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Three cheers for GST – biggest achievement is cooperative federalism, which was unthinkable earlier

Three cheers for GST – biggest achievement is cooperative federalism, which was unthinkable earlier

Those who criticise the GST too much do not seem to remember how bad the situation was earlier. Look at the rates of duty pre-GST. Central excise rates were 2, 8, 10, 12, 14, 24, 37.5, and 42 percent plus cess. There was one service tax rate, but there were many exemptions. Sales tax rates were numerous, and in each state, they differed. Add to this the central sales tax. And entry tax. Exemptions given by the states and the Centre were different and numbered several hundreds.

Seventeen different rates of duty have now been combined, into the 5, 12, 18 and 28 percent slabs. Still, critics are clamouring. Classification controversies now exist for a choice between the 12 and 18 percent slabs only. Earlier, there was a huge controversy about the taxable event. In central excise, the taxable event was the act of manufacture, while, in sales tax, it was the act of sale, and, in service tax, it was the act of supply of service.

There were several Supreme Court judgments on the taxable event, and it still remained an open issue. With GST, there is only one taxable event, namely, the act of supply of goods and services. The distinction between goods and services was creating the problem, which also has been resolved by merging the two. The concept of manufacture, chronically a recipe for Supreme Court cases, has now been abolished.

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