConstitution,—

(i)TinTclauseT(1),TforTtheTwords,TfiguresTandTletterT"ArticlesT268,T268ATandTArticleT269",TtheTwor
ds,TfiguresTandTletterT"ArticlesT268,T269TandTArticleT269A"TshallTbeTsubstituted;

(ii)TafterTclauseT(1),TtheTfollowingTclauseTshallTbeTinserted,Tnamely:—

‘‘(1A)TTheTgoodsTandTservicesTtaxTleviedTandTcollectedTbyTtheTGovernmentTofTIndia,TexceptTtheT
taxTapportionedTwithTtheTStatesTunderTclauseT(1)TofTArticleT269A,TshallTalsoTbeTdistributedTbetw
eenTtheTUnionTandTtheTStatesTinTtheTmannerTprovidedTinTclauseT(2).’’

10.TInTArticleT271TofTtheTConstitution,TafterTtheTwordsT‘‘inTthoseTArticles’’,TtheTwords,TfiguresTan
dTletterT‘‘exceptTtheTgoodsTandTservicesTtaxTunderTArticleT246A,’’TshallTbeTinserted.

11.TAfterTArticleT279TofTtheTConstitution,TtheTfollowingTArticleTshallTbeTinserted,Tnamely:—

‘‘279A.T(1)TTheTPresidentTshall,TwithinTsixtyTdaysTfromTtheTdateTofTcommencementTofTtheTConsti
tutionT(OneTHundredTandTTwenty-
SecondTAmendment)TAct,T2014,TbyTorder,TconstituteTaTCouncilTtoTbeTcalledTtheTGoodsTandTServi
cesTTaxTCouncil.

(2)TTheTGoodsTandTServicesTTaxTCouncilTshallTconsistTofTtheTfollowingTmembers,Tnamely:—
(a)TtheTUnionTFinanceTMinister........................TChairperson;

(b)TtheTUnionTMinisterTofTStateTinTchargeTofTRevenueTorTFinance.................TMember;

(c)TtheTMinisterTinTchargeTofTFinanceTorTTaxationTorTanyTotherTMinisterTnominatedTbyTeachTStat
eTGovernment....................Members.

(3)TTheTMembersTofTtheTGoodsTandTServicesTTaxTCouncilTreferredTtoTinTsub-
clauseT(c)TofTclauseT(2)Tshall,TasTsoonTasTmayTbe,TchooseToneTamongstTthemselvesTtoTbeTtheTVi
ce-ChairpersonTofTtheTCouncilTforTsuchTperiodTasTtheyTmayTdecide.

(4)TTheTGoodsTandTServicesTTaxTCouncilTshallTmakeTrecommendationsTtoTtheTUnionTandTtheTStat
esTon—

(a)TtheTtaxes,TcessesTandTsurchargesTleviedTbyTtheTUnion,TtheTStatesTandTtheTlocalTbodiesTwhich
TmayTbeTsubsumedTinTtheTgoodsTandTservicesTtax;

(b)TtheTgoodsTandTservicesTthatTmayTbeTsubjectedTto,TorTexemptedTfromTtheTgoodsTandTservices
Ttax;

(c)TmodelTGoodsTandTServicesTTaxTLaws,TprinciplesTofTlevy,TapportionmentTofTIntegratedTGoodsTa
ndTServicesTTaxTandTtheTprinciplesTthatTgovernTtheTplaceTofTsupply;

(d)TtheTthresholdTlimitTofTturnoverTbelowTwhichTgoodsTandTservicesTmayTbeTexemptedTfromTgoo
dsTandTservicesTtax;

(e)TtheTratesTincludingTfloorTratesTwithTbandsTofTgoodsTandTservicesTtax;
(f)TanyTspecialTrateTorTratesTforTaTspecifiedTperiod,TtoTraiseTadditionalTresourcesTduringTanyTnatu
ralTcalamityTorTdisaster;

(g)TspecialTprovisionTwithTrespectTtoTtheTStatesTofTArunachalTPradesh,TAssam,TJammuTandTKashm
ir,TManipur,TMeghalaya,TMizoram,TNagaland,TSikkim,TTripura,THimachalTPradeshTandTUttarakhand;
Tand

(h)TanyTotherTmatterTrelatingTtoTtheTgoodsTandTservicesTtax,TasTtheTCouncilTmayTdecide.

