An important aspect of the Indian budget is the confirmation that the Goods and Services Tax will be introduced in April 2010. Customs duty, excise and service tax remain untouched.
It is now known that the basic structure of GST will be in keeping with the principles of fiscal federalism envisaged by the Constitution. The Centre and the States will legislate, levy and administer the central GST and the state GST, in tandem. The central government has yet to decide whether the states will also levy service tax. This appears unlikely, since it would make more sense for central government officers to work out the harmonisation of the Central Excise (Cenvat) and Service Tax.
Two important service taxes have been introduced in this budget - one on transportation of goods by rail and the other on legal consultancy services.
The multiplicity of indirect taxes levied along the supply chain has often made trade uneconomic within India. With the introduction of GST, it is hoped that cost efficiencies will be achieved in the supply chain, and that businesses will be freed from the complex and uncertain nature of trading across state borders.
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