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Monday, January 28, 2013

The Goods and Services Tax (GST) has been seen as a welcome move as it was a comprehensive levy of tax which would do away with various other taxes prevalent in India. But its implementation has been delayed. This is hardly surprising. Given the difference in taxes levied in different states, getting a consensus was always going to be a challenge. But now the Centre and the states are looking to reach a compromise. And if that happens, GST could be launched in April 2014. The main point of contention appears to be the compensation to be doled out to states for central sales tax. For the transition to the GST, the states had cut CST to 2% from 4% as part of a gradual phase-out of the tax. But since there was no further progress on implementation from the centre, no further payments were given out. And so the states were contemplating raising the CST again. Getting all the states to arrive at a solution may not be that simple. And there is the possibility that implementation first will take place in a handful of states with the rest of them following suit. Whatever the case, the government needs to iron out these differences soon. Especially if it is serious about setting in motion its reforms process. 

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