(5)TTheTGoodsTandTServicesTTaxTCouncilTshallTrecommendTtheTdateTonTwhichTtheTgoodsTandTser
vicesTtaxTbeTleviedTonTpetroleumTcrude,ThighTspeedTdiesel,TmotorTspiritT(commonlyTknownTasTpe
trol),TnaturalTgasTandTaviationTturbineTfuel.

(6)TWhileTdischargingTtheTfunctionsTconferredTbyTthisTArticle,TtheTGoodsTandTServicesTTaxTCounci
lTshallTbeTguidedTbyTtheTneedTforTaTharmonisedTstructureTofTgoodsTandTservicesTtaxTandTforTth
eTdevelopmentTofTaTharmonisedTnationalTmarketTforTgoodsTandTservices.

(7)TOneThalfTofTtheTtotalTnumberTofTMembersTofTtheTGoodsTandTServicesTTaxTCouncilTshallTcons
tituteTtheTquorumTatTitsTmeetings.

(8)TTheTGoodsTandTServicesTTaxTCouncilTshallTdetermineTtheTprocedureTinTtheTperformanceTofTit
sTfunctions.

(9)TEveryTdecisionTofTtheTGoodsTandTServicesTTaxTCouncilTshallTbeTtakenTatTaTmeeting,TbyTaTmaj
orityTofTnotTlessTthanTthree-
fourthsTofTtheTweightedTvotesTofTtheTmembersTpresentTandTvoting,TinTaccordanceTwithTtheTfollo
wingTprinciples,Tnamely:—

(a)TtheTvoteTofTtheTCentralTGovernmentTshallThaveTaTweightageTofTone-
thirdTofTtheTtotalTvotesTcast,Tand
(b)TtheTvotesTofTallTtheTStateTGovernmentsTtakenTtogetherTshallThaveTaTweightageTofTtwo-
thirdsTofTtheTtotalTvotesTcast,TinTthatTmeeting.

(10)TNoTactTorTproceedingsTofTtheTGoodsTandTServicesTTaxTCouncilTshallTbeTinvalidTmerelyTbyTre
asonTof—

(a)TanyTvacancyTin,TorTanyTdefectTin,TtheTconstitutionTofTtheTCouncil;Tor

(b)TanyTdefectTinTtheTappointmentTofTaTpersonTasTaTmemberTofTtheTCouncil;Tor

(c)TanyTproceduralTirregularityTofTtheTCouncilTnotTaffectingTtheTmeritsTofTtheTcase.

(11)TTheTGoodsTandTServicesTTaxTCouncilTmayTdecideTaboutTtheTmodalitiesTtoTresolveTdisputesTa
risingToutTofTitsTrecommendation.”

InTArticleT286TofTtheTConstitution,—

(i)TinTclauseT(1),—

(A)TforTtheTwordsT"theTsaleTorTpurchaseTofTgoodsTwhereTsuchTsaleTorTpurchaseTtakesTplace",Tth
eTwordsT"theTsupplyTofTgoodsTorTofTservicesTorTboth,TwhereTsuchTsupplyTtakesTplace"TshallTbeTs
ubstituted;

(B)TinTsub-
clauseT(b),TforTtheTwordT“goods”,TatTbothTtheTplacesTwhereTitToccursTtheTwordsT“goodsTorTservi
cesTorTboth”TshallTbeTsubstituted;

(ii)TinTclauseT(2),TforTtheTwordsT"saleTorTpurchaseTofTgoodsTtakesTplace",TtheTwordsT"supplyTofT
goodsTorTofTservicesTorTboth"TshallTbeTsubstituted;

