Goods & Services Tax aims at simplifying the taxation structure by replacing various indirect taxes such as the Octroi tax on the goods brought into a district and existent only in Maharashtra currently , Central Sales Tax (CST) tax levied on the sales and purchase in the course of interstate trade and commerce , State level Sales Taxes, Service Tax-for the service provided by the service provider including telephone services, hotel services etcetera, Value Added Tax (VAT), Excise Duty- tax paid for the manufacture of goods.
The recent earlier tax reform was the introduction of VAT in 2005 which was largely based on the blueprint of the Bagchi Report. The report mentioned that VAT was a feasible solution to domestic trade tax regime in multi government framework. Embarking on its success the Government set upon introducing the Dual GST regime CGST and SGST alluded to in the report as the perfect solution.
GST is expected to help build a transparent and corruption-free tax administration because it will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets). The impact on the economy and for the Corporates is that there will be atleast 2 percent increase in the GDP. Some state governments are against it because of the worry of loss of revenue.
Finance Minister Pranab Mukherjee while presenting the Budget on July 6, 2009, said that GST would come into effect from April 2010. Although the minister stated that a compensation would be provided, the opposition worried that it would provide too much power to the federal government and a loss in their revenue. Hence a consensus could not be reached because a two thirds majority is required in both the houses of the parliament for introducing the bill.
Finance Minister P Chidambaram set aside Rs.9000 crore in his budget for the first instalment of the balance of CST. Although did not mention a timeframe for implementing GST in his Budget speech of 2013. There are hopes that the GST regime will be introduced by April 2014. The GST panel head, Sushil Modi has stated that the centre and states have agreed over the 80% of the issues regarding the GST and that the compensation in budget has provided a conducive atmosphere for its implementation.
Despite the on goings of the Empowered committee and the GST panel in implementing it and the various perks of GST, it is likely that this move could be a political gimmick by the ruling party ahead of its 2014 elections similar to the Cash transfer move it pulled out. If the results of the upcoming elections seem favourable to the ruling party, there are hopes of its implementation or it could go to the hands of the major opposition and we may not be able to judge its fate considering its stand on major economic reforms including the FDI in retail and others.