The Goods and Services Tax (GST), India’s biggest tax reform initiative could see a staggered implementation, starting with a nationwide unified tax system for goods from April 2016 and extended to services later. At present, each state levying a different set of taxes on goods and services presents a fragmented market. If implemented, the GST can dramatically alter the tax administration by replacing this string of central and state levies such as excise, value-added tax and octroi with a single unified tax, thereby creating a common national market. This is the most ambitious indirect tax reform initiated during the UPA rule but due to lack of consensus from states, the Bill could not be taken up in Parliament for its passage. Under the new system, the Centre and the states will tax goods at identical rates and split the revenue equally. For instance, if 20 per cent is the agreed rate on a certain product, the Centre and states will collect 10 per cent each. The same model will apply for services. Under current laws, only the Union Government taxes services. The government is likely to introduce in the winter session of Parliament the Constitution Amendment Bill that will lay out the roadmap for GST’s implementation, first for products and later for services. Implementation of the tax reform has been politically contentious with states fearing GST could rob them of fiscal powers and tax revenue. The Centre is likely to offer a fresh Rs. 35,000-crore plan spread over three years after phasing out CST – a proportion of which goes to the states – to compensate them for revenue losses. Over the last few years, the government has gradually brought down CST from 4 per cent to 2 per cent as a precursor to rolling out GST. As an interim measure, the Centre has also periodically compensated state governments for revenue losses. The first installment – Rs. 14,000 crore – of the new CST compensation plan is likely to be paid this financial year itself, with the balance over the next two years. A robust country-wide Information Technology (IT) network and infrastructure to make the implementation seamless across state boundaries is also expected to be ready by April 2016.