To begin with, let me make it clear that it is necessary to guard against eulogizing Goods and Services Tax (GST) too much. Judging by the number of cases going on in the European Courts and the controversies as well as evasions that we read about in the international journals, it is necessary to guard against going overboard in praise of GST. We heard about such great expectations being bandied about in seminars on GST held recently.
Some writers have expressed the view that GST would give us Rs 5 lakh cr of extra revenue. Others have emphasized the great possibility of huge extra revenue. This is a complete misconception. Such an idea of excessive potentiality of revenue comes only from a lack of understanding of what GST basically is. GST is nothing but a combination of three taxable events, namely, act of manufacture, i.e., excise; act of sale, i.e., sales tax or VAT; and act of providing service, i.e., service tax.
When these three separate taxable events yield a certain amount of revenue, how can it be said that a combination of the three will give more revenue or immensely more revenue? The only difference between three separate taxes and the GST is that the GST makes the base of tax common for manufacture, sale and goods, and providing of services. If the size of the economy grows at the same rate of, say, 10% per year, with manufacturing, trade and service sectors growing at various rates, there is no economic reason why revenue from a common base will grow much more than if the base is divided into three. A combination can never be more than the sum of all the three. |