(iii)TclauseT(3)TshallTbeTomitted.
13.TInTArticleT366TofTtheTConstitution,—

(i)TafterTclauseT(12),TtheTfollowingTclauseTshallTbeTinserted,Tnamely:—

‘(12A)T“goodsTandTservicesTtax”TmeansTanyTtaxTonTsupplyTofTgoods,TorTservicesTorTbothTexceptT
taxesTonTtheTsupplyTofTtheTalcoholicTliquorTforThumanTconsumption;’;

(ii)TafterTclauseT(26),TtheTfollowingTclausesTshallTbeTinserted,Tnamely:—

‘(26A)T“Services”TmeansTanythingTotherTthanTgoods;

(26B)T“State”TwithTreferenceTtoTArticlesT246A,T268,T269,T269ATandTArticleT279ATincludesTaTUnio
nTterritoryTwithTLegislature’.

14.TInTArticleT368TofTtheTConstitution,TinTclauseT(2),TinTtheTproviso,TinTclauseT(a),TforTtheTwords
TandTfiguresT“ArticleT162TorTArticleT241”,TtheTwords,TfiguresTandTletterT“ArticleT162,TArticleT241T
orTArticleT279A”TshallTbeTsubstituted.

15.TInTtheTSixthTScheduleTtoTtheTConstitution,TinTparagraphT8,TinTsub-paragraphT(3),—

(i)TinTclauseT(c),TtheTwordT"and"ToccurringTatTtheTendTshallTbeTomitted;

(ii)TinTclauseT(d),TtheTwordT"and"TshallTbeTinsertedTatTtheTend;

(iii)TafterTclauseT(d),TtheTfollowingTclauseTshallTbeTinserted,Tnamely:—
"(e)TtaxesTonTentertainmentTandTamusements."

16.TInTtheTSeventhTScheduleTtoTtheTConstitution,—

(a)TinTListTIT—TUnionTList,—

(i)TforTentryT84,TtheTfollowingTentryTshallTbeTsubstituted,Tnamely:—

"84.TDutiesTofTexciseTonTtheTfollowingTgoodsTmanufacturedTorTproducedTinTIndia,Tnamely:—

(a)TpetroleumTcrude;

(b)ThighTspeedTdiesel;

(c)TmotorTspiritT(commonlyTknownTasTpetrol);

(d)TnaturalTgas;

(e)TaviationTturbineTfuel;Tand

(f)TtobaccoTandTtobaccoTproducts.";

(ii)TentriesT92TandT92CTshallTbeTomitted;

(b)TinTListTIIT—TStateTList,—
(i)TentryT52TshallTbeTomitted;

(ii)TforTentryT54,TtheTfollowingTentryTshallTbeTsubstituted,Tnamely:—

"54.TTaxesTonTtheTsaleTofTpetroleumTcrude,ThighTspeedTdiesel,TmotorTspiritT(commonlyTknownTa
sTpetrol),TnaturalTgas,TaviationTturbineTfuelTandTalcoholicTliquorTforThumanTconsumption,TbutTnot
TincludingTsaleTinTtheTcourseTofTinter-
StateTtradeTorTcommerceTorTsaleTinTtheTcourseTofTinternationalTtradeTorTcommerceTofTsuchTgoo
ds.";

(iii)TentryT55TshallTbeTomitted;

(iv)TforTentryT62,TtheTfollowingTentryTshallTbeTsubstituted,Tnamely:—

"62.TTaxesTonTentertainmentsTandTamusementsTtoTtheTextentTleviedTandTcollectedTbyTaTPanchay
atTorTaTMunicipalityTorTaTRegionalTCouncilTorTaTDistrictTCouncil."

MeaningTofTGST:

GSTTisTaTsimplifiedTtaxTstructureTappliedTonTbothTgoodsTandTservices.TItTisTaTvalue-
addedTtaxTleviedTatTallTpointsTinTtheTsupplyTchainTwithTcreditTallowedTforTanyTtaxTpaidTonTinput
TacquiredTforTuseTinTmakingTtheTsupply.TItTwouldTbeTapplicableTonTsupplyTofTgoodsTorTservicesT
asTagainstTtheTprevailingTsystemTofTtaxTonTtheTmanufactureTofTgoodsTorTonTsaleTofTgoodsTorTon
TprovisionTofTservices.TItTwouldTbeTaTdestinationTbasedTtaxTasTagainstTtheTexistingTsystemTofTori
ginTbasedTtax.

