Wednesday, May 06, 2015

Lok Sabha Passes GST Bill

One of the major initiatives of the Modi govt, the GST bill was passed in the Lok Sabha:

http://www.wsj.com/articles/india-moves-a-step-closer-toward-streamlining-taxes-1430909983

http://in.reuters.com/article/2015/05/06/india-tax-gst-idINKBN0NR0XX20150506

Now it's a matter of getting it through the opposition-controlled Rajya Sabha. But as Jaitley has noted, a GST rate of 27% is much too high, and it needs to be brought down.

http://www.livemint.com/Politics/BZTnzKYesLgs42oqrBjCYL/What-India-needs-to-do-to-get-its-new-tax-right.html

2 comments:

nizhal yoddha said...

i hear numbers like 27% bandied about as the GST. that sounds astronomical to me, altho it may be that we are already paying that and just don't know it.

i like the GST as an idea: it creates a single excise union around the country and presumably will reduce the amount of time and energy and bribes paid at borders between states. does this mean that there will be no border check posts? or will the continue? if it's like the european customs union (schengen visa) it reduces friction for sure.

but i am concerned that just like the VAT which actually became an additional tax, that we will continue to pay all the existing taxes and then on top of it another GST. oh, the indian babu is quite capable of doing that.

GST at 27% seems unbelievable. somewhere in the 10-15% may be more humane.

san said...

Jaitley has said that 18% is more likely. The reason why that higher number has been going around is because states are fearful of losing revenues. But once a national market becomes more streamlined, state coffers will be fuller just from the increased economic activity due to less red tape. The new bill will see states compensated for revenue losses anyway: 100% for first 3 years, then 75% in 4th year, and 50% in 5th year.