An Impact Assessment of Goods and Services Tax in India Through Strategic Analysis Approach (SAA)

Introduction

The reform process of indirect taxes in India began with the Central Value Added tax (CENVAT) replacing the central excise duties of the central government, and the VAT replacing the sales tax of the state governments (Ehtisam & Nicholas 1984). Shantayanan & Hossain (1998) says that it mitigated the cascading effect due to a multiplicity of taxes to a great extent. This led to a major simplification of the tax structure and broadening the tax base, with more people coming under the tax –net. But both the CENVAT and the VAT proved to be inadequate .Tarun (2012) suggested that the CENVAT lacks the inclusion of the value addition in the distributive stage and the absorption of many central indirect taxes like the additional excise and custom duties, surcharges etc. Thus, making the utility of comprehensive input tax and service tax set-off absolutely futile. Similarly, Harry, Sophie & Wim (1996) explained that the state wise VAT will bear the cascading effect of multiplicity of taxes and fails to absorb many state level taxes like the entertainment tax, luxury tax, etc. Therefore even after repeated policy- steps to simplify the indirect tax regime, it remains cumbersome, complicated and not business friendly. Klaus (2000) suggested that the GST is a scientific, simplified and modern but unified system of taxation in consonance with the developed nations.

The GST is broad based, single and comprehensive tax Douglas& Terry (2001) levied on goods and services at each stage of the sale of goods or the provision of services. The seller or the service provider at each stage will be eligible to claim the input credit of tax which he has already paid while purchasing the goods or availing the service. Thus, the final consumer will only pay the GST charged by the last dealer in the supply chain of the goods and service.