Give GST a chance 

GOODS and services tax (GST) is considered to be the most important reform in indirect taxes in India and cannot be implemented without the support of the state governments.
Under the proposed GST structure that the industry is aware of, states will get the right to tax services and the central government will be able to tax goods up to retail stage, which is presently restricted up to the manufacturing stage. This will be a major change and will increase the tax base for both the Centre and state governments. However, this requires amendments to the Constitution, which is an important factor in the process of introduction of GST in the right spirit.
GST is a value-added tax, levied at all points in the supply chain with credit allowed for tax paid on inputs used. It would be levied on the basis of destination principle, which means in case of inter-state transactions, the tax would go to the state of destination and not that of origin. This principle is followed in most of the countries having federal structure.
In the case of imports, in addition to basic customs duty, imports will attract central GST as well as state GST as countervailing duties and the portion of state GST collected by the Centre will be passed on to the concerned state. At present, no such provision exists.
Exports would continue to be zerorated, well almost. The proposed GST structure has left our electricity duty and local levies like octroi, etc, which would continue to be embedded in the price of exported products. In other words, India would continue to export some of its taxes. Hopefully, over a period of time,all indirect taxes would get subsumed and Indian exports would not be uncompetitive on account of domestic taxes.
Nevertheless, CII and Indian industry are eagerly awaiting the implementation of GST as it would consolidate various taxes levied on goods and services by central and state governments. GST would eliminate the cascading effect of some of the taxes, lowering the cost structure, reduction in effective tax rates on most of the goods, reduction in transaction as well as tax payment costs, and would be the first step in making India a single market facilitating speedy movement of goods.
India implemented value-added tax (VAT) at state level between April 2005 and January 2008 and it benefited the industry and trade. This was done by the states and the central government facilitated it by way of providing compensation for any loss of revenue. Implementation of VAT resulted in the gradual increase in revenue for all states due to better compliance in the subsequent years.
One of the apprehensions expressed by some states is loss of revenue on implementation of GST. Loss of revenue to states will mainly depend upon the decision on rate structure. In the beginning,  a state with high productivity and less consumption could suffer loss due to non-receipt of any tax on goods produced and sold to another state under GST regime as 2% central sales tax (CST) will be abolished. Union finance minister has already assured compensation to the states for any loss of revenue due to implementation of GST.
Most states are in favour of implementation of GST but some of them have expressed their concern about the loss of the right to tax. Each state will legislate its own GST law and, therefore, it will continue to have the right to tax goods. In addition, it will get power to tax services also. However, states will not be able to change the GST rate structure on their own. As per the draft amendment to the Constitution, a GST council would be set up comprising the Union finance minister, minister of state dealing with revenue and finance ministers of states. This council will determine any changes in GST rate structure in future by consensus. With such a scenario, the states will not lose the right to tax goods and services.
Economists have predicted that implementation of GST would increase GDP considerably. Better compliance under GST regime would also have a positive impact on direct tax collection as all transactions would become transparent. This has also been the experience in other countries. Out of the additional revenue from directtaxtothecentralgovernment, the share of states shall be 32%,as per the recommendations of the 13th Finance Commission. This will be additional benefit to the states.
With this scenario, the empowered committee of state finance ministers under the leadership of Asim Dasgupta should try to resolve the pending issues related to design of GST and support its early implementation in the interest of the country as a whole. The final beneficiary would be the average consumer of goods and services. We owe it to them.

Economic Times, New Delhi, 07-10-2010