Our common market: GST has crossed a critical milestone but many challenges still lie ahead

Lok Sabha on Wednesday approved four Goods and Services Tax (GST) legislation, marking a critical milestone in the second phase of the legislative journey to actualize this tax system. Their aim is to transform India’s indirect tax architecture to create a common market by dismantling fiscal barriers between states. Credit for progress thus far should go to all political parties and particularly state governments who have been willing to give up exclusive jurisdiction over their most important taxes for the greater common good. But much work still remains to be done and all stakeholders need to pull together for it.

The four legislations bring out the GST superstructure – they pertain to the Centre, Union territories, inter-state movement of goods and services, and compensation for states in the event tax collected in the GST regime falls short of what was raised earlier. Next, state governments need to get their state assemblies to clear legislation which is consistent with the Centre’s GST structure.

These legislations are not enough to complete the journey. Tax by its nature is detail-oriented. Inattention to details can undo the overarching aim of tax legislation. Therefore, the Centre and states have to cover considerable ground on the rules which will flesh out GST. This area will need careful handling by the Centre as states today levy different tax rates on products. Political stakeholders need to show maturity and keep in mind that GST will eventually benefit the entire economy. In addition to safeguarding interests of the exchequer, political stakeholders need to engage businesses and consumers more actively. Working groups established by the Centre are already engaging specific sectors of the economy such as banking to ensure that the transition to GST does not disrupt business. But a lot more discussion may be needed for a smooth transition.

The journey to GST has been marked by ups and downs as progress has often been impeded by politics of the day. In the end, India’s political class has shown the maturity to move ahead keeping in mind the larger national interest. It is important that all channels of communication are kept open now, particularly with other stakeholders such as industry and consumers. The sheer scale of transition makes it necessary for lawmakers to constantly absorb feedback from others. Eventually, benefits of a common market will go a long way in making India a more productive economy.

Source : Times of India

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