Basic Concepts and Features of Goods and Service Tax in India

19 Pages Posted: 25 May 2010

Date Written: May 25, 2010


In the process of reform of tax administration in India, GST will be playing a major role provided its enactment and implementation is done with absolute sincerity. Though the governments of States and Center acknowledge the need of modern tax regime which is effective, transparent and assessee friendly, there is still no consensus among the states on its modalities and implementation. First of all, the urge of states to retain their ‘constitutional state sovereignty’ over taxation matters may derail the process and only few states taxes may be subsumed in GST leaving many taxes outside its purview. It is needless to say that more state taxes are to be subsumed in GST to bring the intended objectives into a reality.

Secondly, the rate of tax would be another major bone of contention among states and centers. States may stress upon imposing different tax rates to different kinds of goods; essentially trying to retain the tax rate prevalent under local sales tax/VAT that has been presently imposed. This is one area where if states succeed, will certainly dilute the positive effects and impacts that GST would bring in future.

The issue of compensation of taxes may also delay the implementation of GST. Mostly, the states which have road tax, octroi in State of Maharashtra, purchase tax on agricultural produce in State of Punjab and states having low threshold limits for VAT wish to have assurance from the Union that there will be compensation for any loss of tax by subsuming the various states taxes. However, mostly the states which have octroi and purchase tax are not willing to subsume these taxes in GST. Therefore, there is a need to have a broader consensus and reasons why such states should retain these taxes when majority of state taxes are being subsumed as proposed by First Report.

Therefore, in conclusion, we can say that a vibrant economy can be created only if major indirect tax reformations in India through GST is implemented at the earliest with no or minimum such flaws so that it can have a life of longer duration and can also contribute to the Indian economy reducing cascading effects across all the supply chain. To achieve this utopian objective, the major roadblocks and hiccups that have been on the way must be brushed aside as soon as possible by the Union and the States through consensus.

Keywords: GST, India, Tax, Indirect Tax, Goods and Service Tax, Consumption Tax, Reform, Implementation

Suggested Citation

Dahal, Rajib, Basic Concepts and Features of Goods and Service Tax in India (May 25, 2010). Available at SSRN: or

Rajib Dahal (Contact Author)

Supreme Court of Nepal ( email )


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