GST impact: Manufacturing key winner, telecom likely to be worse off

The realisation of a common indirect tax is critical for the semblance of a common Indian market

Latest news : Termed as one of the biggest reforms of India’s complicated indirect tax base since 1991, the passage of the Constitution Amendment Bill, enabling the introduction of the Goods and Services Tax (GST) seems to have become a reality at last. On March 29, 2017, with the passing of four bills related to different aspects of the GST via the Lok Sabha, the Indian parliamentary system has demonstrated a strong will for enhancing cooperative federalism by signing off on a ‘pooling of sovereignty’ in taxation matters applicable for all 32 states.

The realisation of a common indirect tax, like the GST is critical for the semblance of a common Indian market where all goods and services, depending on the elasticity of their consumption, will broadly be governed under a common indirect tax rate system.

In an earlier article, I discussed how regressive India’s tax structure has been (under a total tax slit of 35:65 ratio between direct-indirect taxes), where, over the last few decades, owing to a complicated web of cesses, surcharges and other indirect taxes (imposed on different baskets of goods and services), the burden of such an imbalance has fallen directly on the consumer regardless of their income.

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