GST a legislative accomplishment by Modi: US analyst

The Dollar Business Bureau 

The Goods and Services Tax (GST) bill cleared by the Parliament is a legislative achievement by Prime Minister Narendra Modi which can’t be dismissed even by his harshest critics, a top US expert said.

"Modi, stung by the criticism that his government has not done enough to reshape India's economic landscape, has notched a legislative accomplishment that even his harshest critics can't easily dismiss," wrote Milan Vaishnav of Carnegie Endowment for International Peace, in an op-ed in Foreign Affairs journal.

"The triumph gives his government newfound momentum at exactly the right time. Early campaigning has already started for January's regional elections in the pivotal state of Uttar Pradesh, home to 200 million Indians. Due to the timing and political importance of the poll, many will interpret it as a mid-term verdict on the Modi government itself," he said.

According to the expert, the GST will provide a common operating system for the states and the Centre to harmonise the indirect taxes on goods and services, including jurisdiction-specific excise, entry taxes, value added and luxury taxes.

The GST will attract a tax on the value addition at each stage of production. It, however, will provide for offsetting tax credits for each transaction right from the point of production to the point of consumption.

Under a "destination-based" tax system, consumers are responsible for the taxes levied by the last actor in the supply chain.

“The GST will not only align India's taxation of goods and services with the practices of most nations, but it will also provide domestic and international firms the uniformity and the predictability they need to do business,” Vaishnav said.

He, however, highlighted that the new regime still faces political hurdles for its implementation. "Next, a GST Council comprised of central and state government representatives will need to be established; this body will be responsible for drafting a model GST law that parliament and all of the states must pass.”