GSTTisTleviedTonTindirectTtaxesTonlyTandTnotTonTdirectTtaxes.TDirectTTaxesTareTleviedTonTIncome
s,TPropertyTandTWealthTwhereasTindirectTtaxesTincludeTCustomsTDuties,TExciseTDuties,TServiceTTa
x,TandTSalesTTax/TValueTAddedTTaxT(VAT).

InTorderTtoTmaintainTtheTfederalTstructure,TtheTnationTisTgoingTtoThaveTdualTGST,TCentralTGSTT(
CGST)TandTtheTStateTGSTT(SGST).TThisTmeansTthatTthereTwillTbeTcommonTtaxTbaseTforTbothTtheT
CentreTandTtheTStates.TThereTwillTalsoTbeTIntegratedTGSTT(IGST).TItTwouldTbeTleviedTonTinter-
StateTsupplyTofTgoodsTorTservices.TThisTwouldTbeTcollectedTbyTtheTCentreTsoTthatTtheTcreditTcha
inTisTnotTdisrupted.TImportTofTgoodsTorTservicesTwouldTbeTtreatedTasTinter-
StateTsuppliesTandTwouldTbeTsubjectTtoTIGSTTinTadditionTtoTtheTapplicableTcustomsTduties.

GSTTandTJustification:

Presently,TtheTCentralTGovernmentTleviesTtaxTonTmanufactureT(CentralTExciseTDuty),TprovisionTofT
servicesT(ServiceTTax),TinterstateTsaleTofTgoodsT(leviedTbyTtheTCentreTbutTcollectedTandTappropria
tedTbyTtheTStates)TandTstatesTlevyTtaxTonTretailTsalesT(VAT),TentryTofTgoodsTinTtheTStateT(EntryT
Tax),TLuxuryTTax,TPurchaseTTax,Tetc.TItTisTclearlyTdiscernibleTthatTthisTfracturedTmandateTofTtaxati
onTbetweenTtheTCentralTandTStateTGovernmentsTleavesTaTlotTofTgapsTinTtheTsupplyTchain.TThere
TisTcascadingTofTtaxesTasTtaxesTleviedTbyTCentralTGovernmentTareTnotTavailableTtoTsetToffTagains
tTtheTtaxesTbeingTleviedTbyTtheTStateTGovernments.TFurther,TtheTvarietyTofTVATTtaxTlawsTinTthe
TcountryTwithTdisparateTtaxTratesTandTdissimilarTtaxTpracticesTdividesTtheTcountryTintoTseparateT
economicTspheres.TCreationTofTtariffTandTnon-
tariffTbarriersTsuchTasTOctroi,TEntryTTax,TCheckTPostsTetc.ThinderTtheTfreeTflowTofTtradeTthrough
outTtheTcountry.TBesidesTthat,TtheTlargeTnumberTofTtaxesTcreatedThighTcomplianceTcostTforTtheT
taxpayersTinTtheTformTofTnumberTofTreturns,TpaymentsTetc.TInTfact,TitTisTsaidTthatTourTtaxTlawsT
haveTcreatedTaTsituationTwhereTbusinessTdecisionsTareTbasedTonTtaxTconsiderationsTratherTthanTl
ogicalTeconomicalTfactors.TAllTtheseTissuesTcreatedTaTneedTforToneTtaxTthatTwillTbeTableTtoTmitig
ateTnumberTofTtheseTproblemsTtoTaTlargeTextent.TTherefore,TallTtheTtaxesTareTproposedTtoTbeTs
ubsumedTinTsingleTtaxTcalledTtheTGoodsTandTServicesTTaxT(GST)TwhichTwillTbeTleviedTonTsupplyT
ofTgoodsTorTservicesTorTbothTatTeachTstageTofTsupplyTchainTstartingTfromTmanufactureTorTimport
TandTtillTtheTlastTretailTlevel.

