India: Road to VAT and GST Reform. Parthasarathi Shome * Director & Chief Executive Indian Council for Research on International Economic Relations (ICRIER). Indian Merchants’ Chamber 2 nd June, 2012 Taj Lands End, Mumbai.
India: Road to VAT and GST Reform
Director & Chief Executive
Indian Council for Research on International Economic Relations (ICRIER)
Indian Merchants’ Chamber
2nd June, 2012
Taj Lands End, Mumbai.
* All opinions expressed within this presentation are those of the author and should not be attributed to any other individual, institution or government unless otherwise stated.
Two independent debit-credit channels—centre and state—for the GST are proposed: CGST and SGST. Each stream will cover all goods and services.
The tax rate(s) on goods and services are to be decided. Not having the same tax rates for goods and services would be a major lacuna since classification problems would soar—in contrast to an ideal GST.
The GST base would exclude petroleum products and alcoholic beverages, a major lacuna in contrast to global GST systems.
CST will be abolished and GST on interstate trade will be monitored with a clearing house based in the banking system—though IT support is awaited. Revenue loss of states from CST abolition will be compensated by the centre.
A VAT Council chaired by the central finance minister with states having a supporting role will decide changes in GST structure, challenging federalism principles at one extreme.
Decisions will be by consensus. This is a lacuna since, at another extreme, the slightest opposition would stall progressive change.