The proposed 1% additional levy on supply of goods under GST will contradicts the actual purpose of GST introduction. Comment.

Model Answer:
GST being a destination-based consumption tax, is levied in the states or places where the goods or services are consumed rather than on places from supply side. But, the manufacturing states such as Maharashtra and Gujarat have demanded they be allowed to levy two per cent additional tax over and above the state GST rate because producer states will face losses as they have spent huge over infrastructure and manufacturing units and now they won’t get any benefit under the GST model. To allay the problems of those manufacturing states, the NDA government has provided for an additional levy of 1% over the GST for supply of goods for a two year time period.
The main purpose behind replacing several indirect taxes with single GST regime was reduction of tax-burden and removal of cascading effect over goods and services. However, the decision of additional 1% levy is criticised on the grounds that it could make the intra-sate movement of goods more expensive and it will hurt the Make in India campaign. Thus, contradicting the actual purpose of GST introduction.

Question for UPSC Mains:
The proposed 1% additional levy on supply of goods under GST will contradicts the actual purpose of GST introduction. Comment.

Published: February 6, 2016 | Modified:June 27, 2019

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