INDIA’S TAX SYSTEM: INCREASING PROGRESSIVELY

The GST is to put an end to the complex web of multifarious indirect taxes that exist at present and replace them with one indirect tax: the GST. It is similar to a VAT and hence, is expected to reduce the problem of cascading effect of taxes. It is to be levied on most goods and services barring items such as petroleum, tobacco, alcohol, etc. The GST, though a single tax, would comprise two components: a central GST and a State GST. As per the Committee headed by A. Subramanian, the number of rates is likely to be limited to: (i) a standard rate to be levied on majority of goods and services, (ii) a lower rate on merit goods and essential items, and (iii) a higher rate on non-merit goods like luxury goods. With the GST, the demarcation of taxation powers between the Centre and the States would get diluted considerably as both the Centre and States can impose indirect taxes on production as well as sale of goods and services.