Goods & Service Tax (GST) – One Question A Day by CA Sudhir Halakhandi – PART 1
Q. The talks on GST is going on in the News papers very prominently and I came to know that GST will be a single tax replacing all the Central and State indirect Taxes and we will require to deposit a single tax in place of VAT, Central Excise and Service Tax. Please explain the new system Sir.
CA SUDHIR HALAKHANDI:-
What you have described is the “Standard format” of Goods and service tax and this was the format which was initially presented by the Government in 2006 and 2007. Let us see the relevant part of the speech of the erstwhile Finance Minister Mr. P. Chidambaram:-
Budget speech – 2006
155. It is my sense that there is a large consensus that the country should move towards a national level Goods and Services Tax (GST) that should be shared between the Centre and the States. I propose that we set April 1, 2010 as the date for introducing GST. World over, goods and services attract the same rate of tax. That is the foundation of a GST. People must get used to the idea of a GST.
Budget speech -2007
116. I wish to record my deep appreciation of the spirit of cooperative federalism displayed by State Governments and especially their Finance Ministers. At my request, the Empowered Committee of State Finance Ministers has agreed to work with the Central Government to prepare a roadmap for introducing a national level Goods and Services Tax (GST) with effect from April 1, 2010.
These two statements made by the then Finance Minister of India in 2006 and 2007 were without any basis and created a false impression in Trade and Industry that a “Single National Level Goods and service tax” is going to be introduced in our country and unfortunately this false impression is also there as it is reflecting from your question.
In our country the system of governance is “Federal” and both states and centre has the power of imposing and collecting indirect taxes. Centre is collecting Central Excise, Service Tax etc. and states are collecting VAT, Entry tax and Central Tax.
Hence the idea of Single National Level GST was rejected by the states at the initial stage of discussion and new compromised formula was emerged in which both the centre and the states will charge GST separately on a single transaction. States will collect State Goods and Service Tax (SGST) and Centre will collect Central Goods and Service Tax (CGST) and further a new and complicated system of collection of Tax on interstate transactions will be introduced in form of Interstate Goods and Service tax (IGST) to transfer the revenue on interstate transactions to the consuming state.