Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
mains Test Series 2018
Q. Hurdles in implementing GST: With assent of President GST become act, but there are many hurdles in its implementation. Outline those hurdles and issues.
Sep 16, 2016 Related to : GS Paper-3

Ans :

Goods and Service Tax (GST)-

GST is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India. It replaced the taxes levied by the central and state governments.

GST Act-

In the last Parliament session both the houses of parliament has passed GST bill. Then the same bill was ratified by 17 state governments. Recently President of India gave his assent Constitution Amendment Bill on Goods and Services Tax (GST), with this GST bill becomes act. It will come into effect from 1st April 2017.

Hurdles in implementing act-

  • Setting up a GST Council, as envisaged in the Constitution Amendment.
  • Fixing the rates of tax under umbrella of GST.
  • Deciding the precise nature of the Central GST Act, the Integrated GST Act and the State GST Act.
  • Figuring out how to settle disputes and how to prevent taxpayers having to interact with multiple levels of the government in order to comply with the tax.

Issues-

  • Though GST become act, but finalising the central GST law and rates is not a easy task. States with industrial base are still fighting for their share from the manufacturing that takes place in their territory.
  • While the 1% tax on interstate sales has sensibly been dropped, but some states are lobbying to retain that tax on consignment transfers across state boundaries.
  • Any managerial decision in a multi-state company would be deemed to be a business service supplied across from the state where the headquarters are located to all other states with branch offices. Giving it a value, taxing it and claiming input credits would be very difficult to compliance.
  • Another issue is a cap on the combined GST rates of the Centre and the states. As centre cannot legislate on subjects that belong to the states, and the states cannot legislate on subjects that are the Centre’s. Hence if the central law attempts to set a cap, it would impinge on state autonomy and states will definitely oppose any such moves.
  • Another issue is dispute resolution. Constitution allows parliament to set up a body to regulate interstate commerce and endow it with the powers it deems necessary. To set up such body centre needs to take states on board.

Conclusion-

Passing of GST is most significant step of in the Indian economic arena, as it compressively changes the Indian indirect tax system. Though it has many pros, but its implementation comes with many hurdles. Hence to implement it effectively centre and all state governments must cooperate each other in the national interest and must resolve issues that comes in the way of its implementation.


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.