GST AND ITS EFFECT ON THE FEDERAL NATURE OF THE INDIAN CONSTITUTION
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Abstract
Tax is a mandatory contribution to state revenue levied by the government on worker's income and business profits, or added to the cost of goods, services or transactions. The current taxation system in India is a very complex one. To understand it in simple words, the system has been divided into two broad categories:
In direct tax the person paying the tax and making the payment of tax is the same. Income tax, corporate tax are examples of this. Indirect tax is when the person paying the tax and person on whom the burden of payment lies are different. In other words, the tax we need to pay sales tax in addition to the original cost at a shop. But the burden of payment of that tax lies on the shopkeeper. Wealth tax and securities tax are examples of indirect tax. This system of taxation is important to understand because there are some major flaws in the system and perhaps to make it a more effective system, GST bill has been passed.
A common man in India has to transfer a large part of his hard earned money to various taxes due to this complex system where the state and center both get their own benefits. In order to reform this taxation system the current government took steps in to amalgamate several central and state taxes into a single tax so that it would decrease the problems of double taxation, by introduction of GST which is the goods and services tax.
This paper focuses on several important aspects of the new GST act that has been passed and will be enacted from 2017, as well as GST's effect on the relationship of centre and state. GST is likely to affect the federal structure of India as it takes us towards a uniform tax system where states will lose their financial autonomy. With reference to its constitutionality, an amendment into the constitution has already been made with respect to GST. This paper focuses on the possible disputes that may arise in the federal nature of Indian Constitution as well as some of the major advantages of GST.
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