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India is on a tax reform path. In the next financial year the country plans to implement a unified goods and services tax.
Currently different states in India attract different taxes making taxation confusing. But in this process the Indian government is facing major hurdles from the opposition party.
One tax on goods and services across India was a tax reform ready to take India on the next level. But the deadline set by the Indian government of 1st April 2011 now seems difficult to meet.
Shweta Bajaj, New Delhi, India, said, "In India almost every good or service you might purchase from a market like this attracts different tax in a different state, which basically means many countries within one country. But the new centralized goods and services tax will be implemented on 1st April 2011. Though it won't be an east task for the Indian government to convince states of their loss in revenues, the Indian government has promised it would make the Indian economy a 2 trillion economy from the current 1 trillion economy."
One tax for all goods and services would mean revenues going to the central government of India and many states ruled by India's major opposition party BJP are not too happy with the Idea.
To make things better for states, the federal government has also agreed to keep petro products and electricity out of the ambit but still obstacles are huge for India to make this tax reform a reality.
Paranjoy Thakurta, Economist, said, "It's going to be fairly long and convoluted process because there are 28 states in India. There are 7 union territories. The constitution of the federal government will have to be amended and individual states will also have to amend their laws. So it's going to be a long drawn process, a difficult process but an important process."
The most difficult part of the implementation is change in India's constitution, which would take away certain fiscal autonomy of Indian states and rest it with the central government.
Implementation of the Goods and Services Tax is seen as the single most important tax reform initiative in India since independence. It's expected to provide a significant boost to investment and growth of the economy.
Bb Bhattacharya, V. Chancellor, Jawahar Lal Univ., said, "GST is a comprehensive one tax. This is to unify tax structure in the country. Right now each state is having a tax rates creating confusion. So to create a country as one economic zone their should be one tax rate."
The indirect tax regime in India is to be replaced by comprehensive dual GST, one for the state and one for the center.
In July, the Union finance ministry had proposed a three-tier rate structure for GST, 12% for essential goods, 16% for goods. GST is aimed at replacing the excise duty and service tax at the central level and value-added tax at the state level.
But the center is now making a last ditch attempt to meet the deadline as just few days are left for the monsoon parliament session to finish. And this would mean once again political disagreements is likely to triumph over lone term economic benefits.