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GST committee to visit States to address their concerns

Background:

  • The Goods and Product Tax Bill or GST Bill, officially known as The Constitution (122nd Amendment) Bill, 2014, would be a Value added Tax (VAT) to be implemented from April 2016. GST is proposed to be a comprehensive direct tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments
  • The most prominent hurdle in introducing this new tax structure has been the ongoing struggle between the states and the centre on the loss of revenue.

Now, the news:

  • The Select Committee of Rajya Sabha on Goods and Services Tax (GST) will go on a four-day tour to Chennai and Kolkata to gather the views of State governments and experts in the region.
  • The effort is to reach out to States and Union territories to address their concerns.
  • The States had demanded that full GST compensation be paid at least for a period of five years through an independent mechanism, which should be built in the Constitution. The Centre had agreed to full compensation for three years, 75 per cent compensation in the fourth year and 50 per cent in the fifth year.
  • States have demanded 100 per cent of the GST compensation should be paid by the Centre for at least five years.
  • State have also raised concerns on issues, such as the Centre’s share in inter-state trade of Goods and Services Tax (IGST), entry tax, additional tax on tobacco and tobacco products among other issues.

Points to ponder:

  • Why does India need the GST?:The GST is being introduced not only to get rid of the current patchwork of indirect taxes that are partial and suffer from infirmities, mainly exemptions and multiple rates, but also to improve tax compliances.The spread of GST in different countries has been one of the most important developments in taxation over the last six decades.Owing to its capacity to raise revenue in the most transparent and neutral manner, more than 150 countries have adopted the GST.With the increase of international trade in services, the GST has become a preferred global standard.
  • The proposed tax system will subsume a variety of central and state levies such as Central Excise Duty, Service Tax and VAT, thereby simplifying the complicated tax structure and reducing compliance costs.