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What is the GST?
GST or the Goods and Services Tax is an indirect tax that brings together most of the taxes that are imposed on all goods and services (except a few) under a single banner. This is in contrast to the current system, where taxes are levied separately on goods and services.

The GST, however, is a comprehensive form of tax based on a uniform rate of tax for both goods and services. However, the GST is payable only at the final point of consumption.

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How will it work in India?
The GST was first mentioned in India during the 2006-2007 budget and the latest budget too includes the need to take steps to make the implementation possible by April 1, 2010. Given the federal nature of the country, GST in India is expected to take the form of a dual GST including both a Central and a state GST.

The Empowered Committee of the State Finance Ministers has been given the responsibility for creating a model and a roadmap for the GST. While there is very little clarity at present, it is expected that the central GST will subsume excise duty and service tax and the state GST may replace the VAT.

What are the benefits of the GST?
At the simplest level, the GST reduces the number of instances where taxes need to be paid thus reducing the possibility of manipulation on the part of tax authorities and is hence assumed to be a much transparent mode of administering taxes. It will alleviate the burden of cascading taxes for individuals. It is also expected to boost revenue collection in certain states and to reduce the prices of goods.

What are the difficulties involved?
The fundamental problem involved is the decision of a revenue-neutral rate for the GST that will be acceptable to all those involved and also whether there will be a single rate or two rates at state and Central level. The federal nature of the country also accounts for its own share of complications and delays. For the Centre to be able to impose tax at the retail level and for states to be able to tax services will require constitutional amendments, which will further need to be passed by the Parliament and state legislatures.