NT NETWORK
PANAJI
Even though Goa may lose out on the proportion of tax revenue as a result of the taxes being subsumed after the implementation of Goods and Services Tax (GST), the same would be offset by the fact that the tax base would get wider due to the state deriving the power to levy and collect tax from the service sector.
The GST is a ‘Destination Based Consumption Tax’ and such tax will flow to the state in which the goods and services are consumed. Since Goa is more of a ‘consumer state’ and since a major portion of the goods or services consumed in the state is procured or availed from outside the state, it is envisaged that Goa will benefit on this count. Furthermore, the Union law provides for compensation for loss on account of implementation of GST, for an initial period of five years.
The Union government is all set to roll out GST from July 1 and the Goa government has convened a special session of the state assembly on May 9 to adopt the central Bill.
There are advantages and disadvantages of GST; however, the state government feels that a state like Goa, which is more of a consumer state will benefit from the implementation of GST.
As per the central Bill, GST will replace over ten indirect tax levies like central excise duty, additional excise duty, service tax, and counter veiling duty, special additional duty of customs, surcharges and cesses. As far as local levies are concerned, VAT, luxury tax, entry tax, entertainment tax, octroi and advertisement tax would be subsumed in the GST. Hence, the tax compliance burden on the business concerns will reduce to a large extent and the compliance cost will fall.
The state government also feels that the entire supply chain would come under the purview of GST and as such, it would be possible to track the same. Currently, the Union levies like excise duty are only being tracked till the goods leave the manufacturer’s premises. However, under GST, a chain would be developed from the point of manufacturer/production till the point of final consumption. Also, there would be dual oversight of the Centre as well as the states on the entire supply chain.
Further, checks and balances on the online portal like of invoices and allowance of input tax credit thereafter will further prevent tax evasion. The combined result will be increased revenue to the Centre as well as states.
It is interesting to note that there would not be any state border check post under GST, which will considerably reduce the transportation time and, in turn, transportation costs. As such, this will help the manufacturing sector in implementing the ‘Just in Time’ approach which will further help in reduction of inventory costs. This will result in reduced handling and carrying costs and boost competition in the manufacturing sector, thereby the goods getting available at competitive prices.
The government also expects that various hassles will vanish after implementation of GST and the input tax will be available on purchase of capital goods, whether bought locally or from outside the state. This will, in turn, reduce the cost of production and the state government is of the opinion that combined effect of all these is expected to result in rise in capital goods investment.
The government is also looking at GST as a step forward in the ‘Make in India’ initiative of the Prime Minister and with implementation of the central Act, it will result in competition among the manufacturing sector by way of addressing the currently faced issues like cascading of tax, inter-state tax compliance issues, high logistic costs and fragmented market.
The bigger states are using exemptions and tax holidays for investment. However, smaller states like Goa tend to lose on this count. Under GST, the tax structure across the country will be the same and the investment decision will be tax neutral and will basically depend on the ‘Ease of doing Business.’ Hence, the states which are at higher index on this will benefit upon implementation of GST since tax structure will not be the deciding criterion.
Lastly, since the major indirect taxes levied by the state, from which over 90 per cent of the state’s tax revenue is earned, will be subsumed in GST, it is feared that there may be a fall in the tax revenue of the state.
Though the Union government has agreed to provide compensation for a period of five years from the date of GST implementation, it is, however, not known as to what will be the scenario of tax collection after that.