Here is an excerpt from an article on VAT , published twelve years ago- “Value Added Tax—one of the most radical reforms to be proposed for the Indian economy, could finally become a reality after four years of political and economic debate.
Yet, the biggest hurdle before the government is not making India ‘a common market’ through a uniform sales tax structure, but removing a complicated tax structure that also allowed for fraudulent practices”
But how did said tax reform VAT implemented with effect from 1st April 2005 affected us? Now after twelve years while rolling out GST, are we not saying the same things again?
VAT could not wipe out fraudulent practices or more specifically tax evasion by traders.
Even the surgical strike on corruption “demonetization” was successfully outsmarted by the trading class.
When we say GST will lead to simplicity and one nation one tax, do we tell the truth? GST has its components like CGST, IGST, UTGST and IGST. The rates will vary from 5% to 28% and again there are exempted goods and services and the list is still not exhaustive.
Also there can be provision of cess over the peak 28% on “luxury and sin” goods.
Identifiable loopholes are the threshold limits on exemption and the intelligent ones perhaps already worked out their accounting statements.
The input tax credit part does not seem to be so simple with the invoice matching condition.
Also I have a doubt regarding the PM’s comment “ long wait by vehicles at toll plazas will end”. If the plaza collected Octroi then it is yes. But “toll” is not a tax but a fee and I think it can’t be subsumed in GST. The “long wait” can be avoided if the vehicle is RFID affixed and the gate is technically enabled but that’s a different story.
If Einstein found it difficult to understand Income Tax, perhaps he would not have found Indian GST any simpler.