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GST: One Tax One Nation

Goods and Service Tax (GST) is an all-inclusive indirect tax regime which is levied on all the manufacture, sale and consumption of goods and services that is to say it is a vast concept that streamlines the giant tax framework design by a single undivided market in India by strengthening the economy, making India more powerful. The Goods and Service Tax is a consumption based value-added tax, where only the final use of the goods is considered as consumption. With this in mind, it is expected to integrate taxes on the goods and services to capture value addition at each stage where the continuous chain of the set off established from the original producer of the project to the retailers which will annihilate the burden of the cascading effects. Now in the case of GST there exists a mechanism of Input Tax Credit system (ITC) which helps us to eliminate the cascading effects of the pre-GST tax regime where here the manufacturer, wholesaler or retailer pays the suitable GST rate and will claim it through the tax credit input system and the end consumers who are the last has to bear this tax and hence the GST will be collected only at the point of sale. A stumbling block in introducing this new tax structure had created the conflict between the states and the center on the loss of autonomy and revenue. Wall Street firm Goldman Sachs, in a note ‘India: Question and Answer on GST — Growth Impact Could Be Muted’, has put out estimates that show that the Prime Minister Modi Government’s model for the Goods and Services Tax (GST) will not raise growth, will push up consumer prices inflation and may not result in increased tax revenue collections[1]. In this essay, I have highlighted about the scope, objectives, and challenges of GST.

Firstly, the tax system is the backbone of any developing nation because the revenue generated through tax collection is the biggest source of income for a nation and to put in other words revenue from tax collection in India is the biggest source of income for its social welfare activities. In the Constitution of India, it has been clearly discussed about the tax collection in the prevailing tax system which is adhered from those sections in the constitution. All the taxes imposed by the government must be laws passed according to the Indian constitution, which states that “No tax shall be levied or collected except by the authority of law”[2]. The entire tax system has divided into direct taxes and indirect taxes. Direct taxes are those taxes which are levied to an entity or an individual which is directly payable to government and cannot be transferred to anyone else. The Indirect tax empowers levy of taxes by the Central government on the manufacturing of goods and supply of services. The multiplicity of taxes which is being fragmented between Centre and States have resulted in a complex system of interconnected legislations leading to substantial distortions, cascading of taxes and adversely affecting growth in Gross Domestic Production (GDP).

Conversely, GST is an indirect tax applied on both goods and services at a uniform rate. Therefore, to this end, GST shall be the biggest indirect tax reform providing a uniform, simplified way and single umbrella rates of indirect taxation. The goods and service tax has been defined under the constitution as any tax on the supply of the goods and  services on both except taxes on the supply of the alcoholic liquor for human consumption[3] and also defines services to mean anything other than the goods[4] and defines goods to mean which includes all materials, commodities and articles[5]. The GST tax framework in India has opted a single unified tax model having two components. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State and the input tax credit for CGST will be available for discharging its liability on each output stage and on the other hand the credits of the SGST paid on the inputs would be allowed for paying the SGST on the output and notably no cross-utilization of credit will be permitted. In the cases of the inter-state transactions the center would levy the integrated goods and service tax (IGST) on all the inter-state supplies of goods and services under the constitution and this tax would roughly be equal to the CGST plus SGST whose aim is to ensure seamless flow of input tax credit of from one state to another[6].

As I said before, GST having a unified tax system aims in removing a number of indirect taxes along with the cascading effects that are the tax on the tax system and is simpler when compared to the earlier tax system. Due to lower burden of taxes on the manufacturing sector, the manufacturing costs will be reduced and prices of consumer goods will come down, which will help in lowering the burden on the common man which will further lead to an increase in the demand for goods and further will lead to increase in supply and hence, ultimately this will lead to increase in the production of goods and then lead to more job opportunities in the long run. More business entities will come under the tax system thus widening the tax base leading to better and more tax revenue collections. As goods move in and out of states without any hurdle or struggle, it will lower down the logistics and inventory management costs, which is quite high in India. One of the major drawbacks of the GST regime could be the direct spike in the service tax rate from 14 percent to 20-22 percent, especially in the Telecommunications Sector in India[7]. Under GST mechanism, the cost of tax that consumers have to bear will be certain, and GST would reduce the average tax burdens on the consumers which is one of the major problems that India is overwhelmed with[8]. This will be a step towards corruption free Indian Revenue Service.

GST is the most logical steps towards the comprehensive indirect tax reform in our country since independence which has created a single, unified Indian market to make the economy stronger. I strongly believe that GST is likely to improve tax collections and Boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate. I hope that GST will leave a positive impact and will help to boost-up the Indian economy and will convert India into a unified national market with simplified tax regime. The government should make an attempt to insulate the vast poor population of India against the likely inflation due to the implementation of GST. This would not only ensure certainty in the implementation of policies but also help in avoiding any disruptions to trade and commerce. Therefore, GST is the first step, and it would need to follow an involved process of dialogue among regulators, industry, and consumers to ensure that it meets the objectives that it proposes to achieve. Let us hope this ‘One Nation – One Tax’ proves to be a game changer in a positive way and proves to be beneficial not only to the common man but to the country as a whole.


Shalini Ramchandaran


TamilNadu Dr. Ambedkar Law University

[1]  Mehra P (2015) Modi govt.’s model for GST may not result in significant growth push. The Hindu.

[2] Article 265 of the Constitution of India 1950.

[3] Article 366(12A) of the Constitution of India 1950.

[4] Article 366(26A) of the Constitution of India 1950.

[5]Article 366(12) of the Constitution of India 1950.

[6] http://goodsandservicetax.com/gst/showthread.php?69-CHAPTER-X-Goods-and-Services-TaxTheway- forward

[7]  TRAI (2015) Highlights of Telecom Subscription Data as on 28th February.

[8] http://fintrakk.com/gst-what-is-the-impact-of-gst-on-common-man/

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