Moderating the Hype

Pinaki Chakraborty writes:

The Constitution 122nd Amendment Bill 2014 or the Goods and Services Tax (GST) Bill has been passed by both houses of Parliament after protracted, and often acrimonious, negotiations. This amendment will enable the introduction of the GST by the union government as well as state governments as a concurrent levy on an overlapping tax base. The GST would subsume major indirect taxes (such as union excise duties, service taxes, state level value added tax and other minor taxes) currently levied by governments at all levels. A unified tax like the GST is expected to provide harmonised and distortion-minimising tax structures that would enable the development of a common market for India which, in turn, is expected to enhance economic growth. The GST law requires the creation of the GST Council to be chaired by the finance minister and ministers representing states as members. The ultimate benefits of the GST would depend greatly on the design of the tax. This design will emerge out of a process of bargaining between the centre and the states in the GST Council. This process could well be contentious and a poor design of the tax will result in a suboptimal outcome.