Major defects in present structure of indirect taxes :
Following can be summarized as major defects in present structure of indirect taxes :
♦ Central Sales Tax (CST) is payable for every movement of goods from one State to other. If the sale is direct, CST is payable, Even in case of stock transfers or branch transfers, there is incidence of tax as input service credit (set off) of input taxes is not fully available.
♦ Central Sales Tax is an orphan. Hence, if there is any difficulty, there is no authority to sort it out and find solutions. This creates numerous problems in CST.
♦ Cascading effect of taxes cannot be avoided due to CST and Entry Tax.
♦ Movement of goods in European Union (EU) is free across all countries without any incidence of tax. However, in India, movement of goods from one State to other is not tax free.
♦ India does not have a national market due to invisible barriers of central sales tax, Entry Tax and State Vat and visible barriers of check posts.
♦ Millions of man-hours and truck hours are lost at check posts. Besides, huge corruption is involved.
♦ Central Government cannot impose tax on goods beyond manufacturing level [CST though levied by Central Government is collected and retained by State Government only].
♦ State Government cannot impose service tax.
♦ Over the years, distinction between goods and services has become hazy, due to which there is overlapping of State Vat and Central Service Tax on transactions like works contract, food rated services (restaurants, outdoor catering, mandap services), Software, IPR Related services, lottery, SIM cards, renting of movable property etc.
♦ Same transaction is taxed both by Central and State Government which creates confusion, litigation and double taxation in many cases.