EXPERT EYE

The goods and services tax (GST) is about a month old. Its introduction was smoother than expected. There are various types of criticism from economists, analysts, industries and traders, which I shall discuss here.

Coming to the views of the economists, I find surprisingly quite an amount of lack of understanding on their part. One eminent economist has said in a seminar that there is only one federal country, Canada, which has the GST. He is unaware that there is value-added tax (VAT)/GST in countries like Brazil, Australia, Russia and China. In fact, Brazil was the first country (known as the "troubled pioneer") to introduce VAT, in 1967. The other misconception on the part of some economists is that most countries have VAT, not GST. This is wrong because of the following reasons: VAT has two meanings. It can mean only the rate of tax, such as 12 per cent or 18 per cent. It also has another meaning: It is a tax on the value-added on goods and services. So, it can be called either VAT or the GST. In this sense, GST is also a VAT. There is one circumstance when a VAT is not a GST and that is when services are not included in the scheme of things, only goods are included. That was the situation in Indian states until June 30, 2017. So now the GST, which has been introduced in India, can also be called a VAT. It may be noted the best magazine in the world on VAT, The VAT Monitor, includes all countries where the taxes are known as either VAT or GST.

It has to be understood VAT is fundamentally different from a turnover tax, which is a levy on the total output. Once the input tax credit

The present GST is good, though not the best. But, the best is often an enemy of the good