The unanimous passage of the Goods and Services Tax (GST) Bill in the Goa Legislative Assembly is one of those rare examples of government and opposition unity. It doesn’t happen often, especially not when such a major legislation is required to be passed.
The unanimous passage of the Goods and Services Tax (GST) Bill in the Goa Legislative Assembly is one of those rare examples of government and opposition unity. It doesn’t happen often, especially not when such a major legislation is required to be passed. While Congress attempted to take credit for the bill, claiming it was an initiative of the then UPA government led by Manmohan Singh and was opposed by the NDA, BJP refuted that saying that GST was the idea of A B Vajpayee, but the bill was brought in by UPA, though it failed to see it through. But as the two parties wrestle verbally to take credit for the historic legislation, the GST regime that will bring about a lot of changes needs more cooperation if it is to become a success in the State.
GST is perhaps the biggest reform in the country’s indirect tax structure since the opening up of the economy in the 1990s. With a July 2017 rollout date, and the Constitution Amendment Bill having been passed and State Assemblies rushing through with the required State legislations, the tax finally looks like it is going to be a reality, as a broad concensus has emerged among political parties.
The GST rollout is scheduled for July 2017, and has already been delayed by three months from the original date of implementation of April 2017. It will bring an end to a large number of Central and State taxes. Among the Central taxes will GST will replace are varied excise duties including Central Excise Duty, Special Additional Duty of Customs (SAD), Service Tax, Cess and surcharges related to supply of goods or services. The State taxes that will be subsumed by GST include, State VAT, Purchase Tax, Luxury Tax, Entry Tax (all forms), Entertainment Tax, taxes on advertisements, taxes on lotteries, State cess and surcharges. Petroleum products, however, have been excluded from the GST.
GST will play a role in reducing transactions in the grey market as it will disincentivise tax evasion, and bring in every item into the tax bracket. Traders will be forced to pay taxes on their sales, as otherwise they will not get credit for taxes on their purchases. It will be harder to hide transactions as they will be buying from traders who have already paid taxes on goods. For the consumers, it will mean lower tax rates. While the current system followed is a simple formula of more taxes on fewer goods, GST will change this to less tax on more goods.
There are fears that this could lead to a drop in the State revenue, and opposition MLAs raised this during the debate on the bill in the Assembly, leading to Chief Minister Manohar Parrikar reassuring that this would be a ‘boon’ for a tourist State like Goa, and that the uniform tax regime would bring in additional revenue to the tune of Rs 600-1000 crore to the State exchequer in the first year of GST itself.
GST could actually work out to be a boon to Goa as the State is a consumer rather than a manufacturing State, and the tax regime is expected to help increase revenues of consuming states. Earlier, manufacturing states charged tax but GST will be a consumption-oriented tax, where the destination state of any product consumed will get the advantage. The tax is actually a way to create revenue collection parity between the developed states and the economically ailing states.
However, there are many challenges before the State government too as it gets ready to implement the GST, especially with the staff, who will have to understand the new tax regime. For them the training sessions that the government is planning would be welcome news.