Journal Press India^®

Dr. M. M. Sury

Editor

It gives me pleasure to introduce yet another issue of VISION to our readers which has a special focus on one of the most significant indirect tax reform in the history of the Indian tax system: the Goods and Service Tax (GST). This impending tax reform will subsume a majority of central and state indirect taxes, putting an end to multiplicity of taxes. Considerable benefits are expected out of this transformation such as rationalisation of tax structure, emergence of a common national market, relief from cascading effect, fostering of economic growth and boost to investments. It is also expected to provide the much needed push to ‘Make in India’ and export competitiveness, as manufactured goods will become more competitive owing to elimination of cascading of taxes and reduced cost of logistics and fragmented markets.

The lead paper in this issue examines the indirect tax structure of India prior to the introduction of GST to enable an understanding and appreciation of the need for GST in India. It analyses the various indirect taxes such as import duties, excise levies, and sales taxes. It also shows how VAT, which is a multi-stage tax levied on all stages of production and distribution of a commodity, suffers from certain limitations. Despite the self-policing nature of VAT, opportunities do exist under it for evasion and fraud. The need to overcome various challenges and limitations of this indirect tax structure has led to the adoption of a unified tax regime, i.e. GST.

Having understood the rationale of GST in India, the next paper on ‘GST: A Comprehensive and Uniform Indirect Tax Reform in India’ presents a detailed discussion on meaning and significance of GST. It explores the reasons for deferment of GST in India, along with the current situation of GST reform. The paper critically analyses the impact of GST on various sectors of the Indian economy and identifies the challenges that need to be resolved before implementing a flawless indirect tax regime in India.

Since implementation of GST has its own peculiarities for a federal polity like India, the paper on ‘Constitutional Provisions Pertaining to Taxes and its implication for GST’ explains the principal theoretical issues involved in financial relations between different layers of the government in a federal set up. While explaining the distribution of taxation powers between the Centre and state governments, it also outlines the special provisions with respect to Goods and Services Tax and sharing of Central taxes. The Constitutional division of taxation powers between the Union and the States in India rests on economic and administrative considerations, which are examined in this paper.

To ensure a smooth transition from the existing indirect tax structure to the proposed GST regime, it would be prudent to learn from the experience of other countries where GST has been implemented. In view of this, this issue has an interesting paper which examines the functioning of GST in certain select countries of the world such as Canada, Australia, Malaysia, New Zealand and Singapore. The experience of other countries have shown that exempting or reducing GST on certain items did not mean that tax savings would be passed on to consumers. Therefore, the GST should be kept broad-based to keep the GST low and the GST system simple, while help is directly provided to the lower-income through transfers and subsidies.

Apart from the primary focus of this issue on GST, there is a paper that focuses on yet another topical issue, .i.e., transfer pricing. Arising from the need for tax certainty and common standards in international transfer pricing, this paper highlights the issue of AMP (advertising, marketing and promotion) costs in transfer pricing and seeks to establish the need for coordination among national tax systems. Ensuring consistency among the tax policies of the world’s nations is important for preventing instances of BEPS (base erosion and profit shifting) that are the products of the gaps between elaborately drafted and extremely complicated tax legislations. The author concludes that the creation of universal tax principles and their effective implementation is the only solution to this problem.

I hope this issue of VISION makes for an interesting reading and provides new insights into a significant tax reform waiting to be implemented (i.e., GST) along with some other pertinent issues in Indian taxation. I also hope that the journal would continue to get the patronage of its readers and contributions from diverse and unexplored areas of international business.

Dr. M. M. Sury

Editor