MeritsTandTDemeritsTofTGST:

MeritsTofTGST:

TheTbenefitTofTGSTTisTnotTinToneTfieldTratherTitTisTbenefitedTtoTGovernment,TIndustryTandTIndivi
dualTetc.TTheTvariousTadvantagesTofTGSTTare:

1.TAdvantageTtoTtheTGovernment:

i)TGSTTwillThelpTtoTcreateTaTunifiedTcommonTnationalTmarketTforTIndia,TgivingTaTboostTtoTforeig
nTinvestmentTandT“MakeTinTIndia”Tcampaign.

ii)TItTwillTpreventTcascadingTofTtaxesTasTInputTTaxTCreditTwillTbeTavailableTacrossTgoodsTandTservi
cesTatTeveryTstageTofTsupply.
iii)TItTwillTharmonizeTtheTlaws,TproceduresTandTratesTofTtax.

iv)TItTwillTimproveTenvironmentTofTcomplianceTasTallTreturnsTtoTbeTfiledTonline,TinputTcreditsTtoT
beTverifiedTonline,TencouragingTmoreTpaperTtrailTofTtransactions.

v)TCommonTproceduresTforTregistrationTofTtaxpayers,TrefundTofTtaxes,TuniformTformatsTofTtaxTret
urn,TcommonTtaxTbase,TcommonTsystemTofTclassificationTofTgoodsTandTservicesTwillTlendTgreater
TcertaintyTtoTtheTtaxationTsystem.

vi)TGreaterTuseTofTITTwillTreduceThumanTinterfaceTbetweenTtheTtaxpayerTandTtheTtaxTadministrat
ion,TwhichTwillTgoTaTlongTwayTinTreducingTcorruption.

vii)TItTwillTboostTexportTandTmanufacturingTactivity,TgenerateTmoreTemploymentTandTthusTincreas
eTGDPTwithTgainfulTemploymentTleadingTtoTsubstantiveTeconomicTgrowth.

viii)TItTwillThelpTinTpovertyTeradicationTbyTgeneratingTmoreTemploymentTandTmoreTfinancialTreso
urces.

2.TAdvantagesTtoTBusinessTandTIndustry:

i)TATrobustTandTcomprehensiveTITTsystemTwouldTbeTtheTfoundationTofTtheTGSTTregimeTinTIndia.T
Therefore,TallTtaxTpayerTservicesTsuchTasTregistrations,Treturns,Tpayments,Tetc.TwouldTbeTavailabl
eTtoTtheTtaxpayersTonline,TwhichTwouldTmakeTcomplianceTeasyTandTtransparent.

ii)TGSTTwillTensureTthatTIndirectTTaxTratesTandTstructuresTareTcommonTacrossTtheTcountry,Tthere
byTincreasingTcertaintyTandTeaseTofTdoingTbusiness.TInTotherTwords,TGSTTwouldTmakeTdoingTbusi
nessTinTtheTcountryTtaxTneutral,TirrespectiveTofTtheTchoiceTofTplaceTofTdoingTbusiness.
iii)TATsystemTofTseamlessTtax-creditsTthroughoutTtheTvalue-
chain,TandTacrossTboundariesTofTStates,TwouldTensureTthatTthereTisTminimalTcascadingTofTtaxes.T
ThisTwouldTreduceThiddenTcostsTofTdoingTbusiness.

iv)TReductionTinTtransactionTcostsTofTdoingTbusinessTwouldTeventuallyTleadTtoTanTimprovedTcomp
etitivenessTforTtheTtradeTandTindustry.

3.TAdvantagesTtoTCommonTMan:

i)TAtTpresentTtheTConsumerTpayTserviceTtaxTandTVATTbothTonTeating.TUnderTGSTTregime,TitTwou
ldTbeTaTsingleTtaxTandTeatingTcouldTbeTcheaper.

ii)TTelevisionTcouldTgetTcheaper,TasTpartTofTtheT“MakeTinTIndia”Tinitiative,TtheTGSTTisTexpectedTt
oTbeTlower.

iii)TBuyingTbags,Tshoes,TelectronicsTgoodsTonlineTwillTbeTgettingTmoreTexpensiveTasTtheTe-
commerceTindustryTcomesTintoTaTtaxTnetTandTwillThaveTtoTpayTtaxTdeductedTatTsourceTforTevery
TpurchaseTfromTitsTsellers.TSoTe-
commerceTcompaniesTwhichTwillTseeTshrinkingTofTprofitTmarginsTandTincreaseTtaxTcomplianceTnet
TcouldTslashTdiscountsTandTfreebiesTthatTtheyToffer.

