Goods & Services Tax

By Jamshyd Godrej, Bhavna Doshi, S.S. Bhandare

Summary

This Forum of Free Enterprise booklet collects three short essays giving an overview of India’s Goods & Services Tax (GST) shortly after its 1 July 2017 rollout. The cover lists three contributors — Jamshyd Godrej, Bhavna Doshi and S. S. Bhandare — and the booklet is sponsored by the Shailesh Kapadia Memorial Trust, with a memorial page dedicated to the late chartered accountant Shailesh Kapadia (1949–1988) preceding the essays. In the rendered pages, two of the three essays appear: Godrej’s brief ‘GST: A Business Perspective’ (a corporate-leader endorsement of GST as the largest indirect-tax reform since liberalisation) and the opening portion of Bhavna Doshi’s longer ‘India Goods and Services Tax — a Macro Overview’ (a technical mapping of the new dual GST architecture, its constitutional path, and its comparison with Australia, the EU and Canada). The volume’s argumentative center, so far as the rendered pages show, is that GST — though imperfectly multi-rated — is a federal-cooperation triumph that simplifies compliance, eliminates cascading, and tilts India toward a single market.

Essays

GST : A Business Perspective

By Jamshyd Godrej

Jamshyd Godrej, writing as an industrialist (Managing Director, Godrej & Boyce), frames GST as ‘the biggest reform in the Indian indirect tax structure since the economy opened up, twenty six years ago.’ He sketches the constitutional and institutional path — the 122nd Constitution Amendment, the formation of the GST Council, the passage of the GST Act and Rules — and argues that subsuming a maze of central and state levies under one umbrella will simplify compliance for businesses operating across states and end the headaches of dealing with each state’s separate rules.

Godrej concedes that the change is sweeping: business processes, accounting and ERP systems must all adapt to a supply-based concept of tax that replaces the older manufacture/sale/service trichotomy, and corporate decisions on plant location and supply chains will now turn on business efficiency rather than tax arbitrage. He credits Parliament, the state governments and the Finance Ministry for the political willingness that delivered the law, and closes with the wish that it deliver ‘an India in which trade is free, compliances are easier, growth is phenomenal and consumers are satisfied’ — adding the pointed reservation that this would have been ‘best achieved through a single low rate structure, similar to what was originally proposed.’

• Calls GST the biggest indirect-tax reform since the 1991 liberalisation, anchored in the 122nd Constitution Amendment and the GST Council.
• Argues the single-umbrella levy ends the burden of dealing with varied state-by-state rules and will simplify compliance for industry.
• Identifies the consumer as the largest beneficiary, with most consumer-price-index items placed at lower rates or exempted.
• Notes that GST forces a paradigm shift from manufacture/sale/service to a ‘supply’ concept, requiring overhaul of business processes, accounting and ERP.
• Predicts the destination principle and zero-rated exports will lift Indian firms’ competitiveness, and ends with a pointed preference for a single low rate.

India Goods and Services Tax – a Macro Overview

By Bhavna Doshi

Bhavna Doshi, a senior chartered accountant and KPMG adviser, supplies the booklet’s technical anchor. She defines GST as ‘a common tax on supply of both, goods and services, to be commonly levied and collected by Centre, 28 States and 7 Union Territories, on a common base, at common rates, having common procedures to be administered fully electronically through a common digital platform,’ and recounts the nine-year negotiation through the Empowered Committee of State Finance Ministers that produced the 122nd Constitution Amendment (the earlier 115th Bill having lapsed) and ultimately the Constitution (One Hundred and First) Amendment Act, 2016. She traces the chain of enactments through the CGST, IGST, UTGST and Compensation Cess Acts up to the 1 July 2017 launch (and Jammu & Kashmir’s 8 July adherence).

In the rendered pages Doshi then situates India’s dual model against Australia’s federal GST (2000, 10% standard rate, ACCC anti-profiteering), the EU’s harmonised VAT under the 1977 Sixth Directive, and Canada’s mixed national/provincial HST/PST/QST patchwork — concluding that none is a clean comparator and that India’s design is novel. She lays out the IGST mechanism for inter-state and intra-entity stock transfers, the elimination of C/F/I forms and state-border check posts, and the credit-chain logic; flags business worries over valuation of inter-state self-supplies and the inclusion of employee cost; and reaches the rate structure (0.25%, 3%, 5%, 12%, 18%, 28% plus Compensation Cess) just as the rendered pages cut off. Throughout, she treats the GST Council’s voting design — where neither Centre nor all States together can override the Council — as a federal-cooperation breakthrough.

• Frames GST as a constitutionally mandated common tax administered electronically by Centre, 28 States and 7 UTs on a common base and rates.
• Walks through the nine-year journey via the Empowered Committee of State Finance Ministers, the lapsed 115th Bill, the 122nd Amendment, and enactment of CGST/IGST/UTGST/Compensation Cess Acts.
• Compares India’s dual model against Australia (federal GST, 2000), the EU (Sixth Directive, 1977) and Canada (HST/PST mosaic), arguing each is only partly comparable.
• Explains the IGST settlement mechanism, the dismantling of C/F/I forms and check posts, and credit-chain restrictions on items like rent-a-cab, outdoor catering and motor vehicles.
• Flags business anxieties over valuation of inter-state self-supplies and the inclusion of employee cost in ‘open market value’ for intra-organisation services.
• Reads the GST Council’s vote-share design as a ‘path breaking’ federal device delivering ‘one tax across the nation’.

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