Indian economy in the recent past has witnessed some breakthrough changes. Diesel deregulation, hike in the gas prices were few among these changes. However, when it comes to reforms, a lot needs to be done. Indian economy is lagging way behind in achieving its true potential. And more than anything else, poor policies are the reason for the same. One such policy has been the taxation policy.
The current taxation system is quite retrogressive in nature. Goods and service tax (GST) could have been an effective solution... had it been implemented in time. However, the reform has been dragging feet for around 6 years since it was proposed to be implemented. This is a reform that has can the potential to add almost 2% to India's GDP. So what is stopping us from going ahead?
Once again, it is political dynamics versus the economic reforms. And so far former have been the main focus. State Governments are reluctant to adopt the change since they believe they will lose their taxation powers. However, things might change soon for the better as empowered panel of state FMs & Centre has given in principle approval to place of supply and consumption rules. The latter determines the tax-recipient state and consuming state and have implications for their revenue. As suggested in article in Economic Times, place of supply rules are fundamental in determining the state where a service is provided and state GST or integrated GST is required to be paid. Finalisation of these rules could set way for GST reform, the target date for which is decided to be April 2016. However, not all is going to be smooth from hereon. For example, there is some disagreement on threshold for taxing goods and services. However, things seem to be moving in this context which in itself is quite significant. Hence, while various issues needs to sorted, we hope, this time GST indeed sees the light of the day as planned in the year 2016.