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THREATS
PROBABLE THREATS IN GST PROPOSAL:Lots of publicity has been made about the benefits of implementing GST. However, on going
through the GST proposal, it is found that there are some grey areas which sigh that it is nothing
but a carry forward of VAT, excise duty and service tax in new name and fame. Lets have a look
on these areas of negativity of GST:-

RATE OF GST: ITS ON HIGHER SIDE:Earlier GST was proposed to be implemented with a rate of 27%. However, later on it has been
clarified that the rate will be around 16-18%. Perhaps it has been done to bring GST rates at par
with those prevailing in the international market. Normally, GST rate varies from 16% to 20% in
international market. However, it is worth noting here that Malaysia has recently adopted GST in
year 2015 only with the rate of 6%. Also, there is example of Australia which has GST rate of
10%. Thus, keeping the latest international trend in mind, the rate of GST still needs revision on
lower side.

DECISION MAKING PROCESS IN GST COUNCIL:In the proposed GST Bill, one vote has been assigned to each State in the GST Council. As per
Government, this has been done to ensure that small states should not lag behind in the GST
Council. However, if we look into the decision making process at GSTC, we find that there is
possibility that the role of small states will be negligible in the vital decisions. It has been
proposed that Decision in GSTC shall be taken at a meeting, by a majority of not less than
three-fourths of the weighted votes of the members present and voting, in accordance with the
following principles, namely:(a) The vote of the Central Government shall have a weightage of one fourth of the total votes
cast, and
(b) The votes of all the State Governments taken together shall have a weightage of three-fourth
of the total votes cast, in that meeting.

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And the vote of each state shall have a weightage proportionate to the population of that State.
[Emphasis supplied]
Thus, while assigning the weightage to vote, the population has been made the prime criteria. It
is worthwhile to mention here that there are certain states which have very less population but
their share in taxes is on much higher side. Such states, though contributing more, will lag
behind in the decision making process taking place at GST Council.

1% ADDITIONAL TAX ON SUPPLY OF GOODS:It has been proposed to levy an Additional Tax not exceeding 1% on supply of goods in course of
inter-state trade or commerce would be levied and collected by the Central Government. This tax
would be assigned to the States in which the supply originates for two years or as recommended
by the GST Council. This will be a non-vatable tax. Thus, this tax itself seems to be against the
very basic vision of GST which says that there will be no-cascading effect in GST. This 1% tax
will ultimately become cost of goods as no Credit of this tax would be allowed.

COMPENSATION TO LOSS MAKING STATES FOR FIVE

YEARS:It has been proposed that the Central Government will compensate the loss arising out to States
on implementation of GST for a period of five years. The compensation will be on a tapering
basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year. This has
been done to make the States affirmative towards the implementation of GST. However, there is
a possibility that States may not take effective steps for smooth run of GST as they are being
compensated for the losses. It is also possible that the actual loss is much lower than that shown
on records in order to get higher compensation. The Central Government will have to take steps
to ensure that this proposal in the GST bill is not misused by the States.

GST PROPOSAL: NOT FRIENDLY TO IMPORTANT SERVICE

SECTOR LIKE BANKS:-

It is much hyped that GST will bring Indian goods a step

forward in the International market. The reasons so given are that the GST will make Indian
products cheaper in long run and thus will promote exports. In this regard, it is to be noted that

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the banking sector pays an important role in the exports. Whether it is export of service or export
of goods, the role of banks is vital. It is worthwhile to mention here that at present service tax @
14% is being levied on the banking transactions. On introduction of GST, this rate will be on
much higher side as predicted. This will ultimately increase the cost of transaction, particularly,
in case of imports and exports where huge amount is transacted. It is also interesting to note that
in most of the countries, banking sector is excluded from the purview of GST. The cost of
transaction there is obviously on the lower side. On the other hand, the cost of banking
transaction, which ultimately becomes the cost of product, will increase after implementation of
GST. Similar is the case with other important services like advertisement and sales promotion
which play a crucial role in exports of a country.

DISPUTE RESOLUTION MECHANISM:

It has been proposed that the GST Council will lay down criteria as to how the disputes arising
out of its recommendations will be resolved. In other words, the disputes arising out of
recommendations of GSTC will be resolved by GSTC itself. This is like a party to dispute has
been given authority to make the judgment. It is against the principles of natural justice. A
question was raised on this proposal which was explained by the Government that if any separate
body is constituted for dispute resolution, it will hamper the working of GSTC in general and of
legislature in particular. However, even after this explanation, there are possibilities that the
decision taken on the disputes are not true and fair, particularly when they relate to small states
which possess lower voting power (since voting weightage is based upon population). If any
separate body is not constituted, the task of laying down the dispute resolution mechanism will
be the toughest one.

SUGGESTIONS
Section 12 of the 2014 Bill brings the addition of Article 279A of the Constitution, providing the
constitution and functioning of the GST Council and through Section 12(11) of the Bill, the GST
Council is made into a dispute resolution body wherein adjudicatory role is being given to such
authority. Now there is no reference to the Supreme Court as the apex constitutional body unlike
its predecessor Bill of 2011. Mere changing of the name does not change the nature and if
anywhere such adjudicatory function is accomplished, the Supreme Court will always bear

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supremacy and ensure the finality of decision in such cases. This misdemeanor in the present Bill
will have an obvious impact on the future business of the GST Council, and even if the Supreme
Court has been sidelined from adjudicating on matters in this regard, in no such case would this
curtail the inherent and sacrosanct power of judicial review by the Apex Court.
Honble Finance Minister calling GST as the single biggest tax reform since independence will
have to compete in the Rajya Sabha or Upper House where political statics are not favorable
unlike as of the Lok Sabha or Lower House, wherein the passage was smooth as it was in the
hand of majority Government. Shifting the debate from political to the legal perspective reaps
better and bearable results as otherwise; the ramification of the GST will be nothing more than it
being the biggest flawed tax reform since independence.

CONCLUSION:
The introduction of GST along with other government initiatives like the make in India
program have the potential to drastically bring down costs, re-define and re-shape the economy
of India. The benefits of implementing GST have been much talked but the probable threats have
only been popularized as opposition partys publicity stunts to hamper the implementation of
GST. Whatever be the case, the fact is that these probable threats in GST should be taken care of
before the bill turns into Act; else the GST will only carry forward the demerits of existing
indirect tax structure, thereby becoming an old wine in new bottle.
The proposed GST can lead to ease of trade across the country but would wipe out most statelevel indirect taxes, thus taking out one the major source of revenues for states. It would also
overlook regional requirements and priorities. The concept of One nation, one tax, if stretched
too far, could be a dangerous proposition.