Break the deadlock
The two-day meeting of the GST council that ended on Wednesday was the eighth meeting of the GST council over the past three months. Several challenges have been overcome, while a few more issues are now required to be ironed out. While the date of April 1 announced earlier looks difficult, it is now expected that GST will kick in from July.
The present system of indirect taxes, comprising excise duty, service tax, value added tax (VAT), luxury tax, entry tax and the like, is plagued with multiple taxable events, cascading of taxes, several authorities, different compliances and absence of seamless credits. GST was conceived to overcome these issues and to bring in a world-class system.
The movement to GST would enable a seamless value chain for manufacturers and service providers, enabling them to offset all their input taxes, while paying only for the value addition at their end. While originally, the intention was to have a single rate of GST applicable to all goods and services, recent developments indicate that there will be a multi-rate GST system with at least four rates of 5, 12, 18 and 24 per cent. These would further be split into the central and state components, which have been termed as CGST and SGST.
The bone of contention now seems to be the difficult issue of dual control. At a broad level, this issue involves deciding on the tax authority (Centre or state) who would control certain categories of assesses. There has been no consensus on this issue in the previous meetings of the GST council either. But it is important to break the deadlock to pave the way for the next steps required to make GST a reality in India.
(The author is senior director, Deloitte in India)