Primer on Goods and Services Tax

  • 2011
  • Sankhanath Bandyopadhyay

India has witnessed substantial reforms in indirect taxes over the past two decades with the replacement of State sales taxes by Value Added Tax (VAT) in 2005 marking a watershed in this regard. VAT was introduced to avoid the ‘cascading effect of taxes’ but the discrepancy between the state and central taxation remained. Also, VAT is a tax on goods only, so there is also the task of calculating tax on services and adding it to the VAT on goods. The government has therefore recognised the need for harmonisation of goods and services tax so that both can be levied in a comprehensive and rational manner in a new taxation regime – Goods and Services Tax. This primer is an attempt to demystify goods and services tax by answering important questions surrounding it.

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