A constitutional amendment proposed by the Centre to give teeth to the goods and services tax (GST) will have serious consequences for centre-state relations. The amendment, reported by Mint newspaper, suggests that every decision of the proposed GST Council, the supreme decision-making body on GST comprising central and state finance ministers, will have to be ratified by the Union finance minister to become law.
GST is good economics, but is it good politics? - Daily News & Analysis
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The GST, India’s biggest fiscal reform to date, is supposed to come into force next year. It seeks to unify both the value-added tax and the service tax into one goods and services tax. Once in force, tax evasion will become difficult each GST assessee effectively polices tax payments by his input providers. This is how it is supposed to work. If I am a car manufacturer, I get a rebate on GST to the extent my suppliers have paid GST. Else, I pay the full rate on my factory price of the car. Over a period of time, the GST will have a moderating influence on prices because it ensures that there are no taxes on the tax component in factory-gate prices. In short, the tax is self-policing and anti-inflationary, and will make India a truly common market with few internal trade barriers.GST is good economics, but is it good politics? - Daily News & Analysis
