A signal for further reforms

SHIFT TO GST HAS BEEN POSITIVE FOR MOST STATES AND IT HAS GENERALLY MET EXPECTATIONS

- R GOPALAN MC SINGHI The authors are former civil servants

MAJOR TAX reform of a goods and services tax (GST) was introduced on July 1, 2017. It is a comprehensive, multistage, destination-based indirect tax that replaced numerous central and state-level taxes and subsumed central excise duty, service tax, additional duties of customs (countervailing duties and special additional duty), certain central cesses, and surcharges of the Union taxes and cesses on state value added tax, central sales tax, entry tax, entertainment tax (except by local bodies), purchase tax, and luxury tax of the states. It took 17 years to implement GST. It was facilitated by a Union government guarantee of a minimum 14% annual growth on the comprehensive tax base for each state for five years. Besides creating a “One Nation One Tax” system, removing the cascading effect of taxes, and ensuring free movement of goods across the country, the two important factors that facilitated the decision of the states to join GST were a widening tax base and reduction in tax exported. Further, it was assumed that uniform countrywide taxes will not result in tax competition, ensure convergence of tax/GSDP ratio across the states, and result in greater tax buoyancy. Overall gross revenue from GST has indeed been significantly buoyant, more