Coming together of four northern states -Delhi, Punjab, Haryana and Himachal Pradesh — to create a uniform tax regime to give boost to the trade and avoid the tax variance for customers thus keeping the price level at a check is a welcome move. The move for uniform tax regime comes much ahead of Goods and Services Tax (GST) implementation in 2016. At present, every 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. 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 implementation of the tax reform has been politically contentious with states fearing GST could rob them of fiscal powers and tax revenue. This fear could be the reason why Jammu and Kashmir Finance Minister Haseeb Drabu wanted to remain outside the regime. But who is the worst affected by government’s such a move. Obvious it is the people of the State who will be buying from essentials to luxury items at a higher price as compared to neighbouring states. The other side is with price variation prevailing in the market there is every possibility of a clandestine parallel inter-state trade emerging. But 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. At present, petroleum products will not be included in the GST but will remain within the Central Act and will be brought in at a later stage through the GST councils. Alcohol will be exempt from GST and states would have the freedom to decide their own levy. The simplification of taxation system will also have positive impact over trade and industry to maintain parity between the regions.
