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Dual Goods and Service Tax

CA. Rajeev Aggarwal (Chartered Accountant) (3424 Points)

15 January 2009

THE evolution of GST in India has taken interesting turns during recent years. On November 19, 2007, the joint working group on goods and services tax recommended not only the replacing of the existing CenVAT and service tax levied by the central government and the state-VAT levied by the state governments, but also suggested subsuming of all the indirect taxes on supply of goods/services by the centre and the states. It has recommended that the three important state taxes—state excise duty, entertainment tax and electricity duty—should also be subsumed in the GST. This would have taken away three important state taxes from the purview of the states.

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2 Replies

CA Sudhir Halakhandi (PRACTICING CHARTERED ACCOUNTANT) (13401 Points)
Replied 15 January 2009

See that the GST in it's pure form can only be imposed by the Centre and Former Finance Minister Mr. Mr. P. Chidamram has also asserted in one of his Budget speech this fact. Now in our system of Governance the states will not be ready to surrender their right to tax. Hence there is a talk of Dual GST. But it will be a compromise the true nature of GST.

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Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 15 January 2009

As far as states revenue is concerned, it can always be taken care of in GST. The real issue is slightly different.

Power to Tax is not merely a revenue generattion exercise- it is a power in the hand of states, and so in the hand of politicians and bureaucrats. It is also a source of corruption for states political and administrative machinery. It appears that people are not willing to forgo this power. It is power politics.

One of the solution is implement GST in the wiling states. With the benefit of GST, trade and industry will shift to those states where it is implemented. Such shifting of trade and industry will force the other states to follow. Same thing which happened with VAT. I think that will happen.