The Goods and Services Tax was first introduced during the UPA II government in 2011, as a Constitutional Amendment. The idea was to create a single tax for the country that would subsume CENVAT, CVD, SAD, VAT and state taxes; it is a single levy at the final point of consumption. The Bill gave Central and State governments concurrent powers to introduce laws on taxation of goods and services. GST was designed to make business easier for the market and cost of living cheaper for the common man.
The attributes of the GST proposed by the Congress party are simple – there would only be a single slab and there would be a cap of 18%. Goods and services consumed by weaker sections of society would be left out of the tax ambit, thereby improving their quality of life and reducing cost of living. It is imperative to cap the tax at 18% so as to ensure state governments will not attempt to lobby for extra taxes over and above GST. We will also bring petrol, diesel and natural gas in the ambit of GST so as to save the common man from the burden of increasing fuel prices.
The Bill also provided for the creation of a GST Dispute Settlement Authority that was able to adjudicate disputes between central and state governments which had the potential to result in loss of revenue or affect the harmonised tax structure. It also ensures there would be no additional levy of 1% on supply of goods over and above GST. Since the tax is levied at point of consumption, 1% levy will create distortions in the tax structure. This has been pointed out by several economists who argue that there is no point in implementing GST with an additional levy.
The current GST with five tax slabs and a cap at 28% makes for an extremely complicated tax structure. An abundance of tax slabs makes corruption more likely and directly affects the functioning of MSMEs. We need a system whereby the state machinery is working in the best interest of the people, ensuring ease of doing business and improving the quality of life for every citizen.