DemeritsTofTGST:

NoTdoughtTthereTareTlotsTofTbenefitsTbyTintroducingTGST,TbutTthereTareTalsoTsomeTdemeritsTofT
GST.TFirstly,TtheTServiceTTaxTinTIndiaTisTnowT15%TbutTtheTproposedTGSTTisTaboutT18-
20%.TAllTtheTservicesTwillTbeTCostlierTandTthisTisToneTofTtheTDisadvantagesTofTGSTTBillTonTComm
onTPerson.

Secondly,TsomeTEconomistTsaysTthatTCGSTT(CentralTGST),TSGSTT(StateTGST)TareTnothingTbutTnewT
namesTforTCentralTExcise/ServiceTTax,TVATTandTCST.

Thirdly,TsomeTEconomistTsaysTthatTGSTTinTIndiaTwouldTimpactTnegativelyTonTtheTrealTestateTmar
ket.TItTwouldTaddTupTtoT8TpercentTtoTtheTcostTofTnewThomesTandTreduceTdemandTbyTaboutT12
Tpercent.
Fourthly,TtheTamountTofTcompensationTforTStatesTunderTGSTTwillTnotTbeTfixedTwhichTcauseTaThu
eTandTcryTamongTtheTStates.

Lastly,TtheTGSTTwillTbeTnon-
applicableTtoTtheTtaxTonTpetroleumTproducts,Telectricity,TalcoholicTliquors,TandTstampTdutyTonTim
movableTproperty.TThus,TtheTconcernedTStateTcanTimposeTtaxesTonTtheseTitemsTtoTfulfillTtheirTre
venueTdeficitTcausedTdueTtoTGST.

Conclusion:

TheTpraxisTofTpolicyTshouldTbeTdesignedTafterTunderstandingTtheTneedTofTtheTeconomy,TinTtheTc
ontextTofTsocio-
economicTenvironmentTandTpublicTneeds.TIndianTmanufacturingTsectorTisTprimarilyTresource-
drivenTthanTtechnology-
drivenTandTtherefore,TtheTinputTcostTandTsubsequentTtaxesTonTitTmakeTtheTsectorTmoreTchalleng
ing.TTheTimplementationTofTGSTTwouldTgoTaTlongTwayTinTpromotingT“MakeTinTIndia”TandTwillTgi
veTmuchTreliefTtoTtheTmanufacturingTsectorTandTcountryTbyTgettingTridTofTcascadingTeffectsTofTS
alesTTaxes,TVATTetc.

ItTcanTbeTconcludedTthatTtheTrealTsuccessTofTGSTTliesTonTtheTimpactTonTgovernment,TBusinessTa
ndTindustryTandTcommonTman.TTheTessenceTofTGSTTisTthatTallTgoodsTandTservicesTbeTtaxedTatT
moderateTrate.T“OneTNation,TOneTTax”TprovesTtoTbeTaTgameTchangerTinTaTpositiveTwayTandTpro
vesTtoTbeTbeneficialTnotTonlyTtoTtheTcommonTman,TbutTtoTtheTcountryTasTaTwhole.TAsTandTwhe
nTaTnewTlawTisTimposed,TitTsurelyTleavesTitsTimpactTespeciallyTonTtheTcommonTman.

TheTGoodsTandTServicesTTaxTmayThaveToneTuniqueTconsequenceTthatTturningTIndia’sTConstitution
TfromTbeingTdescribedTasT“FederalTwithTaTUnitaryTBias”TtoTaT“ConstitutionTforTtheTUnionTwithTa
TFederalTBias”.T