(1) Threshold:Different thresholds have been proposed, Rs 10 lakh for SGST (lower for some underdeveloped states), Rs 1.5 crore for CGST for goods and a lesser amount (not indicated as yet) for services. Thus, there will be four thresholds which has been criticised by several analysts but one must remember it is different in many developed countries as well.
(2) Purchase tax: This will remain outside either fully or partly. This is not desirable but it is only limited to a couple of States.
(3) Items containing alcohol: They will also remain outside GST. Sales tax/VAT will continue to be levied on them. Some States may make them Vatable. Excise duty also will continue to be levied on them. This position is not ideal but the existence of a separate excise duty is not a new concept. It is already there in European Union. In the European Union along with VAT there is also excise duty on tobacco, alcohol andmineral oil. The revenue collected from excises is substantial. In 1970, the total excise revenue average was 4.4 per cent of GDP which got reduced to 3.38 per cent in 1998. In 2001 it was 3.8 per cent. There are wide differences between member states in respect of incidence of excise duty. So the point that I want to make about alcohol is that ideally there should not be difference in the VAT rates between States but in regard to excise duty that can remain in addition to VAT. And it is not against the principle of GST.
(4) Petroleum products: They will not come under GST but the existing situation will continue which means that the sales tax will continue to be levied by the states andthe Centre also would continue with excise duty on it. The system in the EU is also that petroleum products are under GST and there is also excise duty on them. It is not much different.
However, there are certain other concerns which are genuine:
a) Entry Tax:Only those which are not in lieu of Octroi will only be subsumed. So Entry Tax may continue which is a real concern.
(b) Input credit for inter-State Transactions: Inter-State credit of input tax has been proposed to be worked through IGST model which is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. Officers are struggling to understand the mechanism which by any standard is extremely complicated involving for every consignment several transactions like payment of tax to the State, transfer of tax from the selling State to the Centre, again transfer from Centre to the buying State, book adjustment through a huge computer system etc.,
Conclusion is that it would be better to have the normal system of state-to-state input credit operated by the states. The present proposal is for a bigger tax jungle than the existing jungle.