A pragmatic approach by Hindu Editorial

Comments by people

Finance Minister Pranab Mukherjee's latest proposals on the Goods and Services Tax (GST) might not quite meet the standards set by the Centre itself six months ago. At that time, a strong case was made out for a single tax rate over a wide base, with very few exemptions and a relatively low tax threshold. However, with a view to reaching a consensus with the States and bringing all of them on board, Mr. Mukherjee has adopted a pragmatic approach. The idea clearly is to embark on this important tax reform even if, in the first instance, it meant moving farther away from the ideal than earlier envisaged. The new proposals reflect the recommendations of the Empowered Committee of State Finance Ministers in its first discussion paper last November. There will be a dual structure: a Central GST and a State GST. However, over a three-year period, the two separate rates will converge in stages into a single GST. The Finance Minister has now proposed three separate rates: 20 per cent for normal goods, 12 per cent for merit goods and 16 per cent for services. The Centre has rejected the States' plea to set a high exemption threshold of Rs.1.5 crore for goods, preferring to have a much lower and uniform exemption limit of Rs.10 lakh for both goods and services.

To assuage the States' concerns over loss of financial autonomy, it is proposed to leave out petro products and electricity from the ambit of the GST. That would provide the States autonomy to levy taxes on these high-yielding items. Besides, the Finance Minister has promised to compensate the States for possible revenue losses on account of the introduction of GST. Even after all the flexibility shown by the Centre on critical issues raised by the States, it is still not clear whether the deadline of April 1, 2011, for introducing this tax will be met. There is very little perceptible movement in respect of almost all the legal and administrative steps that need to be taken before the GST could be put in place. An up-to-date technology platform is a vital prerequisite. There have so far been few concerted attempts at educating the public on the new tax. There ought to be a greater sense of urgency than what has been in evidence so far in taking the necessary legal steps — for instance, getting the Constitution amended to enable the States to levy a service tax and the Centre to tax goods beyond the factory gate. The existing VAT laws and also some others like the Central Excise Act, 1944 and the Finance Act, 1994 have to be repealed or amended. In the circumstances, even the new time frame for the GST seems unrealistic.



Comments:

Instead of a difficult GST system, we could go for a simple taxation system of taxing at manufacturing level. Once the goods leave factory, it should be free to go anywhere in the country without restriction. This will release crores of man hour which will be lost in complying with GST both in trade and commerce by crores of GST payers.

Why always go for an imported version of taxation, when we can draw inspiration from our Vedas as to how taxes should be imposed.

Ram Deva Baba is proposing simple taxation. Tax at banking transaction level at a minimum rate like 0.25%. The collection will be easy and all people will use their time for productive purposes.

But the bureaucracy always enjoys whipping the citizens.

from: s k sarda
Posted on: Jul 26, 2010 at 05:43 IST


Once GST was promised as only One tax. But now FM agrees for Central and State GST. It is just like State Sales Tax and Central Sales Tax.

The stakeholders have never been consulted, only the top people of Indian Industry. These leaders have staffs,advocates,CAs to get their job done. They rarely know the problems that a small shopkeeper or a small industries face. His income is low and second no lawyer/CAs like to help them for a small fees.

So the ultimate sufferer is the small shopkeeper/small industrialsist or small service providers.

from: s k sarda
Posted on: Jul 26, 2010 at 08:37 IST

The brouhaha over G.S.T. is not of much relief to the common man. Reeling under 20 p.c. food inflation and the concomitant pressure on his meagre resources, he hardly cares about the modalities of the proposed distribution of tax resources between the Centre and the states. With services now accounting for a major portion of the G.D.P, the proposed rate of 16 p.c. is going to make him even less interested in the verbal gyrations of our economists.

Vinod Pandey

from: Vinod Pandey
Posted on: Jul 26, 2010 at 09:20 IST

It's really good to see that F.M. is concerned for increasing or generating the revenue which is ultimately being used for the well-being of citizen. But this would definitely hike the price of goods and existing VAT with this tax would become a bane for citizens. Why govt.is not thinking for the common man, how people below poverty line is struggling for food?

from: chandan
Posted on: Jul 26, 2010 at 09:24 IST