Goods and Services Tax (GST) is a part of the proposed tax reforms that center round evolving an efficient and harmonized consumption tax system in the country. Presently, there are parallel systems of indirect taxation at the central and state levels. Each of the systems needs to be reformed to eventually harmonize them.
In the Union Budget for the year 2006-2007, Finance Minister proposed
that India should move towards national level Goods and Services Tax
that should be shared between the Centre and the States. He proposed to
set April 1, 2010 as the date for introducing GST. World over, goods and
services attract the same rate of tax. That is the foundation of a GST.
The first step towards introducing GST is to progressively converge the
service tax rate and the CENVAT rate.
The goods and service tax (GST) is proposed to be a comprehensive
indirect tax levy on manufacture, sale and consumption of goods as well
as services at a national level. Integration of goods and services
taxation would give India a world class tax system and improve tax
collections. It would end the long standing distortions of differential
treatments of manufacturing and service sector. The introduction of
goods and services tax will lead to the abolition of taxes such as
octroi, Central sales tax, State level sales tax, entry tax, stamp duty,
telecom licence fees, turnover tax, tax on consumption or sale of
electricity, taxes on transportation of goods and services, and
eliminate the cascading effects of multiple layers of taxation. GST will
facilitate seamless credit across the entire supply chain and across all
states under a common tax base.
Roadmap to GST
As we have parallel systems of indirect taxation at the central and
state levels, each of the systems needs to be reformed to eventually
harmonise them. The central excise duty should be converted into a full
fledged manufacturing stage VAT on goods and services and the states
sales tax systems should be transformed into a retail stage destination
based VAT, before the two are integrated. At the central level,
beginning has been made by converging widely varying tax rates and
extending input tax credit to convert excise duties into a CENVAT