Interesting post with practical example. It is queer that states treat their borders as their own fiefdom (with due disregard to the spirit of one nation) to ensure that their revenues are secured, irrespective of what is borne by the customer (ignore all the talks by the politicians for the common man).
GST aims to do away with the power of the states to impose indirect taxes and replaces them with a single uniform tax which would be administered and collected by the centre with the states getting their due share from the centre (and not directly).
Imagine the situation: There is an incentive to buy raw materials, manufacture and sell them in the same state, irrespective of what the natural / economic conditions state. A cross border transaction would imply existence of CST (central sales tax), which is not deductible. Multiply this with the large number of products, and you end up having the customer pay for the state fiefdoms. Add the concept of entry tax and octroi, and costs shoot up significantly.
http://businesstoday.intoday.in/story/gst-holds-positive-surprises-for-the-indian-economy/1/190710.html
GST aims to do away with the power of the states to impose indirect taxes and replaces them with a single uniform tax which would be administered and collected by the centre with the states getting their due share from the centre (and not directly).
Imagine the situation: There is an incentive to buy raw materials, manufacture and sell them in the same state, irrespective of what the natural / economic conditions state. A cross border transaction would imply existence of CST (central sales tax), which is not deductible. Multiply this with the large number of products, and you end up having the customer pay for the state fiefdoms. Add the concept of entry tax and octroi, and costs shoot up significantly.
http://businesstoday.intoday.in/story/gst-holds-positive-surprises-for-the-indian-economy/1/190710.html
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