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India delegation studies Australian GST model of revenue sharing
To meet its changing needs, the Australian government is keenly looking at tax reform to shore up its revenue model. There seems to be an inevitability that the Goods and Services Tax (GST) will increase from 10% to 15%, but the application of the increased revenue divides the two side of politics. While Labor would like the funds to go towards education and health, the Coalition prefers the monies be spent on decreasing personal taxes.
While the debate rages on, a group of State Finance Ministers from India visited Australia recently to study the GST system here.
What was of interest to them was the sharing of the revenue model between the Central and State governments.
In this connection, a delegation of 13 State Finance Ministers and their representatives including those from Maharashtra, Tamil Nadu, Kerala, West Bengal, UP, Andhra Pradesh visited Sydney. They met Premier Mike Baird, Treasurer Gladys Berejiklian and Minister for Trade Stuart Ayres. The delegation was also briefed on GST by Blair Comely, Secretary Department of Premier and Cabinet, and Dr Ken Henry, former Secretary to the Treasury. They also met other senior officials in Canberra.
Leading the Indian delegation was Rashmi Verma, Special Secretary, Department of Revenue.
Speaking to Indian Link about the proposed implementation of the tax, she said, “The GST framework is a very important reform for the country as it will take away a lot of inefficiencies in the system. We believe it will make the tax procedures fairer, and more transparent and efficient for producers and administrators.”
The bill on GST, which will be the biggest tax reform after 1947, was introduced in the Lok Sabha in December last year. According to the bill, a single rate of GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax to ensure seamless transfer of goods and services.
“The discussion of reforming our tax began in 2005-06,” Verma explaind. “We have travelled a long way since then. Politically it is important to meet the deadline of 1 April 2016 to implement these changes. GST, one of the priorities for the Modi Government, is often viewed as an economic game-changers in India. Our studies say that GDP flow-on effect will be an additional 1.5%. But this may not come to pass as there are some changes to the system since the studies were done. In spite of this, it is a mammoth task getting 30 states and Union Territories to agree on each and every decision. Still, I think we are progressing very well and the final bill could even pass in the winter session of the parliament.”
If this happens, then the new regime will be in effect on 1 April 2016, but experts are giving it another year beyond that, expecting more political wrangling.
“I believe that once all the stakeholders understand the issues, they will realise that everyone is a winner from these changes,” Verma admitted. “We are hoping that the efficiencies will mean that the pie is larger and so people can share more of it.”
Some valuable lessons have been learned from the Australia visit, Verma revealed.
“From what I have learned from my interactions with the Australian thinktanks on how they implemented their GST here, the education of the public is very important. Another important takeaway is that Australia studied very closely the impact of their GST on the price index of various commodities. They made the expected price changes public and in turn had a regulator who could monitor this price impact and ensure if there were any savings that they were passed on to the consumer. That is an important learning for us,” she said.
As “the face of GST India”, to use her own words, Verma admitted her role is challenging, but with her obvious skills and confident attitude – and some tips from Australia – there’s no doubt she will see in the much-needed changes as India steadies itself on the economic front.