GST implementation

After the Bihar elections,goods and services tax (GST) bill in the Rajya Sabha looks increasingly ambivalent[am'bi-vu-lunt(uncertain,अनिश्चित)]. In any case, the time available does not permit implementation of the GST from April 1, 2016. This impasse provides an opportunity for the Centre to initiate the GST incrementally by taking three steps. First, mimic the GST at the Central level from April 1. Second, rework the GST bill. Third, integrate the GST implementation experience from Malaysia. By doing so, the Centre can bolster[bówl-stu(strengthen,मजबूत)] the confidence of industry.
The various types of excises being levied today would need to be consolidated[kun'só-li,dey-tid(strong,सुदृढ़)]. The impact of this mimicry would be that a de facto[di'fak-tow(real,वास्तविक)] Central GST (hereafter DGST) would be in place, providing tangible[tan-ju-bu(realizable,मूर्त)] preliminary benefits to industry, while the two taxes retain their nomenclature[now'meyn-klu,chu(terminology,language,शब्दावली)].

Four important changes required. First, excise duties applied today range between 1 per cent and 14 per cent. Service tax is applied at 14.5 per cent, with abatement[u'beyt-munt(lessening,कमी)] up to 70 per cent. Thus, both taxes are effectively applied at multiple rates. It should be possible to put in place a three-rate structure — 1 per cent for precious metals, a concessional rate (say 4 per cent), and the standard rate. the standard rate can be brought down appreciably. At the same time, the vestiges of specific rates in the excise regime need to be transformed to ad valorem[ad vu'lo-rum(In proportion to the estimated value of the goods taxed,मूल्यवर्धित कर)] rates.

Second, presently there is an asymmetry[ey'si-mut-ree(imbalance,असंतुलन)] in the application of input tax set off between excises paid and service tax paid.This asymmetry needs to be addressed so that excise duty and service tax are treated comparably.

Third, the excise tax base is determined through a positive list, while service tax depends on a negative list. Fourth, the Central government has in place a number of cesses[ses(rate,दर)] on excise and service taxes to fund special initiatives. A cess is an anathema[u'na-thu-mu(curse,श्राप)] to the GST. The Centre may need to withdraw the cesses and seek additional resources by suitably adjusting the tax rate.

Malaysia implemented the GST on April 1 this year. There is much to learn for India from this tumultuous[tyoo'múl-choo-us(disquiet,अशांत)] Malaysian journey.

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